Correlation and Causation in Marketing: Accept Both

Marketing is the activity of promoting and, hopefully, selling products. It is rare that a business can become sustainable without significant marketing efforts. One website has identified 52 types of marketing, giving a great overview of the possibilities for businesses. In our experience, a small business might focus on a handful of these, and a large business probably does some variant of all 52.
The most important outcome of marketing is sales, either immediately or building a brand and awareness that might result in long-term sales. Every marketer faces these questions every day: am I spending too much, too little or just the right amount to drive profitable sales? That is, a am I making a good return on the investment in marketing? If I buy a Super Bowl commercial for $5 million–the cost of a 2018 Super Bowl ad–will I get my money’s worth? Will it drive huge sales? Will it introduce my new product to millions effectively? Does it position my brand as the go-to brand for that product?
In the ideal world, we all seek a causative effect between our marketing and our revenue. If I spend $1, will I make $10? Or, if I spend $1 will I make a $1, which for most businesses with overhead, staff costs, and product costs, this is a money-losing investment.
Key to determining the value of marketing is to look at activities which are causal–a direct and undeniable link between the activity–and correlational–a link that is anywhere from highly probable to assumed.
Here are some marketing activities that provide evidence of a direct causal link:

  1. Google Ads and Bing advertising, where the click is tracked to a sale
  2. Coupon codes for a website that are unique to a promotion
  3. Coupons used in a store or for a service provider
  4. Unique phone numbers used for a promotion
  5. A/B testing of for an email campaign with unique URLs

With these, there is certitude about the connection between the activity and the sale.
Here are some marketing activities which can only provide a correlational link to sales:

  1. Sponsoring a community event
  2. Most print (newspaper, magazine) advertising
  3. Most radio advertising
  4. Most television advertising
  5. Podcast advertising

With these, there may be strong evidence of a connection, but it cannot be certain. If your sales go up after an ad, and nothing else has changed, it’s a good bet the ad caused the sales. Likewise, if your sales go down after stopping a promotion, and nothing else has changed, it’s a reasonable assumption the ad was a good sales driver.
The correlational aspect of the above comes from the fact that you can’t prove someone bought booked a tour because of any one activity. They may have learned about you from word of mouth, finding you on a Google search, seeing your storefront signage, and many many more places. There is no certitude, no direct link between the activity and the sale.
I know some business owners who eschew any advertising which does not allow them to draw a causal link between sales and marketing efforts. They basically believe if you can’t measure it precisely, it is or may be a waste of money. This is an extreme view of marketing.
At the other extreme are what I call data-phobic business owners. These are business owners who distrust numbers–perhaps because they don’t understand how they are generated or how they can be interpreted–and focus their efforts mostly on things that can only offer a reasonable and logical (one would hope) connection between marketing efforts and rewards.
If you are exclusively at the extremes–only causal or only correlational–you are, without a doubt, missing many opportunities.
At Kona Impact, we strongly believe that businesses should have their feet in both camps: work on ways to grow your business that are causal, but also keep doing things that may have a less direct link to sales. We like to experiment by starting and stopping various marketing efforts to see what effect this has on our sales. We prefer certainty but are willing to accept a level of ambiguity along the way.

Kona Impact 808-329-6077