Lesson 9: Time Decay Attribution

In the context of Multi-Touch Attribution Models, Time Decay Attribution is a method that assigns more credit to the touchpoints that happened closer to the conversion event. This model operates on the premise that the more recent interactions have a greater influence on the customer's decision to convert.

Understanding Time Decay Attribution

Time Decay Attribution is particularly useful in long sales cycles where the customer journey involves multiple touchpoints. The logic behind this model is that recent touchpoints are more influential than older ones. This can be represented mathematically by an exponential decay function.

Note: This method is ideal for businesses where the influence of marketing efforts diminishes over time.

Exponential Decay Function

The exponential decay function can be represented as:

\( w(t) = e^{-\lambda t} \)

Where \( w(t) \) is the weight given to a touchpoint at time \( t \) and \( \lambda \) is the decay parameter.

Visual Representation

graph TD; A["First Touchpoint"] -->|30 Days| B["Second Touchpoint"]; B -->|15 Days| C["Third Touchpoint"]; C -->|10 Days| D["Fourth Touchpoint"]; D -->|5 Days| E["Conversion"];

Example Calculation

Suppose we have a conversion path with four touchpoints:

  • First Touchpoint: 30 days before conversion
  • Second Touchpoint: 15 days before conversion
  • Third Touchpoint: 10 days before conversion
  • Fourth Touchpoint: 5 days before conversion

With a decay parameter \( \lambda = 0.1 \), the weights can be calculated as:

  • First Touchpoint Weight: \( e^{-0.1 \times 30} \approx 0.05 \)
  • Second Touchpoint Weight: \( e^{-0.1 \times 15} \approx 0.22 \)
  • Third Touchpoint Weight: \( e^{-0.1 \times 10} \approx 0.37 \)
  • Fourth Touchpoint Weight: \( e^{-0.1 \times 5} \approx 0.61 \)

Advantages of Time Decay Attribution

  • Reflects the diminishing impact of older touchpoints
  • Suitable for long sales cycles
  • Can be customized using different decay parameters

Disadvantages of Time Decay Attribution

  • May undervalue early-stage touchpoints
  • Requires precise tracking and data collection

For more on various attribution models, see Types of Marketing Attribution Models.

For a deeper dive into marketing analytics, consider reading Marketing Analytics: A Practical Guide to Improving Consumer Insights Using Data Techniques.

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