How are lower funnel channels identified?

Lower funnel channels are those channels whose spend is caused by other channels (which we call “upper funnel”), and therefore whose budget is not directly under the control of the marketing team. For example, a TV ad may lead someone to search for the brand on Google. They may then click on the ad — leading to increased branded search spend — or they may click on the affiliate link a few places below — increasing affiliate spend. The branded search ad or the affiliate may yet have had a truly incremental effect; it’s possible that the TV-watcher would not have bought the product had it not been for either of those two placements. Perhaps, for example, a competitor was bidding on the branded term, and the ad recaptured a potential customer that was on the cusp of being lost.

How they are treated in the model

In this case, the TV spend is “upper funnel” and the branded search and affiliate spend is “lower funnel”. Recast handles these kinds of interactions by modeling them directly. For example, if we imagine that every dollar of TV spend leads to one dollar of branded search spend and one dollar of sales, and every dollar of branded search spend leads to two dollars of sales, a naive model that doesn’t account for the induced spend will understate TV’s ROI by 25% and overstate branded search’s ROI by 50%. Recast solves this by using a sophisticated statistical method that simultaneously estimates the relationship between TV and branded search spend (more TV spend causes more branded search spend), the relationship between TV and sales directly, and the relationship between branded search and sales directly. The Recast platform can then calculate both the direct and indirect effects of TV on sales.

When you upload a budget into Recast’s forecasting tool, it’s not just predicting how much revenue you’ll earn, but also how much you’ll spend on branded search. (In fact, it’s first predicting how much branded search spend there will be, and then how much revenue you’ll earn, because that depends on the effect of the branded search spend). We have a strong perspective about how to properly handle these types of channels when validating the performance of your model.

In Recast, an extra dollar spent on TV will:

lead to increased sales directly
lead to increased spend on branded search
leads to increased sales indirectly.

Capping Lower Funnel Channels

Lower funnel spend is driven by upper funnel spend. This means that as a marketer you do not have direct control to determine how much of your budget is going to your lower funnel channels. In order to set limits on how much you spend in your lower funnel channel, Recast allows you to provide caps on your lower funnel.

To cap a lower funnel channel:

Select the checkbox labeled “Do you want to limit spend in any lower funnel channels?”
This opens a menu with your lower funnel channels. Each channel has a dropdown menu next to it with the option to leave the channel uncapped, turn the lower funnel channel off or input a channel spend cap.

Turning Lower Funnel Channels off:

If you choose to turn a lower funnel channel off, Recast will not take that channel into consideration when optimizing your budget. This will assume that you will spend $0 in this lower funnel channel.