Last-click attribution has long been the industry standard for measuring digital ad performance. But with more data available about a customer’s browsing and purchase history and more sophisticated tools to mine that data, brands are seeing “clicks and views” for what they are: vanity metrics that don’t actually help a business grow revenue.
Advertisers can now get an edge on their competition by choosing the right partner and tool to do deeper analysis on user behavior and determine whether ads have incremental value.
Incrementality is a term some know but may not be measuring. In short, it’s the measurement of how much business a brand gets when it spends money on advertising relative to how much it gets when it doesn’t spend money on advertising. This is calculated as the difference in revenue between two groups: those assigned to a treatment group (who see ads) and those in a holdout group (who do not see ads). This difference reveals the additional revenue generated directly by advertising.
Incrementality allows marketing teams to then uncover which users have “high incremental lift” (they’re more likely to be influenced by an ad to make a purchase) and which have “low incremental lift” (they are likely to purchase regardless of seeing an ad). A team can then hold back on showing ads to “low lift” users and replace them with less-expensive-to-acquire “high lift” users whose behavioral data shows they’re likely to be persuaded by ads.
Putting incrementality into practice is an adjustment for those accustomed to a click-based attribution model. But when implemented correctly, an incrementality model can boost a brand’s net-new revenue by a sizeable order of magnitude.
Here are five steps for marketers looking to break free from last-click attribution and assimilate incrementality into their advertising decisions.
1. Instill a ‘testing’ mindset in your company’s culture
Successful digital-first brands like eBay and Netflix A/B test nearly every aspect of their business before making decisions, including the incremental value of their advertising spend. For a “test and learn” approach to be sustainable though, senior leadership must encourage and support it completely. There must be a company-wide commitment to measurement and optimization.
2. Embrace rigorous measurement standards
Companies like Google, Amazon and Facebook are setting new standards for using meticulous measurement that lead to better business decisions and increased revenue. Measurement is key to understanding what investments are paying off and what exactly is influencing them.
Without this knowledge, you cannot fully understand where your ROI is coming from. For example, a company could redistribute budgets to certain areas — such as ad remarketing — where incrementality data shows net-new revenue growth.
There’s a reason CMOs consider incrementality the “gold standard” of performance metrics. It’s the only way to accurately answer the question: “Did my advertising actually impact sales?”
3. Hire experienced, data-minded people
Marketing is an art and a science, but the word “science” is showing up in more marketing job titles. “Marketing data scientist”, “director of marketing science”, “VP of advertising science” are key positions at digital innovators like Netflix, Booking.com and Expedia.
The reason is clear. To survive and thrive in today’s fragmented digital landscape you need people with expertise in A/B testing who can measure and learn from the results like a scientist and use that data to optimize each advertising channel more effectively.
4. Invest in technologies for growth
Incrementality will likely require you to reconsider your marketing stack. Current platforms may be great for pinpointing what ad your customer clicked on or viewed right before purchasing, but advertisers have long known that this paints an incorrect picture.
Related post: How Retargeting Delivers Incremental Revenue [Video]
The good news is the right incrementality platform can simplify connecting the dots between marketing touchpoints and the impact they have on sales. This is an investment that comes with a cost, but the revenue gains from incrementality and the ability to facilitate a consistent consumer experience across digital inventory will be worth it.
5. Start gathering data and take action
Remarketing campaigns are a good place to start with incrementality testing because you already have behavioral and identity data on your site visitors. Conduct some small A/B tests with treatment and holdout groups. What’s the difference between the two? Additionally, what does the data analysis of your site visitors reveal? What percentage have high lift and are therefore worth the retargeting ad spend? What percentage have low lift and are not worth showing an ad?
You should strive to prove that every tactic has a net positive impact through incrementality. If you can’t prove that, you can either figure out why or stop spending.
Incrementality demands a diligent “test and learn” approach and an investment in teams and tools. But there’s a reason CMOs consider incrementality the “gold standard” of performance metrics. It’s the only way to accurately answer the question: “Did my advertising actually impact sales?” By that measure, it’s critical for marketing teams to get started with incrementality or risk leaving real revenue on the table.
Are you optimizing your advertising toward the only performance metric that truly matters to your bottom line? Here’s everything you need to know about incrementality.
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