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Incrementality: The Key to Measuring Advertising Effectiveness

Written by: Carolyn Berk, Content Marketing Associate

Do you know the true value of your retargeting ad campaigns? While focusing on return on ad spend (ROAS) is certainly important, it doesn’t provide marketers with the insight that’s necessary for determining the effectiveness of their retargeting efforts, and the amount of budget they should dedicate to running retargeting campaigns.

So how can advertisers know for sure if they’re successfully allocating retargeting ad spend? The answer lies in incrementality.

What is incrementality?

Incrementality is the measure of the lift that advertising spend provides to the conversion rate.

To measure incrementality, advertisers need to compare how they currently allocate spend to target known users to holdout groups. These holdout groups are composed of users who don’t see retargeted ads. This allows advertisers to compare purchase rates of users who were shown retargeted ads to the control group of users who weren’t shown retargeted ads.

Incrementality graph

In the example above, you can see two users: Michelle, who was part of a group that was shown retargeted ads, and Justine, who is part of a group of users who never saw a retargeted ad. Both Michelle and Justine visited a site, browsed products, added an item to their digital shopping carts, and then left. As a result of these actions, they both fall into the same retargeting audience. Upon a visit to a subsequent website, Michelle, along with others in her group, were delivered Dynamic Ads, leading her to return to the advertiser’s site and complete her purchase.

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Justine, however, was added to a holdout group, and was never shown a retargeting ad. But she still returned to the site and finished making her purchase. By monitoring Justine’s behavior after she left the site, but including her in a holdout group and never showing her an ad, it’s possible to measure the effect that this advertising campaign had on this audience. In this case, the group that was shown retargeting ads displayed a purchase rate increase of 2% (giving her an incremental lift of 2% over Justine.)

Why do advertisers need incrementality for proper measurement?

Understanding incrementality allows advertisers to optimize their ad budgets by allocating retargeting ad spend in the most impactful way possible. Measuring incrementality allows advertisers to see which groups of users, like the one that Michelle and Justine fall within, should receive increased retargeting spend, because groups with higher incremental lift are those that need an additional “push” through the sales funnel. Groups of users that have lower incremental lift have a greater likelihood of having purchased regardless of seeing an ad. By understanding this full user pathway, advertisers can better optimize where they spend their retargeting dollars.

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