Incrementality

What is incrementality?

Incrementality measures the impact generated by advertising activity compared to what would have happened organically.

Imagine a campaign where a soda brand, purchases a top-sponsored placement for the search term “soda” on a retailer’s website. While the RMN may be able to directly tie on-site purchases to the ad’s activity, the brand may not see any significant sales lift overall. In this case, the ad is being actioned by users that would have purchased anyways, and the ad did not cause the brand’s sales to increase.

In the past, retail or commerce media networks simply offered measurement such as ROAS. However, advertisers began to push back as this metric didn’t measure if their ads were influencing customer buying behavior. Now, with incrementality measurement, brands can see the impact of their ads vs organic activity run. Retailers can directly report to advertisers that their ads influenced customer behavior and made a substantial difference in the advertiser’s sales.

Overall, incrementality measurement enables brands to quantify the real value ads bring to their campaigns, helping retailers retain advertiser trust and even expand budgets into upper-funnel branding efforts.

How incrementality measurement works

The industry standard in retail media is A/B testing incrementality.

In A/B Testing, publishers split users into two groups. A small portion of users is excluded from receiving any ads. These “holdout groups” serve as a baseline to compare the performance of targeted users.

Incrementality metrics like Incremental Conversions, Incremental Revenue, Incremental CVR, and Incremental ROAS are calculated by comparing the relative performance of the test group vs the control group.

The importance of incrementality

As most funding for RMNs comes from shopper marketing budgets, incrementality helps retailers prove effective shopper marketing results while also examining how their platform could drive results from brand and upper-funnel budgets as well. The ANA reported that over 60% of RMN spend has been taken from existing budgets– if RMNs want incremental spend, they need to prove incremental results.

Commerce media networks benefit from incrementality because they can:

• Prove incremental ROAS to advertisers that shows how running campaigns impact actual revenue and order value compared to organic results
• Push for greater budgets from advertisers if they can show clear ROI
• Increase competition for ads between brands to increase placement value
• Increase overall budgets and spend on their platform
• Better understand their ad placement performance on-site to improve user experience

Advertisers benefit from incrementality because they can:

• Compare brand performance of organic placements vs. ad placements on their platform to quantify the value of ads to their business
• Provide actionable insights to help allocate budgets effectively
• Help identify the most valuable audiences
• Unlock deeper insights into ROI and growth sources within marketing strategies so they can make data-driven decisions
• See an increase in brand sales and revenue from users exposed to ads vs those who weren’t

Incrementality vs attribution

Commerce media networks have long used attribution as a key way to measure the impact of ads on overall sales. Attribution clearly ties sales to ads that a user viewed, clicked on, or interacted with previously. It outlines the user journey from the ad to the purchase.

Incrementality takes this a step further. Attribution can tell an advertiser if a user clicked on a sponsored product and added that product to cart. But it can’t tell the advertiser if that product wasn’t sponsored, would the user have still added it to cart anyway? Take our previous example. If the user searched “soda,” would they have clicked the specific brand regardless of if there was an ad there or not? Incrementality can give the advertiser that insight, whereas attribution can only matter-of-factly declare that the ad led to a sale.

Challenges commerce media networks face when launching incrementality

Incrementality sounds simple, but in reality can be complex to launch. Commerce media networks will need to factor the following capabilities when building for measuring incrementality.

Audience segmentation: Commerce media network tech must have the ability to segment users into control and test variants, and consistently apply the treatment in real-time. Additionally, they’ll need to perform audience segmentation analysis to ensure audience randomization.

Data collection: This ensures that all relevant signals are captured for both of the A/B test groups, even when ads aren’t shown.

Post-test analysis: Commerce media networks will need to run best practice statistical analysis on the result set to determine the results of the test at statistical significance levels.

Incrementality reporting and storytelling: Incrementality measurement is a nuanced metric that can be confusing to advertisers who are new to the concept. Test results must be presented in a way that advertisers understand in order to drive results.