What is Incrementality and How Does it Affect Marketing?
Picture this: You just executed a highly successful campaign. You assembled the perfect mixture of channels, you’re exceeding all of your key performance indicators, and it all went off without a hitch. Now, it’s time to start building on that success with your next campaign.
Except, there’s one small wrinkle to overcome: Marketing leadership noticed that your television advertisements didn’t have a clear impact on campaign success. They ask you to cut back and try a different channel that will drive more leads. You know that television advertising was a crucial initial touchpoint – but you are having trouble proving it.
Thankfully, there is a way to prove the impact of a single tactic, channel, or campaign. By measuring incrementality in all of your marketing campaigns, you can show leadership exactly how each of your efforts led to favorable outcomes.
Let’s take a closer look at exactly what incrementality in marketing is, why it’s important, and how you can start using it.
What Is Incrementality in Marketing?
In the world of marketing, incrementality refers to growth that can be directly attributed to specific marketing efforts above and beyond the existing brand equity. For example, how much a certain channel, tactic, or overall campaign helped influence an increase in sales, newsletter sign-ups, etc. Ultimately, the purpose of incrementality in marketing is to prove the impact of a single variable by isolating it from all other factors that are beyond a marketer’s control such as interest rates or the weather.
Why Do Marketers Measure Incrementality?
Overall, incrementality helps marketers determine which touchpoints are driving their campaign forward, allowing for a more strategic investment of marketing dollars. It doesn’t just outline which aspects of the strategy are having a positive impact, either – it also reveals which tactics aren’t so successful.
Here’s a quick list of the questions that incrementality can answer:
- Which advertising media channels are helping me hit a certain KPI?
- What will happen if I adjust or reallocate my marketing spend?
- What will happen if I introduce a new channel, vendor or tactic?
- Are my marketing investments cannibalizing each other?
With omnichannel marketing becoming the norm, it’s crucial to answer these questions. You can’t examine each channel or touchpoint in a vacuum -- it’s essential to understand how every touchpoint contributes to your larger strategy.
How to Test and Measure Incrementality in Marketing
Given the current state of the marketing landscape, it’s certainly essential to measure incrementality. However, many marketers aren’t sure exactly how to get started.
One way to dip your toes into the water is with a holdout test. This method isn’t sophisticated, but easy to carry out. Simply choose a target audience, and segment it into two groups: A test group and a control group. Then, target the test audience with your chosen marketing tactic – the simpler the tactic, the better. Once a significant portion of both audiences have seen each version of your strategy, take a look to see if they engaged differently. The difference between each audience is the incremental impact of that change.
However, holdout tests are a manual approach that doesn’t scale well for large marketing campaigns. For large-scale campaign optimization, it’s best to use a form of multivariate testing. This method will allow you to test the impact of many different strategic decisions across many different campaigns. With that said, be aware that multivariate testing on a scalable level will require the help of marketing technology.
How to Calculate Incrementality in Marketing in Practice
Now that we understand a few different ways to measure incrementality, let’s see how each tactic might work in practice.
Imagine that a fashion retailer wanted to try adding display ads to their media mix. However, some members of the marketing team questioned if adding these touchpoints would be worth the investment it required. Since this was a simple change where data collection was relatively straightforward, the retailer decided to employ a holdout test.
They broke their audience into a test group and a control group, with 30 percent of the audience seeing the new display ads, and 70 percent receiving a typical campaign. After running the campaign for 14 days, they noted that the control group had a 1.7 percent conversion rate, while the test group had a 2.3 percent conversion rate. From there, they used the following formula to measure the incremental impact of the new display ads:
(Test Group Conversion Rate – Control Group Conversion Rate)
= Incremental Impact
Control Group Conversion Rate
Then, they plugged the data into this formula:
(2.3% – 1.7%)
Thanks to this analysis, it was clear that adding display advertisements had a positive 35.3% incremental impact on conversions. With that said, keep in mind this doesn’t mean the fashion retailer should immediately add display advertisements to the mix. A positive incremental impact is certainly a good sign, but always ensure a placement is profitable in the long run before you start heavily investing in it.
For a more complicated analysis, the fashion retailer would need to use marketing technology. For example, if they wanted to reduce spend in television advertisements, reallocate spend to social media, and start investing in display ads, a holdout test would struggle to support every variable. That’s where multivariate testing comes in.
Marketing Evolution’s Media Reporting functionality uses a mixture of tactics, including multivariate and holdout testing, to predict how certain changes in your media mix impact key performance indicators like brand equity or revenue on a long-term basis. Simply connect the data to the platform, choose your target audience, KPI, and time range, and hit submit. Then, you’ll see a detailed report outlining the impact of your new strategy. Here’s a snapshot of how this function looks:
Whether your customer journeys have 5 touchpoints or 500 touchpoints, our proprietary models will give you the insights you need right when you need them – and you don’t even need to buy the ad space. If you do decide to go forward with your investment, then our solution will continue to refine its predictions, giving you a clear view into the future impact of your strategy. This ensures your team is always equipped with data-driven, actionable recommendations to improve your strategy, no matter how complex it is.
Measuring Incrementality: The Finer Details
When you’re collecting high-quality data for analysis, consider the benefits and drawbacks of these three marketing measurement models:
- Marketing Mix Modeling – Marketing mix modeling (MMM) uses aggregate data to assess the impact of techniques across different marketing channels. While this is an easy model to get started with, it doesn’t account for potential disruptions in your campaign, like seasonality or increased competition.
- Multi-Touch Attribution – Multi-touch attribution (MTA) goes a step further than MMM, as it measures the impact that each touchpoint has in driving a conversion. Unfortunately, it doesn’t tell the full story when it comes to offline data or external trends.
- Unified Marketing Measurement – Unified marketing measurement (UMM) combines the strengths of MMM and MTA into a single, holistic model. While this is the gold standard for marketing measurement, it often requires an investment in specialty technology.
Remember: Your insights can only be as strong as your foundational data. For that reason, it’s crucial to determine which model is best for your needs before you get started.
Incrementality testing and measurement is essential to creating successful omnichannel marketing campaigns. Depending on the complexity of your campaigns, you may be able to manually assess the incremental impact of certain tactics. However, for brands with sophisticated marketing strategies, a data-driven approach will be necessary.
If you’re ready to take a data-driven approach to marketing measurement, Marketing Evolution is ready to help. Sign up for a demo today, and we’ll show you exactly how it works.