Incrementality has become a marketing buzzword, but truly understanding it can be the difference between effective campaigns and wasted ad spend. It’s not just about measuring what your ads achieve it’s about understanding what wouldn’t have happened if your ads didn’t exist. In this white paper, we will delve into the concept of incrementality, its importance in optimising your ad spend, and how you can accurately measure it to fuel sustainable growth.

What Is Incrementality?

Incrementality refers to the incremental impact of your marketing efforts that is, the additional conversions, sales, or actions that occur as a direct result of your ads. It helps you identify the true value of your campaigns by excluding actions that would have happened organically or without any influence from your advertising.

Understanding incrementality is crucial for making informed decisions about your media spend. While knowing that a campaign drove conversions is useful, it’s even more important to determine whether those conversions were truly influenced by your ads or if they would have occurred without them.

Why Incrementality Matters

Many marketers rely on traditional metrics like ROAS (Return on Ad Spend) and CPA (Cost Per Acquisition), but these can give an incomplete picture. Conventional attribution models may overestimate the effectiveness of campaigns by assigning credit to ads that didn’t necessarily drive consumer decisions.

Here’s why incrementality matters:

  • Accurate ROI Measurement: Incrementality shows the actual return on your ad spend by highlighting which conversions wouldn’t have occurred without your ads.
  • Optimised Budget Allocation: By identifying campaigns that drive true incremental results, you can direct your budget more efficiently and reduce wasted ad spend.
  • Informed Strategy: Incrementality testing offers insights into the real drivers of your campaign’s success, allowing you to focus on effective strategies and eliminate those that don’t deliver incremental value.

The Nuances of Measuring Incrementality

Measuring incrementality is complex and comes with several nuances that influence how you interpret your data and refine your campaigns.

1. Control Groups

To measure incrementality accurately, you must compare the performance of an audience exposed to your ads with that of a control group that isn’t exposed. This is the foundation of incrementality testing, also known as holdout testing. By withholding ads from a subset of your audience, you can better assess the real impact your campaigns have on conversions.

Example: If 5% of your target audience is held out from seeing your ads and their conversion rate matches that of the group exposed to your ads, it suggests your ads aren’t driving incremental conversions. However, if the exposed group converts at a higher rate, your ads are providing real value.

2. Incrementality vs. Attribution

Traditional attribution models give credit to ads based on the customer’s interactions, but they don’t always tell the full story. Incrementality focuses on causality whether the ad caused the conversion. It’s possible for an ad to appear in the customer journey without actually influencing their decision.

Attribution Caveat: A customer may click on an ad but already intended to make a purchase. Traditional attribution would credit the ad, but an incrementality test could reveal that the sale would have occurred regardless of the ad.

3. Types of Incrementality

There are several types of incrementality you can measure, depending on your objectives:

  • Sales Incrementality: The number of additional sales driven by your ads.
  • Conversion Rate Incrementality: How much your conversion rate increases due to your ads.
  • Revenue Incrementality: The additional revenue your campaigns generate this may differ from sales incrementality if, for instance, the average order value is lower than expected.

Each of these metrics offers different insights. A campaign might boost sales incrementality, but if those sales come with a lower average order value, your revenue incrementality may not be as impressive.

4. Ad Frequency and Saturation

Ad frequency is another crucial factor in incrementality. While more exposure can lead to increased conversions, there’s a point where additional impressions stop driving incremental results and can even have a negative impact by causing ad fatigue.

Example: You might find that showing an ad three times to a customer drives incremental value, but beyond that, the effect plateaus, and further impressions deliver diminishing returns.

Best Practices for Implementing Incrementality Testing

Although incrementality testing can seem complex, following best practices will help ensure your campaigns are accurately measured and optimised:

1. Set Clear Objectives: Define what type of incrementality you’re measuring be it sales, conversions, or revenue and establish clear benchmarks before starting.

2. Create Effective Control Groups: Randomly select a portion of your audience to serve as a control group that does not see your ads. This allows for an accurate comparison of their behaviour with the exposed group.

3. Track and Compare: Gather data on both groups’ behaviour and compare the results to measure the incremental impact of your ads.

4. Scale Incremental Campaigns: Once you identify which campaigns are delivering true incremental results, allocate more budget to those strategies and scale them effectively.

5. Continuous Review and Adaptation: Incrementality testing isn’t a one-off process. Consumer behaviour, market trends, and competitive environments change over time. Regularly review and adapt your strategies based on fresh test results.

Conclusion

Understanding the nuances of incrementality is essential for improving your marketing strategy and optimising your ad spend. It’s not just about driving conversions it’s about identifying the real incremental value your ads bring to your business. By implementing incrementality testing, you can ensure that your campaigns not only generate more conversions but also deliver a higher return on every pound spent.

If you need assistance setting up incrementality tests or refining your marketing strategy to improve effectiveness, our team is here to help. Get in touch, and we’ll work with you to unlock the full potential of your marketing efforts.