Author: Social Nucleus

In the fast-paced world of digital advertising, controlling costs while driving conversions is a balancing act. Meta’s bid caps and cost caps are invaluable tools for advertisers who want to optimise their campaigns, ensuring efficient spend without sacrificing performance. The key to their success lies in Meta’s advanced forecasting system, which uses predictive data to guide ad performance. This white paper delves into how Meta’s forecasting powers these caps, making them work more effectively for advertisers.

Meta’s Forecasting: The Foundation of Bid Caps & Cost Caps

At the heart of Meta’s predictive power are two core metrics:

• Expected Click-Through Rate (eCTR): Meta uses early user engagement data (clicks) to predict how often an ad will be clicked. Since clicks happen frequently and early in a campaign, Meta quickly develops a reliable eCTR.
• Expected Conversion Rate (eCVR): The second, more nuanced metric, eCVR, is Meta’s prediction of how many users who click an ad will go on to convert. Because conversions require more data than clicks, Meta’s eCVR predictions take longer to refine but are crucial for estimating the eventual Cost Per Acquisition (CPA).

Formula:
Amount Spent * eCVR = Expected CPA
This simple formula drives both cost and bid caps, allowing Meta to determine how much it should bid to ensure profitability within your target CPA.

Deep Dive into eCVR: The Key to Optimising Performance

eCVR (Expected Conversion Rate) is a fundamental piece of Meta’s forecasting model. While eCTR can be quickly assessed through clicks, eCVR requires a more detailed analysis of post- click behaviour—how likely users are to make a purchase or complete a goal once they engage with your ad.

• How it works: Meta needs a critical volume of clicks to predict conversion likelihood. It uses data from interactions such as time spent on the landing page, adding products to a cart, or completing forms to gauge the likelihood of conversion.
• Impact on CPA: A lower eCVR can lead to higher CPA predictions, causing Meta to adjust bids downward to avoid inefficiencies. Conversely, a higher eCVR means Meta will confidently bid more, knowing that the chances of conversion are higher.

Why eCVR is crucial for advertisers:

If your conversion rate prediction is off, it can significantly affect the performance and profitability of your campaign. Therefore, optimising for both click-through rate and post-click conversion is critical to success. If an ad performs well in engagement but falls short in driving sales, Meta will adjust bids to prevent overspending.

The Role of Engagement Signals in Meta’s Forecasting

Meta’s ability to predict the success of your ad is powered by a vast dataset of engagement signals. These signals include user interactions like clicks, shares, comments, and video views. Meta draws on its extensive historical data, also known as priors, to predict how your current engagement will lead to conversions.

Examples of signals that fuel forecasts:

• If an ad receives a high number of shares, Meta knows this is a strong sign of purchase intent.
• If users watch a video ad for a long time, Meta recognises the high interest and increases bids accordingly.

By combining real-time user engagement with its enormous backlog of data, Meta’s forecasting becomes highly accurate, ensuring your ads are positioned to succeed without unnecessary overspending.

Ad Set-Level Metrics and Adjustments

• Meta’s forecasts are dynamic. As your ad gathers more data, the system continuously updates predictions at the ad set level. If the actual conversion rate deviates significantly from the expected eCVR, Meta adapts its bidding strategy to reflect this new data.

For example:

• If an ad gains lots of clicks but fails to convert, Meta will eventually throttle back bids to avoid wasting budget. This prevents campaigns from spending inefficiently on engagements that don’t lead to sales.

Why this matters:

Dynamic forecasting ensures that even if an ad overperforms or underperforms in the early stages, Meta’s system will gradually adjust its bidding strategy to optimise for better efficiency and profitability over time.

How Meta’s Forecasting Makes Bid & Cost Caps Effective

Meta’s forecasting system allows cost caps and bid caps to function seamlessly by ensuring that each dollar spent aligns with expected performance. These caps provide critical cost control while Meta’s system continually fine-tunes bidding decisions based on predicted outcomes.

Here’s how this benefits advertisers:

1. Maximising Efficiency: Meta predicts where bids will drive conversions, ensuring that you’re not wasting budget on ineffective placements.

2. Cost Control: Forecasts allow Meta to maintain your CPA target within budget by continuously adjusting bid amounts.

3. Scaling Confidence: Accurate forecasts enable you to scale campaigns without fear of overspending, knowing Meta’s system is constantly working to optimise costs and bids.

Conclusion: Unlocking the Power of Meta’s Forecasting

Meta’s forecasting system is the engine behind the success of bid caps and cost caps. By leveraging real-time engagement data and vast historical insights, Meta helps advertisers maintain control over their spending while optimising for the highest possible performance. Whether you’re scaling a campaign or tightening cost control, understanding how Meta’s forecasting works is essential for getting the most out of your ad spend.

If you’re ready to explore how Meta’s forecasting can help you drive efficient growth, reach out for a consultation. We can help you harness these powerful tools to optimise your ad campaigns for profitability and scale.

This white paper breaks down how Meta’s bid caps and cost caps work, emphasising the role of forecasting and the impact of metrics like eCVR on ad performance. It serves as a comprehensive guide for advertisers looking to understand and leverage Meta’s advanced ad system for more effective campaigns.

As a savvy marketer, you understand that maximising returns while controlling costs is critical to running successful Meta (Facebook and Instagram) ad campaigns. One of the most effective tools in your arsenal for achieving this balance is cost controls, which include mechanisms like bid caps and cost caps. These tools allow you to manage your ad spend more strategically, ensuring you stay within budget while optimising performance.

In this white paper, we’ll explore why cost controls are essential for your Meta ad campaigns, how they help optimise budget allocation, and when and how to use them effectively.

What Are Cost Controls?

Cost controls in Meta advertising refer to settings that enable you to limit the amount Meta can bid for each impression or regulate the overall cost per action (CPA) in your campaigns. The two primary types of cost controls are:

• Bid Caps: These set a maximum bid for your ads, ensuring Meta doesn’t bid more than the specified amount in auctions for impressions.
• Cost Caps: These allow you to set a target cost per action (CPA), like a purchase or lead, and Meta’s algorithm adjusts bids to keep the average cost within your desired range.

By using these tools, you gain better control over your ad spend, allowing for flexibility in how you scale and manage your campaigns.

Why Cost Controls Matter

Meta’s advertising platform operates on a real-time auction system, where the highest bidder typically secures the best ad placements. Without cost controls, you leave Meta in charge of how much to bid on each impression, potentially leading to overspending. Cost controls provide the following key benefits:

1. Optimising Return on Ad Spend (ROAS)

Using cost caps ensures that Meta’s algorithm adjusts your bids to keep acquisition costs within a specific range. This enables you to optimise for the best Return on Ad Spend (ROAS) by maintaining acquisition costs that don’t erode profitability, ultimately maximising your profits.

2. Improved Budget Allocation

Cost controls allow for more efficient allocation of your ad budget. For example, a bid cap ensures that Meta doesn’t overspend on impressions that don’t align with your profitability goals. This means your budget is spent on impressions that are more likely to convert at a price point that works for your business.

Example:

If you set a bid cap of £50, Meta’s algorithm will never bid more than that for an impression. This ensures that your ads are served only when they have a strong chance of driving a conversion at your desired cost. Without this control, you could pay £60 or more for the same impression, reducing your overall effectiveness.

3. Controlling Customer Acquisition Cost (CAC)

With cost caps, you can directly control your Customer Acquisition Cost (CAC) by setting a maximum amount you’re willing to spend to acquire a new customer. This prevents overspending on impressions that don’t align with your CAC targets.

Example:

If your target CAC is £70, Meta’s algorithm might go beyond that without a cost cap, leading to unsustainable acquisition costs. By setting a cost cap, you ensure that Meta’s bids stay within a range that keeps your campaigns profitable.

4. Increasing upside potential and minimising downside risk

• Advertising is an auction, and we’re selling to real people. Performance fluctuates depending on real time events, and many different factors. By utilising cost controls, we can massively increase the upside potential of our campaigns, by setting an extremely high campaign budget, on good days in the market Meta will spend the entire budget at our target CAC. On the flip side, on quieter days in the market, public holidays/busy times etc, Meta will simply pull back spend, and remain efficient. Using highest volume/lowest cost, Meta will spend the entire daily budget on bad days giving us hugely unprofitable days. 1 inefficient day can wildly change our P&L for the whole month.

When and How to Use Cost Controls

While cost controls can provide excellent results, they must be used strategically to unlock their full potential. Below are some best practices for implementing cost controls effectively:

1. Scaling Campaigns

When scaling a campaign, controlling acquisition costs becomes critical. Cost caps help you increase your budget without disproportionately inflating your costs, ensuring that scaling doesn’t come at the expense of profitability.

2. Long-Term Profitability

For brands focused on sustainable growth, keeping acquisition costs under control is essential. Cost caps allow you to maintain profitability over time by ensuring that conversion costs stay within a manageable range.

3. Combining Bid Caps and Cost Caps

One challenge marketers face is balancing auto-bid campaigns with cost-controlled campaigns. If most of your budget is allocated to auto-bid campaigns, your bid cap campaigns may not receive enough spend. To avoid this, allocate at least 50% of your budget to campaigns using cost controls, ensuring they receive sufficient delivery.

Example:

If your total ad budget is £10,000, ensure that at least £5,000 is dedicated to campaigns with bid or cost caps. This allows Meta’s system to optimise your spend for lower-cost impressions, giving you better results for your money.

Pitfalls to Avoid with Cost Controls

While cost controls are highly effective, they can become counterproductive if not used carefully. Here are some common pitfalls to avoid:

1. Setting Caps Too Low

If your bid caps or cost caps are set too low, your ads may not get enough visibility, leading to limited impressions and poor delivery. Ensure your caps are realistic, aligned with historical performance data and industry benchmarks.

2. Over-relying on Caps During High-Competition Periods

In periods of high competition, such as during major sales events or holidays, strict cost controls may prevent you from competing effectively. Consider adjusting your caps during these periods to ensure you can still win prime placements while maintaining overall profitability.

3. Giving in too early

The most common mistake people make when using cost controls is giving in too early, a few days of £0 spend and moving back to lowest cost campaigns. We have to play around with the cap for some time before we find the sweet spot of profitable spend.

Conclusion: The Strategic Power of Cost Controls

Cost controls are a vital tool for ensuring your Meta ad campaigns run efficiently while driving profitable results. Whether you’re scaling your campaigns, optimising ROAS, or controlling CAC, cost controls allow you to manage your budget effectively and maximise the impact of your ad spend.

If you’d like to explore how to implement cost controls for your Meta campaigns or need help optimising your ad strategy, we’re here to assist. Get in touch, and we’ll work with you to drive sustainable growth and maximise your marketing budget.

At Social Nucleus, we are dedicated to helping direct-to-consumer (DTC) ecommerce brands scale in a sustainable and profitable way. Through optimisation models, we have successfully driven incremental growth for our clients, particularly through Meta’s advertising platforms. In this edition of our newsletter, we will dive into why we prioritise the 7-day click optimisation window, avoid using the 7-day click and 1-day view model, and in which situations a 1-day click optimisation might be appropriate. Our goal is simple: ensure every click adds measurable value.

The Importance of Incremental Growth in DTC Advertising

For ecommerce brands, the objective is clear: growth. But sustainable, long-term growth depends on incremental improvements, small but consistent gains that accumulate into significant results over time. Incremental growth ensures that every advertising effort contributes measurably to business objectives, making scaling both profitable and
sustainable.

Choosing the right optimisation model is central to achieving this. At Social Nucleus, we primarily use the 7-day click window to focus on high-intent, incremental actions. In specific cases, we may consider a 1-day click optimisation model. Let’s explore why these choices matter.

Why We Use 7-Day Click as Our Primary Optimisation Model

The 7-day click optimisation model focuses on high-intent actions that reflect consumers who are more likely to convert. Here’s why it is the best fit for scaling DTC brands:

1. Aligns with Consumer Behaviour

The 7-day click window is well-suited to typical ecommerce buying behaviour, where consumers often take time to consider their options before making a purchase. Whether comparing prices or considering alternatives, many customers don’t make immediate decisions. Allowing for up to seven days from the initial click captures higher-intent buyers who may take longer to convert but are still valuable.

2. Greater Control Over Incrementality

The 7-day click model provides clearer attribution, focusing on actions that reflect meaningful engagement. By only tracking clicks, we can measure the incremental impact of our efforts. This ensures that conversions are more likely driven by advertising and not merely passive views, giving us confidence that our spend is contributing to growth.

3. Cleaner, Actionable Data

With the 7-day click model, we avoid passive data points like view-through conversions. The data we gather is cleaner and more actionable, allowing us to optimise for high-quality clicks that drive revenue. By focusing on active engagement, we ensure that Meta’s machine learning algorithms optimise for users who are likely to convert, improving long-term campaign performance.

When using the view window, this skews ad account data to create cases like capo/ other big spenders where the ad account ROAS is better then blended ROAS which creates confusion. Using click only attribution ensures that the ad account aligns more with backend numbers.

Why We Avoid the 7-Day Click and 1-Day View Model

The 7-day click and 1-day view model can be tempting because it tracks both clicks and views, but it comes with notable drawbacks:

1. Lower Incremental Value

This model includes passive views, which can dilute the incremental value of each conversion. Users who simply see an ad may not be actively considering a purchase. By including these passive engagements, the model makes it harder to accurately assess the real value your ads provide.

2. Overestimation of Impact

The 1-day view component can inflate your performance metrics, as conversions might be falsely attributed to users who saw an ad but were already planning to purchase. This leads to an overestimation of impact, making it harder to optimise for true, measurable growth.

3. Focus on Intent

We prioritise high-intent clicks over passive views. While awareness is important, it’s not the goal when optimising for conversion-driven campaigns. We want every click to reflect a strong likelihood of conversion, and the 7-day click and 1-day view model doesn’t align with this goal.

Not only does the 1 day view window mislead us as media buyers, but it also makes the machine lazy and directs it to start optimising for view through conversions, rather than meaningful click conversions.

When 1-Day Click Might Be Appropriate

Though we typically rely on the 7-day click model, there are instances where a 1-day click optimisation window might make sense. This model is suitable when purchase decisions are made quickly, such as with low-cost or impulse-buy products.

Use Cases for 1-Day Click:

• Impulse Purchases: If your brand sells items like fashion accessories or consumables, consumers are more likely to make a decision immediately after seeing an ad. A 1-day click model captures these rapid conversions and ensures we’re optimising for quick, intent-driven actions.
• Frequent Purchases: For brands with products that have a shorter purchase cycle or lower price point, the 1-day click model may help focus on immediate buyers rather than those who need more time to consider their options.

However, for higher-cost products or those with longer consideration periods, the 7-day click model is generally more appropriate. It allows for a fuller picture of customer intent and behaviour, ensuring that we capture those conversions that take a few days to finalise.

Making the Machine Work Hard for Every Click

At the heart of our optimisation strategy is the belief that every click should count. We strive to make the machine learning algorithms that power advertising platforms “work hard” to ensure each click reflects high-intent behaviour. By focusing on models like 7-day click, we maximise efficiency, ensuring that ad spend is tied to incremental growth.

When Meta’s algorithms work harder to identify and target high-value users, we reduce waste on low-intent clicks and passive impressions. This leads to more effective ad spend, higher ROI, and sustainable growth for your brand.

Final Thoughts

As your ecommerce advertising partner, our mission is to align our strategies with your business’s growth goals. By selecting the right optimisation models and focusing on incrementality, we help your brand scale without wasting spend on low-value clicks or passive
engagements. While the 7-day click window is our primary approach, we’re flexible and adjust strategies to meet the unique needs of each client.

It’s not about casting the widest net but about focusing on quality, ensuring that every click we drive contributes to incremental growth and profitability.

Here’s to your continued success and growth. As always, we’re here to optimise, scale, and help you thrive.

In today’s highly competitive ecommerce landscape, your website is one of the most critical tools for turning visitors into paying customers. Optimising your site for conversions not only boosts revenue but also improves the return on your marketing investments. This white paper outlines essential best practices that will help enhance your website’s ability to convert traffic into sales.

1. Simplify Navigation and Structure

A well-organised, easy-to-navigate website is crucial for creating a seamless user experience. Reducing friction for users leads to higher conversion rates.

• Surface Primary Links: Ensure key product categories and links are easily accessible in your navigation bar. Avoid the use of hamburger menus on desktop versions to make navigation more intuitive.
• Use Solid Colours for Navigation: A solid colour background for your navigation bar helps improve contrast and visibility, particularly on mobile devices, where clarity is essential.

A clean, straightforward structure ensures visitors can quickly find what they’re looking for, improving the likelihood of converting them into customers.

2. Optimise Product Pages for Conversions

Your product pages are the heart of your website when it comes to driving sales. A well-optimised product page encourages users to take action and add items to their cart.

• High-Quality Images: Use detailed product images, showcasing multiple angles and user-generated content (UGC) where possible to build trust.
• Social Proof: Display product reviews, “Best Seller” badges, and ratings prominently under product titles to enhance credibility and trustworthiness.
• Clear CTAs: Make “Add to Cart” buttons large, highly visible, and in vibrant colours to catch the user’s attention and prompt action.

By presenting products in an appealing and transparent way, you can better guide visitors towards making a purchase.

3. Leverage Incentives and Urgency

Creating urgency and offering incentives are proven methods to encourage quicker buying decisions.

• Free Shipping Progress Bars: Include a progress bar that shows customers how close they are to qualifying for free shipping, motivating them to add more items to their cart.
• Low Stock Alerts: Show low stock alerts to create a sense of urgency, encouraging users to complete their purchases before the product sells out.

Tactics like these help reduce hesitation and speed up the customer decision-making process.

4. Streamline the Checkout Process

Cart abandonment is a common challenge for ecommerce sites, often caused by complex or confusing checkout processes. Simplifying checkout can dramatically improve your conversion rates.

• Security Icons: Display security icons, such as a lock symbol, near the “Checkout” button to reassure users that their payment information is safe.
• Streamline Payment Options: Offer a few clear and simple payment options rather than overwhelming users with too many choices, which can lead to decision paralysis.

A faster, more straightforward checkout process minimises drop-offs and increases the likelihood of completed purchases.

5. Harness User-Generated Content (UGC)

People trust other customers’ experiences more than polished marketing materials. Leveraging UGC helps build credibility and trust.

• Swipeable UGC Carousels: Display user-generated content in swipeable carousels, featuring customer photos and usernames to highlight authenticity.
• Product Reviews with Photos: Combine customer reviews with real-life photos of your products being used to demonstrate their value in a practical context.

UGC provides social proof, which is a powerful tool in nudging potential customers towards a purchase.

6. Improve Technical Performance for Faster Loading Times

Website speed is critical for both user experience and SEO performance. A slow site can frustrate visitors and lead to higher bounce rates, affecting conversions.

• Optimise Image Sizes: Compress large image files and use the correct formats to ensure faster page loading times without sacrificing image quality.
• Minify HTML, CSS, and JavaScript: Reducing the size of these files helps improve load speed and site performance, which is crucial for keeping visitors engaged.

Fast, responsive websites lead to better user satisfaction, higher engagement, and increased conversions.

7. Test and Iterate for Continuous Improvement

To ensure your site is continually optimised for conversions, regular testing and analysis are essential.

• A/B Testing: Run A/B tests on key elements such as product pages, navigation, and checkout processes to identify which designs and layouts convert better.
• Monitor Site Metrics: Keep a close eye on metrics like bounce rates, conversion rates, and average time spent on the site to identify areas for improvement and adjust your strategies accordingly.

Testing allows you to continuously refine and optimise your website based on data-driven insights.

Conclusion

Optimising your ecommerce website for conversions requires a focus on both user experience and technical performance. By following the best practices outlined above, you can transform your site into a more effective sales tool, turning visitors into loyal customers and maximising the return on your marketing investments.

If you have any questions about implementing these strategies or would like to discuss how to optimise your website for better conversions, don’t hesitate to reach out.

I hope you’re doing well! Following up on our recent discussion about optimisation models and driving incremental growth, I wanted to share insights on how to plan, monitor, and leverage your backend data to ensure sustainable growth for your brand.

At the core of successful growth is ensuring that your incremental media buying efforts are accurately measured and evaluated. This requires focused attention in three key areas: establishing a single source of truth, identifying a clear North Star goal, and aligning all media channels with these standards. Additionally, we’ll discuss why relying solely on in-platform ROAS (Return on Ad Spend) can be misleading and why incremental testing is crucial for understanding the true value each channel provides.

1. Establish a Single Source of Truth

When scaling your brand, it’s essential to have a reliable, unified source of data that you can trust. A single source of truth ensures consistency in reporting across all channels and allows for accurate measurement of the incremental value delivered by your campaigns.

Key Benefits:

• Eliminates Conflicting Data: Using multiple tools for measurement can lead to discrepancies, making it difficult to assess the real impact of your campaigns. A single source of truth removes this ambiguity, ensuring all stakeholders are working with the same, reliable data.
• Better Decision-Making: Clean, consistent data allows you to make well-informed decisions about optimising your media spend and driving incremental growth.
• Seamless Reporting: A unified data source simplifies reporting, making it easier to compare performance across different channels, a vital component of effective campaign analysis.

Actionable Strategy:

Integrate backend sales data with advertising data to ensure every action contributes to measurable business outcomes. This alignment between backend and marketing efforts is crucial for identifying and driving incremental value.

2. Identify Your North Star Goal

Your North Star goal serves as the guiding metric for all media efforts. It’s not just a revenue target or a vanity metric; it’s a reflection of long-term growth for your brand. This goal could represent customer lifetime value (CLTV), repeat purchase rate, or a specific profit margin.

How to Use Your North Star Goal:

• Track Progress Regularly: Use your single source of truth to measure how your media efforts are contributing to this goal. Regular tracking ensures all teams and channels are aligned towards the same outcome.
• Align Incremental Growth: Every campaign should be evaluated based on how it moves your brand closer to this goal. For instance, if your North Star is CLTV, measure how ad spend impacts not only immediate conversions but long-term customer retention and repeat purchases.
• Prioritise Long-Term Success: Focus on strategies that drive sustainable growth. Short- term wins can be tempting, but aligning with your North Star goal ensures long-term profitability and scalability.

Actionable Strategy:

Ensure all campaigns are assessed based on their contribution to your North Star goal, tracking incremental performance through data-backed insights.

Live example:

– For a health/wellness client of ours with a subscription product and a 300% increase in LTV within 3 months of first purchase, our north star is NCPA. This is the holy grail metric, upon which all decisions are made. With every single change, we ask on a weekly basis: “How did this change affect our NCPA?”

– Moving spend to a new channel – How did this affect our overall NCPA?
– Increasing number of weekly email campaigns – How did this affect our overall NCPA?
– Scaling meta spend by 30% – How did this affect our overall NCPA?

Having too many north star metrics creates confusion when deciding if changes have had a positive impact or not.

3. Why In-Platform ROAS Should Not Dictate Business Decisions

While ROAS is a common metric for assessing ad performance, relying solely on in-platform ROAS can lead to misleading conclusions. Here’s why:

Key Issues with ROAS:

• ROAS Can Be Misleading: Platforms like Facebook and Google track and report ROAS based on direct interactions they can measure. However, this can create attribution bias, as they may claim credit for conversions influenced by other channels. A high in-platform ROAS does not necessarily indicate true incremental growth.
• Double Attribution: Multiple platforms may claim credit for the same conversion. For example, if a customer interacts with both Facebook and Google before making a purchase, both platforms might take credit, leading to inflated results.
• Incrementality is Key: The best way to measure true channel performance is by running incrementality tests. These tests determine how much additional value a channel provides that wouldn’t have occurred without the ad spend, giving a clear picture of real growth.
• ROAS is a ‘revenue’ metric, and not a ‘profit’ metric. It doesn’t take into account your transaction fees/ COGS/ fulfilment fees/ returns etc so without context, it doesn’t actually mean that much…
• ROAS does not equal GROWTH. By using ROAS as a north star metric, it’s very easy to start making ad account decisions which do not align with the company’s goal of profitable revenue growth. IE, spending more on bottom of funnel/ retargeting,

Why Incrementality Testing Matters:

• Prove Real Growth: Incrementality testing, through methods like A/B testing with control groups, reveals whether media spend is driving actual growth.
• Use ROAS as a Guide, Not the Final Decision: ROAS can still help understand campaign efficiency, but decisions should be based on incremental value, ensuring every pound spent drives sustainable, long-term growth.

Actionable Strategy:

Run incrementality tests regularly to evaluate the real impact of your media channels and ensure that each contributes to your North Star goal.

4. Monitor Incremental Value Across Media Channels

Not all media buying efforts deliver the same value. To optimise growth, it’s important to assess the incremental contribution of each media channel, particularly when measured against your North Star goal.

How to Monitor Incremental Growth:

• Channel-Level Analysis: Dive deep into backend data to evaluate how each channel performs in driving high-value, long-term customers. This will help determine where to increase spend and where to optimise.
• Focus on Quality of Conversions: Incremental growth is about quality, not just quantity. Go beyond immediate conversions and assess whether a channel brings in customers likely to contribute to long-term growth.
• Be Agile: Incremental insights allow for real-time optimisation. Adapt your media spend and strategies based on the most current data to maximise efficiency and reduce waste.

Actionable Strategy:

Continuously monitor incremental performance across channels, adjusting strategies and spend to focus on areas delivering the greatest long-term value.

Conclusion

By establishing a single source of truth, setting a clear North Star goal, and regularly monitoring incremental value across media channels, you can drive sustainable growth for your brand. Remember, in-platform ROAS should serve as a guide, not the sole basis for decision-making. Instead, focus on incrementality testing to prove that each channel is contributing real, measurable growth.

Let’s schedule a follow-up to review your current data and discuss how we can align your media efforts with these strategies. Together, we can ensure every pound spent is contributing to meaningful, long-term success for your brand.

In today’s increasingly complex digital landscape, ecommerce brands are constantly seeking new avenues for growth. A popular strategy for many is to diversify both their ad spend and sales channels. While this approach can unlock new opportunities, it also introduces inefficiencies that can hinder growth. In this white paper, we will explore why scaling efficiently is critical for long-term success and how over-diversification in both sales channels and ad spend can sometimes do more harm than good.

Channel Diversification: Striking a Balance Between Amazon and Your .com Store

Many brands are choosing to expand their presence across multiple platforms such as Amazon, online retailers, and wholesale in an effort to capture demand from a broader range of customers. However, one challenge that often arises from this diversification is the tendency to silo each channel managing them independently in terms of profit and loss (P&L) and media spend.

Siloing and Its Impact on Efficiency

For instance, many brands fail to allocate Meta ad spend towards driving sales on Amazon, even though both channels target the same audience. This raises a critical question: Is the incremental lift worth it?

As Amazon sales increase, brands often experience a corresponding decline in their .com sales, as customers prefer the convenience and speed of purchasing from Amazon. This creates a trade-off where the growth on Amazon could cannibalise .com revenue. It’s essential to assess whether the additional sales gained from Amazon justify the potential losses on your own website.

Measuring Incremental Lift

When diversifying into new distribution channels, brands need to account for how these changes affect their total revenue realisation. Many fail to measure the incremental lift that paid media brings to each channel, making it difficult to determine whether the overall impact of diversification is positive or negative.

Actionable Solution:

• Evaluate Channel Impact: Analyse the incremental lift across all platforms, measuring the effect that ad spend has on both your .com store and Amazon performance. Ensure that you’re balancing ad spend effectively between channels to avoid cannibalising sales.

Diversification of Ad Spend: Is It Really Helping Your Bottom Line?

Another common approach is to diversify ad spend across multiple platforms. While this may sound appealing, shifting budget away from high-impact channels like Meta and Google to lower-impact platforms such as TikTok, Snapchat, or TV often results in reduced efficiency.

“Now we’re bigger, we feel like we should be spending in more places.” – This is a huge misconception. Being bigger doesn’t mean you need to diversify channel spend – Its vital to remember what got you to this stage in the first place. Focus on the basic channels. We have many clients spending north of £1m a year on only meta alone, you do not need to diversify channel spend to grow.

The Efficiency Trade-Off

Consider this scenario:

• In 2023, a brand allocates 80% of its budget to Meta and 20% to Google, both of which deliver high returns on investment (ROI).
• In 2024, the brand diversifies its spend by moving 30% of the budget into TikTok, Snapchat, and TV.

This shift frequently leads to less effective results because brands are moving budget away from their most efficient channels and into platforms that are harder to measure or provide lower returns. While diversification can open up new growth opportunities and help increase volume, it often comes at the expense of efficiency.

Platforms like TikTok or Snapchat often receive smaller portions of ad spend for a reason they tend to generate lower ROI than more established channels like Meta and Google. Brands that over-diversify their ad spend often find that their media strategy becomes unnecessarily complex, while yielding lower returns.

The measurement issue with additional marketing
channels

Every single channel has a different recommended attribution window:

Meta: 7 day click, 1 day view
Google: Unsure?
TikTok: 7 day click
Pinterest: 28 day view
Snapchat: 28 day view

What does this mean? You could be pumping budgets up based on in channel metrics, when really all of your marketing spend is being measured differently.

Actionable Solution:

• Focus on High-Impact Channels: Prioritise ad spend on platforms that deliver measurable, high returns. Test smaller portions of your budget on new channels, but ensure that the majority of your ad spend goes towards platforms that drive results.
• Data-Driven Decisions: Use data to assess the performance of each platform and allocate spend accordingly. Resist the temptation to diversify purely for the sake of variety; instead, focus on driving the best possible ROI.
• Always having north star metrics we measure come rain or shine: Contribution margin, net profit, blended ROAS, NCPA. Whatever the north star measurement is for your business, live and die by this and come back to it as the primary decision maker when asking yourself ‘is this new channel efficient?’ “How did moving 15% of our media spend affect our blended ROAS?”

Do you have the correct content production systems for different channels?

Building a creative production system for Meta is a huge challenge, and only a small % of the industry has this right. To then underestimate the importance of doing this for new channels, is a mistake. Each channel requires a different kind of content to see success because consumers don’t go to each marketing channel to see the same content. Tiktok content and IG content is polar opposite to one another, as is FB content, as well as snapchat. So before you branch out into channel diversification, are you in a position to produce the right amount of appropriate content to see success?

Rising CPMs and Managing Meta Costs

As Cost per Thousand Impressions (CPM) on platforms like Meta continues to rise, brands are faced with the challenge of scaling efficiently while maintaining profitability. Without cost controls, increasing ad spend in the face of rising CPMs can quickly lead to inefficiency and wasted resources.

Making Incremental Spend More Efficient

There are several strategies that brands can employ to scale efficiently on Meta while keeping costs under control:

1. Set Cost Controls: Establish strict cost controls aligned with your key performance metrics. By setting bid caps and CPA targets, you can ensure that your ad spend remains efficient as you scale.

2. Gradual Budget Increases: Rather than dramatically increasing your ad spend, make incremental adjustments only when your campaigns meet or exceed your target performance metrics. This helps ensure that your growth is sustainable.

3. Continuous Creative Testing: To avoid ad fatigue and keep your audience engaged, regularly test new creatives. By introducing fresh ads into your campaigns, you’ll increase the chances of finding new winning combinations that drive better results.

4. Relentless Testing: Increase the number of variables in your creative testing process. Brands like Loop have more than 5,000 live ads in their Meta account to ensure consistent results and maintain a competitive edge.

5. Creative Production System: Develop a scalable system for rapidly producing and testing new creatives. This allows you to continuously iterate and improve results over time, while keeping your campaigns fresh and engaging.

6. Having what we call a ‘scaling margin’ – Only scaling when your campaigns are ABOVE your desired target, taking into consideration the fact that a slight dip is inevitable when scaling. IE, blended ROAS needs to be at a 2.7, don’t scale ad spend at a 2.7, scale it at a 3x or above allowing for a small margin for efficiency to dip slightly, but keep us in the green.

Actionable Solution:

• Structured Creative Testing: Implement a robust creative testing framework that allows you to frequently rotate new ad formats and messages. This will help combat rising CPMs by ensuring that your ads remain efficient and cost-effective.
• Testing creatives using cost controls – Creative testing is the biggest cost centre for most ecom brands using Meta ads, if we test using cost control campaigns and trust in Metas machine algorithm to only spend on winners, we still find winners, but spend isn’t forced on losers which removes wasted spend = Improves efficiency.

Conclusion: Focus on Efficiency Before Diversifying

While diversification offers growth opportunities, it’s important to prioritise efficiency before spreading your resources too thin. Expanding into new sales channels or allocating budget across multiple ad platforms can seem like a smart strategy, but without careful planning, it often leads to inefficiencies that reduce overall effectiveness.

By maintaining a focus on your core, high-performing channels and only diversifying when you fully understand the potential impact, you can achieve sustainable growth without sacrificing profitability. Remember, efficiency should always be your primary goal, with diversification playing a secondary role in supporting your long-term growth strategy.

If you’re looking to refine your ad strategy or improve the efficiency of your incremental spend, our team is here to help. We specialise in helping ecommerce brands scale efficiently without compromising their bottom line. Get in touch today to learn more.

 

In the quest for expansion, many ecommerce brands naturally turn to diversification whether through exploring new sales channels or spreading their ad spend across various platforms. While diversification can offer access to new audiences and growth opportunities, it also introduces the potential for inefficiencies that can negatively impact profitability. This white paper will explore how over-diversification can complicate results and reduce overall effectiveness, offering insights into how brands can balance growth with efficiency to achieve sustainable success.

The Pitfalls of Channel Diversification: The Amazon and .com Conundrum

A common approach for ecommerce brands is to diversify sales channels by expanding into Amazon, online retailers, and wholesale, while continuing to invest heavily in Meta ads for their own .com stores. On the surface, this seems like a logical move to increase reach and capture a broader customer base. However, this strategy carries the risk of siloing your channels, which can create inefficiencies and reduce profitability.

The Silo Effect: Cannibalising Your Own Revenue

Amazon and your .com store often cater to the same audience, yet many brands fail to integrate their strategies across these platforms. A significant portion of Meta ad spend is directed solely at promoting the .com store, while the Amazon marketplace receives little to no direct support. As a result, while sales on Amazon may increase, the revenue generated from your .com store may start to decline, as customers gravitate towards the convenience of purchasing from Amazon.

This raises a crucial question for ecommerce brands: “Is the incremental lift from Amazon worth the potential loss in .com sales?” To answer this, brands need to carefully evaluate whether the additional sales generated through Amazon justify the reduction in .com revenue.

Measuring Incremental Lift

When diversifying distribution channels, it’s essential to consider the overall impact on revenue realisation. Many brands fail to measure the incremental lift that paid media provides across all platforms, including Amazon, .com, and other retailers. Without this data, brands may be unknowingly allocating budget inefficiently, supporting channels that don’t provide enough return to justify the loss in another area.

Actionable Solution:

• Measure and Analyse: Implement systems that allow you to track and measure the impact of paid media on all sales channels. Analyse how increased investment in Amazon or other retailers affects your .com performance.
• Cross-Channel Strategy: Rather than siloing sales channels, consider an integrated approach that aligns your ad spend with the total customer journey, from discovery to purchase across all platforms.

Diversification of Ad Spend: Balancing Risk and Reward

Many brands fall into the trap of believing that spreading their ad spend across multiple platforms such as TikTok, Snapchat, or TV is essential for future-proofing their business. While diversification can open doors to new audiences, it can also dilute your overall advertising
effectiveness, particularly if it draws resources away from high performing channels like Meta and Google.

The Efficiency Trade-Off

For example, let’s say in 2023 you allocate 80% of your ad spend to Meta and 20% to Google, where you consistently see the highest return on investment (ROI). In 2024, you decide to diversify, moving 30% of your budget to TikTok, Snapchat, and TV. While these platforms may
offer growth opportunities, the return on investment is typically lower, and shifting funds away from your most effective channels can negatively impact overall efficiency.

Many brands learn the hard way that channels like TikTok or Snapchat, while valuable for building awareness, don’t perform as well in driving direct, measurable sales. Therefore, while it’s important to explore new avenues, it’s equally critical to maintain the efficiency of your existing high-impact channels.

Actionable Solution:

• Prioritise High-Impact Channels: Focus the majority of your ad spend on channels that deliver the highest return on investment. Consider smaller, controlled tests on emerging platforms, but avoid large shifts that could compromise overall efficiency.
• Track Ad Spend Performance: Use data-driven insights to track the performance of each channel and reallocate spend dynamically, ensuring that your budget is always working towards maximum efficiency.

Navigating Rising CPMs on Meta: A Path to Scalable Growth

As Cost per Thousand Impressions (CPM) rises across platforms like Meta, scaling efficiently becomes more difficult. Brands that fail to implement cost controls or carefully manage their budgets risk spending more for diminishing returns. However, there are ways to make incremental ad spend more efficient and avoid the common pitfalls of scaling.

Strategies for Efficient Scaling:

1. Set Cost Controls: Implement clear cost controls based on your performance metrics. By establishing bid caps and target cost-per-acquisition (CPA) limits, you can prevent overspending as you scale.

2. Increase Budget Strategically: Only increase your ad spend when your campaigns are performing at or above your target metrics. Avoid throwing money at underperforming campaigns in the hope that more spend will improve results.

3. Expand Creative Testing: Constantly test and iterate on your creative assets to keep ad performance high. This can help combat ad fatigue and ensure that your audience remains engaged over time.

4. Test Relentlessly: Introduce variables in your ad campaigns new formats, copy, visuals, and CTAs to improve performance. Brands like Loop have run over 5,000 live ads in their Meta accounts to stay competitive and maintain efficiency.

5. Develop a Creative Machine: Build a system that allows for rapid production and testing of new ad creatives. This will help you quickly identify what works and scale those successful creatives more efficiently.

Actionable Solution:

• Creative Testing Framework: Develop a structured framework for creative testing that allows you to continually refresh your ads. By consistently testing new ideas, you can stay ahead of creative fatigue and ensure that your ad spend remains efficient.
• Incremental Spend: As you increase your ad spend, focus on making small, data-driven adjustments rather than large, sweeping changes. This helps you maintain efficiency while scaling.

Conclusion: Efficiency First, Diversification Second

While diversification is often viewed as a critical component of growth, over-diversification can introduce inefficiencies and complicate your results. The key to long-term, sustainable growth lies in balancing new opportunities with proven, high-performing strategies. Brands should
focus on maximising efficiency in their core channels before expanding into new platforms or sales channels.

By following the principles outlined in this paper measuring the impact of diversification, prioritising high-return channels, and managing rising CPMs on Meta ecommerce brands can scale efficiently without compromising their bottom line.

If you’re looking for tailored advice on refining your ad strategy or scaling efficiently, our team of experts is ready to help. We specialise in developing data-driven strategies that maximise growth while preserving profitability. Get in touch to learn more.

 

Scaling Meta (Facebook and Instagram) campaigns is a key objective for many marketers, but doing so without a solid understanding of how Meta’s spending tiers impact your Customer Acquisition Cost (CAC) can lead to inefficiency. Meta does not distribute your budget evenly but rather allocates it across different audience segments, known as spending tiers or tranches. As your spending increases, Meta shifts your budget into higher, less efficient tiers, driving up your average CAC.

This white paper will explore how Meta’s spending tiers work, how they affect your CAC, and how you can optimise your campaigns to maintain efficiency as you scale.

How Spending Tiers Work

Meta’s ad platform divides audiences into segments or spending tranches based on how likely they are to convert. Your ad budget is progressively allocated across these tranches:

• Lower tranches consist of your most responsive and cost-effective audiences. These users are the easiest to convert, resulting in a lower CAC.
• As your spend increases, Meta moves into higher tranches, targeting less efficient audiences. These users are harder to convert, leading to higher acquisition costs.

As a result, spend and efficiency have an inverse relationship. The more you spend, the more of your budget gets allocated to higher-cost, less responsive audience segments, which increases your overall CAC.

Example of Spending Tiers in Action

To illustrate the effect of spending tiers, let’s take a scenario where your campaign budget is set at £10,000 per day:

• The first £5,000 of your budget might yield a CAC of £50, as it targets the most responsive, low-cost audience segments.
• The next £3,000 could push your CAC to £60 as your ads reach higher tranches with slightly less responsive users.
• The final £2,000 may push your CAC to £70 or higher, as this budget is spent on the least efficient and most expensive audiences to convert.

As you scale your spending, the budget shifts into more expensive audience tranches, which leads to diminishing returns on your investment and a rising CAC.

Reducing Spend to Improve Efficiency

One way to optimise your CAC and maintain efficiency is by reducing your budget to stay within the most cost-effective tranches. For example:

• If you reduce your spend from £10,000 to £7,000, you may keep your CAC in the £50 to £55 range. This prevents your budget from being allocated to the higher-cost audience segments, preserving efficiency and ensuring you only target users who are more likely to convert at a lower cost.

Key Takeaways

• Meta allocates your ad spend across tiers of audiences, with lower tiers being more responsive and cost-effective, while higher tiers are less efficient and more expensive to convert.
• As your total spend increases, Meta moves your budget into these higher-cost tranches, causing your CAC to rise.
• To optimise efficiency, monitor and adjust your budget to keep your spend within the lower, more efficient tiers.

By understanding how Meta’s spending tiers impact your campaigns, you can make more informed decisions about scaling while maintaining a healthy CAC and maximising your return on investment.

If you’d like to explore strategies for adjusting your budget to optimise efficiency or need help fine-tuning your Meta campaigns, don’t hesitate to reach out.

In the fast-paced world of ecommerce, businesses are constantly under pressure to grow, scale, and outperform their competition. While much of the focus is on rapid customer acquisition and encouraging repeat sales, one critical element of financial sustainability often gets overlooked: first order profitability.

First order profitability refers to a business’s ability to generate profit from a customer’s very first purchase. Achieving this milestone provides immediate cash flow, reduces reliance on future purchases, and creates a strong foundation for sustainable growth. This white paper explores the importance of first order profitability in the broader context of ecommerce and offers practical strategies to achieve it.

Why First Order Profitability Matters

First order profitability is the cornerstone of a resilient, scalable business model. Many ecommerce brands operate under the assumption that long-term success relies on acquiring customers at any cost, with profits materialising over time through repeat purchases. However, this approach presents several risks:

1. Uncertainty of Future Sales: There is no guarantee that a customer will return to make a second or third purchase. Focusing solely on lifetime value (LTV) without ensuring profitability from the outset puts businesses in a vulnerable position, particularly if customers fail to return.

2. Improved Cash Flow: Achieving first order profitability creates a healthier cash flow cycle, allowing businesses to reinvest more quickly into marketing and growth initiatives without relying on external funding or loans.

3. Reduced Risk: Businesses that generate profit from a customer’s first purchase are more protected from market fluctuations, changes in consumer behaviour, or economic downturns. This reduces the need for exceptionally high customer retention rates and gives companies more financial breathing room.

By ensuring that each new customer’s first purchase is profitable, ecommerce businesses strengthen their ability to scale efficiently and sustainably.

Key Strategies for Achieving First Order Profitability

Achieving first order profitability requires a well-thought-out approach, balancing customer acquisition costs (CAC), product margins, operational efficiency, and pricing strategies. Below are several actionable strategies that businesses can adopt to unlock first order profitability.

1. Set the Right Acquisition Costs

One of the most crucial factors in first order profitability is customer acquisition cost (CAC). Many brands overspend on advertising channels such as Meta (formerly Facebook) or Google Ads, driving up their CAC beyond sustainable levels. Without careful management, acquisition costs can easily outstrip the value of a customer’s first order.

Actionable Solution:

• Implement cost controls: Set bid caps within your ad campaigns to ensure you’re not overspending. This will help to maintain alignment between your marketing spend and your target CAC.
• Only scale when profitable: Ensure you are hitting your profitable CAC targets consistently before scaling ad budgets. Scaling too early can lead to higher acquisition costs and diminishing returns.

2. Focus on High-Margin Products

Profit margins are central to first order profitability. High-margin products allow businesses to cover acquisition costs while still generating a profit, even on the first transaction.

Actionable Solution:

• Promote high-margin SKUs: Direct your marketing efforts towards products that offer the highest margins. These products are more likely to deliver first order profitability, even after factoring in acquisition costs.
• Evaluate product lines: Regularly assess your product range to identify items that provide both high profit margins and customer demand. Consider bundling lower-margin products with higher-margin offerings.

3. Leverage Bundles and Upsells

Increasing the average order value (AOV) is an effective way to improve first order profitability. Bundling products or encouraging upsells can significantly raise the total value of each transaction, helping to cover acquisition costs.

Actionable Solution:

• Offer product bundles: Combine complementary products into bundles, offering a small discount to encourage customers to purchase more in one transaction. This not only increases AOV but can also enhance customer satisfaction by offering a complete solution.
• Encourage upsells and cross-sells: Use checkout prompts or recommendation tools to suggest additional or higher-value items, boosting the overall order size.

4. Optimise Shipping and Fulfilment Costs

Shipping and fulfilment can eat into your profit margins, particularly if you offer free or discounted shipping. Optimising these costs or incorporating them into your pricing strategy can help preserve profitability.

Actionable Solution:

• Introduce a free shipping threshold: Encourage customers to spend more by offering free shipping on orders over a certain value. This not only increases AOV but also helps offset shipping costs.
• Negotiate better rates: Work with fulfilment partners to secure more competitive shipping rates, or streamline your logistics to reduce operational inefficiencies.

5. Develop Efficient Creative Testing

Paid advertising plays a vital role in driving traffic, but over time, creative fatigue can cause ad costs to rise and returns to diminish. Continuous testing and optimisation of ad creatives help keep acquisition costs under control, improving first order profitability.

Actionable Solution:

• Establish a testing framework: Set up a structured process for testing new ad formats, visuals, and copy. By rotating creatives and optimising for performance, you can maintain a strong return on ad spend (ROAS) and reduce acquisition costs.

6. Diversify Acquisition Channels

Relying heavily on one acquisition channel, especially paid advertising, can limit your ability to achieve profitability. Expanding into other, lower-cost channels such as email marketing, affiliate marketing, or organic search can reduce CAC while improving overall profitability.

Actionable Solution:

• Invest in email marketing: Build email campaigns to nurture leads and re-engage past visitors. Email marketing offers a high return on investment (ROI) and can complement your paid acquisition efforts.
• Focus on SEO: Invest in search engine optimisation (SEO) to drive organic traffic. Ranking well in search results can reduce your dependency on paid ads, helping to keep CAC in check and boost profitability.

Monitor and Adjust Pricing Strategy

Your pricing strategy is a key factor in determining whether you achieve first order profitability. If your current pricing model doesn’t cover acquisition and fulfilment costs, it may be time to make adjustments.

Actionable Solution:

• Review pricing regularly: Ensure your product prices reflect the costs of customer acquisition, fulfilment, and other operational expenses. Periodic reviews can help you identify where small price increases may be necessary.
• Test price increases: Consider experimenting with minor price adjustments to determine whether your customers are willing to pay more. Often, small price increases won’t significantly affect conversion rates but can have a substantial impact on profitability.

Conclusion: A Framework for Sustainable Growth

In a competitive ecommerce environment, where customer acquisition costs are rising, first order profitability offers a path to sustainable, long-term growth. By focusing on controlling acquisition costs, promoting high-margin products, and optimising every step of the customer journey from pricing to fulfilment businesses can unlock profitability from day one.

Brands that master first order profitability will be in a stronger position to scale, with every new customer contributing positively to their bottom line. Implementing the strategies outlined in this paper can transform your business model from one reliant on repeat purchases for profit to one built on a solid, profitable foundation from the very first sale.

If you’re interested in optimising your ecommerce strategy to unlock first order profitability, our team is here to help. We specialise in maximising advertising efficiency, improving product margins, and driving sustainable growth. Get in touch to learn more.

 

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.