There is a renewed focus on the term ‘incrementality,’ as retailers set out to differentiate their retail media networks.
While the idea of measuring incremental lift is something marketers have been focused on for a long time, there has been an uptick in the usage of the term incrementality as the economy has worsened and marketing budgets have gotten tighter. In particular, companies ranging from Instacart to Albertsons are touting incrementality in their sales pitches more frequently, as they try to convince brands to spend their precious advertising dollars on nascent retail media networks.
For instance, Instacart, which generated over 30% of revenue from selling ads in 2022 according to the Information, previously told Modern Retail that “incrementality testing or lift studies” is one key area of focus for the company as it builds out its ad offerings. Instacart’s VP of ad product Ali Miller said incrementality is the “gold standard in terms of showing the actual impact or causal impact of ads on driving sales for our advertisers and brands.”
Similarly, Albertsons Media Collective’s vp of product and innovation Evan Hovorka told Chain Store Age recently that incrementality helps retailers justify the effectiveness of campaigns run on their retail media networks. Hovorka said “incrementality tells you not only did you make a sale, but how much of that total sale amount came as a result of the retail media network advertising. We can prove something like a customer was spending $10 a month on a product before the marketing campaign and then moved up to $12 a month after it.”
But while advertisers contend that investing in incrementality testing is a good way for platforms and retail media networks to stand out to advertisers, it is not a silver bullet. Platforms, for example, have difficulty incorporating incrementality metrics into the offline world. Additionally, there isn’t one universal standardized framework for measuring incrementality. In turn, that makes it difficult for brands and media buyers to suss out which incrementality statistics to trust.
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What is incrementality?
Technically speaking, the Media Rating Council defines incrementality as a measure of the true value created by any business strategy, determined by isolating and measuring related results independent of other potential business factors.
In other words, incrementality is the potential causal impact of marketing. According to Jeffrey Bustos, vice president of measurement addressability and data center at Interactive Advertising Bureau, incrementality is the ability to isolate the media spend when looking at things like sales, ROAS or any other type of conversion measure a brand is tracking.
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Jason Goldberg, chief commerce strategy officer at Publicis said incrementality often gains popularity in an economic downturn as focus shifts to how much actual sales or profit brands are getting for all the marketing activities they’re spending money on. “People get more interested in incrementality when budgets are tight, and people are trying to control costs, and they’re concerned about their profitability. So, in any economic downtime, you start looking at all spending more critically.”
Bustos also agreed that incrementality has become a growing focus for all advertisers, as they want to “minimize media waste” and really focus on what ads are driving that value for them.
“Due to the higher purchase intent that we see in retail media, incrementality is a good way for both brands and retailers to really gauge the success of their campaigns, and ensure that media efficiency, and focus on gaining market share on those incremental customers that were influenced by the ad. Ando, not focus so much on the customer that was already going to buy the product,” he explained.
Meanwhile, Goldberg said more retailers want to build retail media networks because it is typically more profitable and has higher margins compared to selling physical goods. Going by numbers, e-commerce giant Amazon has the largest retail media network today, which generates roughly $30 billion a year.
Goldberg pointed out that if a retailer is struggling to stay profitable, and inflation is taking a big bite out of its profitability and if the company is wondering — how do I make more money? — “The most appealing thing you could do is sell dollars of advertising.”
How does it help differentiate effectiveness of retail media networks?
Retailers want to give brands evidence that spending money on their retail media network will make them more money — and incrementality metrics are one way to do that.
Goldberg said incrementality is a measure that can show brands “real math” that proves “investing in a retail media network will make them money and not just hypothetical money that you’ll never see, but money that actually shows up in your GAAP reported income statement.”
According to Bustos, the way for retail media networks to stand out today “is by ensuring that there’s specific standards on non-derived metrics like viewability, attribution and incrementality and that’s how you would differentiate yourself.”
Brendan Grove, chief technology officer at adtech firm Prizeout, said that incrementality in some ways helps brands get a fuller picture of their marketing profile at a macro level. “Then, it is easier to start to test kind of holistically if I remove spend here increased spend here, what happens and what’s the effect post campaign on that retail segment,” he said.
Grove compared incrementality to a “broken slot machine” since it helps advertisers decide where and whether to cut back and see if they lose sales. But it also helps brands discover new channels so they can invest in those channels and see if more money comes out.
Instacart has been touting its incrementality tests to show brands how much conversion its sponsored ad campaigns are driving. Most recently, the platform posted a blog about how the company Reckitt saw an incremental sales lift of 16.5% from their ad campaign on Instacart that ran in the third and fourth quarter of 2022.
What are the limitations of incrementality metrics?
IAB’s Bustos said that from an attribution perspective, brands should be aware of the issue of viewable ads, and what meets the standard of a viewable impression. “They should only attribute sales to a viewable ad,” he said. Bustos suggested that retail media networks should ideally comply with MRC’s standards for viewability of an ad.
“But that’s really what brands need to be aware of when they’re looking at conversions, because essentially, if you don’t have that viewability of the ad attributed to the sale, then incrementality offers another way to quantify the impact and outcome of the campaign to measure the results of the campaign,” Bustos said.
Another issue is that brands have struggled to find a way to do incrementality testing offline. That often leads to unanswered questions such as: “Is this better incrementality than buying a billboard or better incrementality than remodeling a store or building a new store?” Goldberg said.
There are also issues with measuring incrementality because there are lots of methodologies, formulas and datasets involved. And, invariably, no two measurements of incrementality tend to use the same system. “Marketers and CFOs want to compare these things apples to apples, and that’s not possible,” Goldberg said.
Goldberg said the way platforms and vendors arrive at these numbers is so vastly different that a brand can’t simply pick the platform that claims to give them the most incremental lift and spend money there. “Most of the incrementality that we talk about is what’s called channel silo incrementality. And that means what’s the incrementality of buying an ad on one particular channel, versus not buying an ad on that channel.”
Thus, according to Goldberg, it’s not actually comparing the effectiveness of spending on one platfrom versus another. “It’s merely saying, how many additional sales do I get if I buy a Google product listing ad or if I buy a YouTube shoppable ad,” he said.