Vendors Shouldn’t Fear Incrementality

Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Alexei Chemenda, chief revenue officer for apps and managing director, US, at Adikteev.

Most marketers use return on ad spend (ROAS) as the benchmark for their retargeting campaigns. The problem here is that if they are targeting active mobile users to drive more engagement, they could be wasting impressions on customers who would have converted anyway.

Another way to measure is incrementality, which gauges revenue lift provided by advertising spend. Incrementality is not well understood in the marketplace. Many advertisers have heard the term, but it is not a metric they are commonly using. To calculate incrementality, you compare the revenue of an audience group that was served advertising to a control group that was not.

Some players in the advertising ecosystem shy away from incrementality because they fear it will call their solutions into question and make customers rethink their spending. If data shows consumers would have made a purchase anyway, vendors are going to get less credit for their work. But for those vendors that have effective solutions, incrementality is a good thing.

Mobile marketers often think of retargeting as a tool for bringing back users who haven’t opened their app in a while, maybe 30 days or more. But they can also use retargeting to make sure the active users they worked hard to acquire spend as much time and money as possible.

For example, a food delivery service can use retargeting to entice users to add a drink or appetizer to their next order. When it comes to evaluating campaigns like these, marketers have to be careful because some users would have converted regardless. The ROAS can be misleading. To evaluate these campaigns, marketers need to establish a control group and measure success not just by looking at how the ads perform, but also by comparing users who are served ads to those in the control group.

Incrementality can be used to measure user acquisition. Imagine a hip sneaker company runs a mobile Facebook campaign targeting people who are into cool sneakers, with the objective of driving app downloads.

Or, if we take the targeting one step further, imagine a specific sneaker company targets people who are already fans of its brand. Some people in these audience groups are likely to convert organically. Incrementality allows the advertiser to determine if its campaign is driving action that wouldn’t have happened otherwise by comparing a control group to a group that sees the ads.

Incrementality gives vendors the ability to help their advertisers curb waste. Rather than seeing incrementality as a risk, vendors should see it as a way to offer more value to their clients.

This is all good stuff, assuming the ad vendor’s solutions work. If they are not effective, then the vendor should look at incrementality with some trepidation. Its perceived value will end up taking a hit because incrementality is going to be neutral, meaning audiences that see their ads will not behave any differently than those that do not. Incrementality begets a new discussion: what types of mobile ads are most effective.

I have heard vendors say, point blank, that they don’t even want to talk about incrementality. If that is someone’s take on a metric that is an important tool for helping advertisers better measure the effectiveness of their ad spend, it makes you wonder how confident they are in their company’s technology or strategy.

For vendors using quality creative that drives real impact, incrementality can deliver more value for customers and potentially introduce them to an audience group they wouldn’t have previously felt confident targeting.

Follow Adikteev (@Adikteev) and AdExchanger (@adexchanger) on Twitter.

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1 Comment

  1. Well said! Advertising ought to be a business investment that is evaluated by its incremental ROI. Incrementality offerings like Google’s and Facebook’s Conversion Lift (the former powered by ghost ads) are game-changers for measuring the causal effect of ads. We advocate for a new CPIA pricing model—Cost per Incremental Action—that aligns the incentives of the ad platform with those of advertisers.
    Cost Per Incremental Action: Efficient Pricing of Advertising