Incrementality Marketing: Back to Performance Fundamentals

There are infinite ways to measure the success of a marketing campaign. Still, one of the marketers' top challenges comes when it's time to quantify campaign success in terms of actual revenue dollars. Making the leap between marketing metrics and business outcomes often requires collecting data from multiple platforms, connecting the dots, and filling in the blanks. 

Traditional marketing performance metrics simply aren't the most accurate for measuring business success, but newer platforms and tools enable a better alternative — incrementality marketing. Incrementality takes a different approach to metrics like attribution, lift, and ROI, which means learning new strategies and measurement plans.

What is incrementality marketing, and why is it important?

Incrementality is a way to measure the impact a certain marketing activity has on a desired business outcome. Incrementality helps marketers discern what portion of success can be attributed to campaign efforts versus which results would have occurred organically without a specific marketing interaction or touchpoint.

Collecting and using third-party data for marketing campaign targeting and optimization is increasingly difficult and costly. Privacy and tracking regulations will only become stricter in the coming months and years. With the shift toward first-party data and tracking comes the need for new tools and methodologies.

In a Cardlytics study, we discovered a major disconnect between the outcomes businesses deem important and the effectiveness of current marketing initiatives at achieving those outcomes. For example:

• 72% of retail executives said "gaining competitive market share" is one of their top three priorities from performance marketing investments.
• But 61% said current performance marketing initiatives are ineffective in terms of helping them gain a competitive market share.

Clearly, retailers are hungry for initiatives that actually drive results. The ineffectiveness of current approaches necessitates a shift to methodically shape marketing strategies and measure campaign success.

Strategies for incrementality

Incrementality marketing may seem complex, but that's mainly because it has historically been difficult to measure. There is good news, though. The shift from third-party data makes incrementality more important and easier to implement. With privacy regulations shielding customer data from marketers, incrementality measurement and first-party data will soon reign supreme.

In the past, many online marketing tools and platforms simply didn't collect the data needed to measure incrementality with confidence. This meant marketers relied on metrics like ad views and click-through rates to make assumptions about campaign performance. Now, the latest customer data platforms (CDPs) move beyond these traditional KPIs and dial into exactly which digital efforts have an impact on sales — all while providing a more seamless experience for marketers and consumers alike.

In addition to having the right tools in place to prioritize incrementality marketing and measurement, marketers need a mindset shift to understand which of their efforts truly moves the needle.

Moving from engagement to growth as KPI

Increasing user engagement is a common goal for performance marketing campaigns. Common customer engagement KPIs include:

• Email open rates and click-through rates
• Ad clicks
• Social media engagement
• Session duration

Brands want to drive customer engagement because of the assumption that engaged customers will spend more money, shop more frequently, and make recommendations to friends. These assumptions may be true, but they're difficult to prove with hard data — especially because most engagement campaigns rely on third-party data for audience targeting and tracking.

To make the shift to an incrementality mindset, move away from engagement-focused KPIs and focus on growth-focused KPIs. Growth KPIs include things like:

• Customer lifetime value (CLV)
• Incremental revenue
• Competitive market share
• Category wallet share

These KPIs provide a better picture of campaign success — as long as you can accurately attribute outcomes to specific marketing efforts. This ties back to the importance of first-party data. Clicks, views, and other engagement metrics will never be as precise as growth metrics measured with data from first-party sources such as customer transactions.

Focus on gaining competitive market share

One of the key growth-based KPIs marketers should focus on as they shift to an incrementality mindset is competitive market share. As with other incrementality measurement methods, quantifying competitive market share can seem like a tall order — especially if your current platforms and tools are limited in terms of targeting and other performance measurement capabilities.

If this challenge sounds familiar, you're in good company. For example, 76% of advertisers do not currently have the capabilities to define an audience or develop a campaign targeting high-spending shoppers in their category who have not spent with them for a defined timeframe.

This may seem like an extremely specific segment to target. Still, this level of specificity is within the realm of possibility when you prioritize marketing tools that combine strategic first-party customer data and robust in-platform intelligence.

Adopt an omnichannel approach

If you're an omnichannel advertiser, do your performance marketing and measurement efforts reflect that? Chances are, there is some disconnect between your online and in-store campaign measurement. Our study found that 84% of marketing executives cannot tie in-store purchase data directly to performance marketing campaigns.

Historically, it has been difficult — even impossible — for marketers to connect online marketing efforts to in-store sales accurately. Strategies such as buy online, pick up in-store (BOPIS) help bridge the gap between eCommerce and in-store shopping experiences. However, there's still a disconnect between online and brick-and-mortar attribution. An omnichannel approach to sales and measurement is needed to capture your marketing efforts' impact fully.

How do you measure incrementality?

Measuring incrementality requires comparison and experimentation, typically with split-testing and control groups. As you begin, you'll first need a baseline understanding of expected revenue without any marketing efforts. You may need to pause your marketing efforts for a time to collect accurate data.

Next, pick an audience to segment into a test group and control group, and serve your marketing campaign to the test group only. Comparing the two groups' conversion rates will help you determine the incremental impact of the campaign.

Driving incremental revenue is a major priority for business executives and marketing leaders, but the two groups disagree on exactly how to measure it. There's a further issue — many businesses measuring incremental market share are not satisfied with their methodology.

• 81% of executives say that incremental market share is important
• 69% do not measure it
• Of those that do measure it, 83% are dissatisfied with how they're measuring it

Some of this disconnect arises because most traditional performance marketing metrics are simply inadequate for measuring incrementality. Any brands seeking to learn how to measure incrementality should start with revising their performance evaluation methodologies.

Attribution vs. incrementality

Attribution is the practice by which marketers discern which marketing touchpoints lead customers to a particular action or event. According to our study assessing over 250 business and marketing executives, 86% are currently relying on classic attribution methods, such as:

• Single-touch attribution models assign 100% of the credit for a conversion to one marketing touch point, such as the first or last touch.
• Position-based attribution splits the credit for a sale between the first and last touchpoints — also known as a U-shaped attribution.
• Multi-touch attribution models distribute attribution between various touch points.

The problem with these attribution models is that they can only approximate a digital campaign's impact and can't account for a buyer's full journey. They also don't account for offline touchpoints such as print ads, in-store signage, or promotions.

There is a more robust alternative to these attribution models: closed-loop attribution. Closed-loop attribution is a data-backed way for marketers to know exactly how a specific marketing channel or campaign contributed to sales and revenue. With closed-loop attribution, marketers can connect actual online purchases to specific digital campaigns to gain a clearer picture of the impact of their initiatives.

ROAS vs. iROAS

Another shift marketers need to make on their way to better incrementality measurement and analysis is the move from traditional return on ad spend (ROAS) measurement to incremental return on ad spend (iROAS) calculations. 

Calculating ROAS is straightforward. You simply divide the revenue attributed to your marketing campaign by the cost of that campaign:

Revenue / campaign cost = ROAS

ROAS is a classic way to measure the success of an ad campaign, but it doesn't take incrementality into account. To find your iROAS, the formula is very similar:

Incremental revenue / campaign cost = ROAS

The main difference in the incrementality model is the understanding that only a portion of your campaign revenue can be confidently attributed to your paid marketing efforts and would not occur without your campaign. Realistically, a portion of your campaign revenue would have come through regardless of your paid marketing efforts, and iROAS accounts for that.

Cardlytics is the incremental marketing tool you need

Your incrementality efforts will only be as good as the tools you use to craft and measure your campaigns. Cardlytics helps marketers measure the true impact of their digital campaigns — not just overall sales increases but incremental returns. With access to 179 million bank customers' real transaction data, Cardlytics gives brands a goldmine of first-party data, omnichannel attribution opportunities, and streamlined performance measurement and reporting.

More precise targeting based on first-party data

Third-party data is more expensive to attain and less accurate than first-party data. Also, third-party data is dying. With Cardlytics, campaign targeting is informed not by third-party data but by one out of every two card swipes in the US. 

Cardlytics worked closely with Dunkin' Donuts to identify which customers were most likely to be repeat customers based on first-party data — specifically, past purchase behavior with Dunkin' and its competitors. Cardlytics targeted this "likely to return" customer segment with cash-back offers via their online banking platforms, giving them an incentive to buy themselves a treat at Dunkin'. This campaign would not have been possible if Dunkin' had only relied on third-party data.

More accurate omnichannel attribution

What typically happens when someone sees an ad for a retailer online but then purchases in the brick-and-mortar store? There has historically been no way for that purchase to be accurately tracked and attributed to the online touchpoint. Cardlytics changes that. 

Because Cardlytics campaigns are based on bank transaction data, it doesn't matter where those transactions occur. Every time a customer swipes their card, there's a new data point Cardlytics can use for campaign targeting and reporting.

Straightforward performance measurement

Cardlytics eliminates the need for data interpretation, estimation, and assumptions. Our data comes from real purchases made by real people. Our campaign reports are based on real transaction data from people who saw ads on our digital ad platform. It's all first-party data, and it's easy to see results. When you launch a campaign with Cardlytics, we'll be able to report on growth-based KPIs such as:

• Long-term customer value
• Incremental return on ad spend
• Impact on overall market share 

With Cardlytics, retailers become market leaders well-positioned for omnichannel success.

Taking the next step with Cardlytics

It's hard to imagine marketing without third-party data and traditional KPIs, but the marketing landscape is changing whether we like it or not. Retailers must embrace incrementality and first-party data to remain competitive in the coming years. Learn more about marketing solutions and campaign measurement from Cardlytics, and contact us for more information.