Incremental testing is becoming a valuable practice for today’s marketing teams. In a difficult economy, marketing budgets are diminishing, and team leaders (like CMOs) are under increasing pressure to prove that their promotional efforts are paying off.
At the same time, as customer expectations and journeys evolve, businesses in all industries need to explore new channels and marketing strategies to ensure they can capture, convert, and retain their target audience. Incrementality testing offers organizations an opportunity to accurately and effectively track the results of each marketing campaign and channel.
It’s how businesses make up-to-date and data-driven decisions about the best ways to drive profitable growth, and overcome various marketing measurement challenges.
Here’s everything you need to know about incrementality testing.
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What is Incrementality Testing in Marketing?
Media or marketing incrementality testing is a way for companies to measure the impact of a specific marketing activity on sales or business growth. It involves evaluating the exact results (such as additional sales) that occurred exclusively as a result of a specific advertising strategy.
In the past, companies often took a much broader approach to examining the results of their marketing efforts. For instance, when a marketer ran a paid social campaign on Facebook, they often attributed 100% of the conversions from customers who interacted with that ad to Facebook.
However, the reality is that many conversions may have happened regardless of whether a customer was exposed to the Facebook ad. Incremental testing attempts to focus on the conversions that were directly influenced by the media in question.
In short, incrementality testing provides a more precise way to understand the direct impact advertising efforts have on consumer behavior. When you know which campaigns and channels directly influenced sales results, you have a better idea of where to spend your marketing budget.
How to Measure Incrementality in Marketing
Incrementality testing relies on the use of test and control experiments. Unlike digital multi-touch attribution techniques, which assigns credit for a conversion to various touchpoints across a customer journey, incrementality testing isolates the casual impact of a specific marketing intervention. Companies compare the behavior of a “control” group, to a “treatment” or test group.
- The control group: Isn’t exposed to a specific ad or campaign, allowing them to serve as a baseline for a comparison.
- The test group: Is exposed to a specific ad, allowing for an insight into how that advertising strategy impacted consumer behavior.
Creating the right control group is essential to effective incrementality testing. Most experts agree this group should represent about 10% of the total test. Companies can use various strategies to build control groups, such as eliminating ad exposure for a subset or their target audience.
By withholding an ad from a specific segment of an intended audience (your control group) you can see the percentage of your target audience that still converts without being exposed to an ad.
An Example of Incrementality Testing
Let’s take a look at an example of what incrementality testing might look like in practice. Imagine a software company runs an incrementality test for the AI-powered Google Ads solution, “Performance Max”. Comparing their control group to their test group, they see that the control group had a 0.5% conversion rate, but the test group had a 1.5% conversion rate.
This result would suggest that without the campaign, the company would miss out on 66.7% incrementality in conversions. Based on this insight, the software company might decide to increase its Performance Max budget, or keep it the same, to retain revenue.
The Complexity of Incrementality Testing
Notably, incrementality testing can vary in complexity. Some companies use simple “holdout tests”, while others utilize data from a number of sources to reveal the incremental impact of a range of different marketing techniques.
For instance, the Conversion Lift feature in Google Ads allows brands to run tests based on users, or geography, depending on the level of granularity you want in your results. Conversion lift insights based on users often require smaller budgets, and metrics can be broken down by age and gender.
With conversion lift insights based on geography, on the other hand, advertisers can run larger campaigns with any data source, without relying on cookies.
In all incrementality testing strategies, the focus is on quantifying the incremental revenue generated by a specific campaign, to determine what kind of sales your company might have missed out on, if you hadn’t invested in a specific promotion.
If a change isn’t detectable between the control group and the test group however, this doesn’t always mean that your chosen marketing channel or campaign isn’t effective. It just means that the specific execution measured in the test (such as a specific targeting strategy) might not be working.
Incrementality Testing vs MMM and Attribution Reports
Traditionally, most finance teams and CMOs allocated fixed percentages of revenue to advertising, based on the estimated revenue returns suggested by “marketing mix modelling” (MMM) and attribution reports. Those methods are becoming increasingly less effective for accurately measuring Return on Ad Spend (ROAS) for a few reasons.
First, MMM is excellent at evaluating cross-channel advertising performance, but its limited in terms of delivering rapid, granular insights. Usually, marketing mix modeling is better at guiding companies with overall budget distribution, rather than providing them with a direct insight into the result driven by a specific ad format or channel.
Secondly, attribution reports can be helpful for day-to-day advertising optimization, and they can provide valuable insights for AI-powered campaigns. However, privacy updates and the decision to phase out third-party cookies made by multiple platforms have made it harder to rely on this method alone for marketing decision making.
Why Companies Should Measure Incrementality
Ultimately, incrementality testing is the key to making sure you’re actually getting the best return on investment from your chosen advertising campaigns and channels. Studies show that marketing accounts for around 21.1% of the overall budget for B2C companies alone.
If your marketing spend is responsible for about a fifth of your company’s budget, you want to ensure that you can actually track the results of your spending across channels. Unfortunately, previous methods of measuring return on investment haven’t always delivered the best insights.
Incremental testing offers a more nuanced and agile approach to measuring advertising effectiveness. It prevents companies from relying on flawed last-touch attribution methods, and outdated measurement strategies, and allows companies to see comprehensively which media investments are contributing to business growth.
As companies lose access to third-party data and user-level tracking, the accuracy of platform reporting methods will only continue to diminish, making incrementality testing more crucial.
Optimizing Your Ad Spend with Incrementality
Using incrementality testing experiments to understand the incremental impact your media campaigns have on your business can be extremely valuable for today’s companies. Incremental testing gives you an accurate, consistent way to make data-driven decisions on how to use your budget.
The biggest issue is that implementing this testing method can be complex, particularly for companies that haven’t used incrementality experiments before. That’s why it’s so valuable to work with an agency that understands how to effectively calculate the results of your campaigns.
At The Graygency, we leverage incrementality testing practices, alongside a range of other techniques, to provide granular views into the results of every marketing effort. Contact our team today to learn more about how we can help you optimize your return on ad spend, reduce customer acquisition costs, and improve your revenue.
Want to learn more about full funnel paid media ? Try these articles below:
How to run a geo lift test on your paid social ad campaigns
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