As the advertising landscape shifts, marketers refocus on incrementality
Incrementality is changing the game for marketers everywhere by enabling greater visibility into consumer behavior and campaign performance. But making the most of incrementality requires that marketers pay greater heed to loyalty metrics, writes Cardlytics' North America president Ross McNab.
Digital advertising and the way it’s measured is going through a notable transformation thanks to the imminent death of third-party cookies and Apple’s app tracking policy, which has led to 95% of iOS 14.5 users to opt out of tracking online behavior. As these changes start to impact revenue for major digital players, measurement will become the talk of the industry. Deloitte even proclaimed: “The end of third-party cookies will be one of the greatest internet disruptions ever seen.” The good news is that brands and ad agencies can thrive despite this disruption by rethinking how they measure campaigns and by, most importantly, leaning into incrementality.
Incrementality is a way to measure an event that wouldn't have occurred without a specific interaction. In advertising, it’s a business conversion that happened as a result of an ad view. Historically, this has been difficult to measure. And due to shifts in privacy, incrementality will become a must-have superpower for marketers to connect the dots between customers and desired business outcomes.
Due to first-party purchase data, location data and other intelligence, brands are zeroing in on how digital ads influence online and offline sales that otherwise wouldn’t have occurred. Well-known brands such as Netflix and Airbnb and up-and-coming companies such as Ettitude rely on advertising that’s measured with incrementality to understand exactly how their ad campaign bolstered sales growth. Perhaps most importantly, these brands take advantage of the right tools and testing methods at their disposal to drive their success.
Harnessing today’s tools
In the coming months, more brands will adopt advertising strategies similar to that of Netflix, Airbnb and Ettitude, demanding measurement that appraises the bottom-line impact of ad campaigns. And incrementality will become the go-to measurement for the most sophisticated marketers to prove campaign success and secure future advertising dollars. That means marketing strategies must include tools that accurately report incremental return, providing a full 360-degree view of the customer journey.
In the past, marketers simply relied on directional information, such as click-through rates, as the right tools to measure incrementality with confidence did not exist. But they can now see advertising’s impact beyond bottom-of-the-funnel data that only shows what happens the moment before purchase. Specifically, there are smarter customer data platforms (CDPs) that help marketers better evaluate sales impact—some down to the penny—showing incremental return on ad spend. Subsequently, brands will spend more dollars on first-party data ad platforms that drive sales. Thanks to such CDPs, the data silos are no longer obstructing marketers’ view into sales impact because of improved digital tools.
So, brand marketers can see how ads holistically influence a customer’s path to purchase. This visibility helps them see and evaluate which data-driven targeted ads the customer sees before hitting the BUY button or purchasing in a store.
Testing for loyalty
While raw sales remain an important metric, marketers are ultimately judged by how they spend their ad budget and how they make strategic optimizations. With that in mind, precise measurement can help them impress higher-ups, redirecting competitive spend and allowing them to use more budget on campaigns that create loyal customers. They need toolkits to help them get there, including features that let them rigorously test—with randomized test and control groups—to answer key questions, such as:
Would customers have purchased anyway?
Did the campaign increase sales?
What was the incremental return on ad spend?
To get the answers, brands need to look at the purchase patterns of people who converted from previous campaigns to measure their loyalty. Particularly, this data will identify repeat customers, zeroing in on the number of times they purchased and how much they spent with the brand. For instance, this information can tell brands whether the customer is likely to convert on the 5% cash back offer or whether it’s worth it to run ads with a 10% cash back offer.
Further, advertisers can pinpoint which variables, such as ad creative or audience segments, are the most impactful for conversion. This data helps marketers become much more intelligent about how to optimize their campaigns, weighing efficacies and shifting budgets and tactics to lift ad performance more precisely.
Knowing what works
Advertising is becoming a precision game, indeed. First-party data will increasingly become vital for brands who want to generate and maintain lifelong relationships with customers—sometimes that will mean a steady flow of cash-back offers, other times it will mean understanding what products they’re in the market for based on past purchase behavior.
Harnessing the right tools for measurement and rigorous testing is a one-two punch that will help marketers leverage incrementality and adapt to the privacy-led world. What’s more, brands can garner new customers on a multi-channel basis by understanding how single-channel and omnichannel customers behave, by seeing conversion down to the offer or product level—rather than just where and when people shop and whether they click or not.
More and more, incrementality is shifting the stakes for marketers. By no longer buying ads in the dark and hoping they make an impact, marketers can now “close the loop” and fully understand how an ad directly impacts consumer behavior. By investing in tools that measure the incremental impact of an ad, marketers become more informed and advertising becomes more actionable, which will not only impress the C-Suite, but reinforce the business value and role advertising plays in driving bottom-line sales impact.
Ross McNab is president of North America advertising at Cardlytics.