Overview of media incrementality

Modified on Fri, 22 Aug at 2:53 AM

What Is Incrementality?

Incrementality can be defined as the measure of the ‘true’ impact of marketing spend on sales. It is the quantum of sales actually attributed to advertising activities which would not happen in the absence of advertising. In other words it is the measurement of ad effectiveness.

Incrementality is a way to measure an event that wouldn’t have occurred without a specific interaction, such as an ad view, resulting in a desired outcome, such as a conversion.

Key Questions Incrementality can help answer:

What happens if I stop spending with Vendor X today?
What happens if I increase or decrease budgets for Channel X?
Which ad creative is the key contributor to my desired outcome?

These questions can be summarized as:

"Do my ads drive actual value, or just claim credit for an action that would naturally occur?"

Incrementality strives to identify the causal event of a conversion, allowing businesses to properly allocate budget and reduce wasted ad spend.

How does Incrementality differ from traditional Optimization methods?

Incrementality offers new metrics which can be used to optimize the ad spend. It is a better way to measure ROI on ad spend as it actually estimates the sales that would go away if a customer does not advertise.

Incrementality isn’t about assigning credit to a conversion; it’s about identifying the interaction that moves a user from passive to active. Whichever interaction influences an actual outcome is identified as incremental.

How is CIQ measuring Incrementality of Advertising?

Mathematically, CIQ's incrementality modeling separately estimates the long-term and the short-term component of incrementality :

Short-term: Direct sales conversions due to specific advertising/marketing activities over a target period of 14-days.
Long-term: The sales impact due to ad-driven organic ranking improvement and the sales driven by repeat purchases and Lifetime Value (LTV) from new customers acquired through marketing activities.

In the current release, we are only estimating the short-term impact of advertising to measure incrementality.

CIQ Incrementality Model

CIQ's real time incrementatlity model is a blend of

Brand's Share of Voice (SoV)
Buyer's Propensity to Buy
Brand's Relevance

Incrementality ~ 1/ Share of Voice

Higher a brand's Presence, lesser is the incrementality.

A 100% organic presence infers a 0% incremental to advertise, as even without advertising 100% of the traffic will convert.

A 0% organic presence infers 100% incremental, as sales happen only due to sponsored advertisement and not due to brand's presence.

Incrementality ~ 1/ Brand Propensity

Higher a brand's Affinity, lesser is the incrementality.

Branded Keywords indicate a ROAS (high), Incrementality (low) thus leading to protection of the brand
Generic Keywords indicate a ROAS (medium), Incrementality (medium), thus leading to an increase in long term sales
Competitor Keywords indicate a ROAS (low), Incrementality (high), thus leading to a win over competitors

Incrementality ~ 1 / Relevance

Higher a brand's Relevance, lesser is the incrementality.

Higher the precision of search towards the product description of a brand, higher is the intent to buy the specific product, hence lower the incrementality.

What are the different metrics being rolled out as part of the release?

CommerceIQ introduces a few new proprietary metrics regarding incrementality with its forthcoming release.

Incremental Fraction - The metric defines the estimated share of total paid sales that are truly incremental (would not be possible without advertising). This is the key output of incrementality estimation model. A high incremental fraction implies efficient advertising.
Incremental Sales - The metric defines the amount of total paid sales that are truly incremental (would not be possible without advertising). This metric better represents the net new sales instead of Paid 14-day sales reported by retail platforms.
Incremental RoAS - The metric defines the incremental sales generated for each dollar of ad spend.
Incrementality Band - The metric defines the classification of performance on the basis of incrementality. High band implies the majority of paid sales are incremental and Low band implies that the majority of sales are not incremental.

Mathematically,

Incremental Sales = Incremental Fraction * Paid 14-day Sales

Incremental RoAS = Incremental Fraction * RoAS

Incremental Fraction = 1 / Organic Share of Voice

All these metrics are computed at a keyword level for each day and aggregated with the ad spend weights to get the incrementality metrics for a defined date range and at a campaign/profile/account level.

How confident are we with the accuracy of these metrics?

CIQ is fairly confident in the directionality of these metrics and is continuously working on enhancing the models to become numerically accurate.

This means, while you can compare incrementality numbers of two keywords and campaigns to identify which one is more incremental with high confidence; the quantum by which one is more incremental than the other is a measurement that is still being improved on.

These numbers are further validated by more than 10 real-world experiments which we performed across a variety of clients and 98% experiments showed a positive lift (in total sales and TACoS) when campaign budgets and bids were optimized based on iRoAS.

How does Performance Tracking change with the introduction of Incrementality?

With incrementality-aware advertising automations and actions, CIQ aims to optimize the efficiency of ad spending by reducing spending on areas of high organic presence.

Hence the north star metric for all advertising activities should now evolve to Total Sales (organic+paid) with secondary metrics being incremental fraction, incremental RoAS, and incremental sales.