What incrementality is and how to measure it.
Incrementality has quickly risen to the forefront of the retail media conversation, becoming a crucial metric that advertisers are increasingly expecting from retail media networks. Publishers have measured incremental lift for a long time, but with marketing budgets shrinking YoY, according to Gartner’s CMO Survey, advertisers are more stringent than ever about where they spend their money.
Many leading retail media networks (RMNs) have already started investing in measurement and showcasing incrementality to advertisers. Instacart’s VP of Ads Product, Ali Miller, has dubbed incrementality the “gold standard in terms of showing the actual impact or casual impact of ads on driving sales for our advertisers and brands.”
Albertsons has also embraced incrementality in recent times. Evan Hovorka, Albertsons Media Collective’s VP of Product and Innovation, recently stated that incrementality helps retailers justify the effectiveness of campaigns run on their RMNs.
"Incrementality tells you not only did you make a sale, but how much of that total sale amount came as a result of the retail media network advertising."
- Evan Hovorka, VP of Product and Innovation at Albertsons Media Collective, Chain Store Age 2023
According to the Interactive Advertising Bureau (IAB), incrementality in retail media “...quantifies the causal impact of marketing strategies on outcomes such as sales, isolated from other business influences and attributed to advertising campaigns.” The IAB’s Jeff Bustos also explains incrementality as the ability to isolate the media spend when looking at things like sales, ROAS, or any other kind of conversion measure a brand is tracking.
Put simply, incrementality, sometimes also called “incremental lift”, is a measure of true value; the potential causal impact of marketing. In formulaic terms, incrementality is the difference between the number of sales that would have occurred without the campaign and the number of sales or engagements that actually occurred with the campaign:
(Test Conversion Rate - Control Conversion Rate) / (Test Conversion Rate) = Incrementality
See below section “Incrementality Testing Examples” for more on calculating incrementality.
Measuring incrementality is crucial to understanding the impact of marketing campaigns, but it can be challenging due to the various methodologies, formulas, and data sets involved. It’s rarely guaranteed that two measurements of incrementality use an identical system. In fact, Jason Goldberg, Chief Commerce Strategy Officer at Publicis, put it like this: “Marketers and CFOs want to compare these things apples to apples, and that’s not possible.”
To better understand how to measure incrementality, let’s go over the various methodologies, data requirements, and best practices for transparency according to the IAB.
Here are the IAB-recommended methods for measuring incrementality:
New methods for measuring incrementality in retail media are still being developed. This includes:
Different types of data are necessary for accurately measuring incrementality.
These data types include:
Key data sources for measuring incrementality include:
Remember: Incrementality within the retailer’s ecosystem may not consider broader market impact.
MRC standards stress transparency in incrementality methodology, assumptions, and limitations. Here are some IAB-recommended best practices for transparency:
For more in-depth information, download the IAB and MRC’s Retail Media Measurement Guidelines here, or browse the IAB’s Retail Media Measurement Guidelines Explainer here.
Incrementality Example #1: Test Calculation
To calculate incrementality using an A/B method, you’ll want to find the conversion difference between a test group and a control group. This formula looks like:
(Test Conversion Rate - Control Conversion Rate) / (Test Conversion Rate) = Incrementality
To see this formula in action, let’s imagine your test group saw 1.5% conversion and your control group saw a 0.5% conversion -- “conversion” meaning leads, sales, profit, or whatever metric is relevant to your business.
(1.5% - 0.5%) / 1.5% = 66.7% incrementality in conversions
Incrementality Example #2: Step-By-Step
Here’s a more functional example of what incrementality testing can look like:
Incrementality has become crucial for advertisers because it allows them to measure the true impact of their retail media campaigns. According to a report by the Association of National Advertisers (ANA), advertiser reception to RMNs has been relatively lukewarm, with 42% of advertisers feeling “on the fence” regarding their RMN investments. The same report found that brands believe a lack of measurement standardization and transparency is “preventing advertisers from deriving full value from their RMN investments.”
That’s where incrementality plays an important role:
Unlike return on ad spend (ROAS), which only measures total sales or engagement generated by a campaign, incrementality focuses on the additional sales or engagement that is directly attributable to the campaign. This distinction is why some feel that a high ROAS can be misleading -- a sentiment reflected in the 56% of advertisers surveyed who cite incremental sales as their most used KPI for RMNs, just behind 58% that cite ROI and ROAS.
"Incrementality is a measure that can sh ow brands 'real math' that proves investing in a retail media network will make them money, and not just hypothetical money that you'll never see, but money that actually shows up in your GAAP reported; income statement."
- Jason Goldberg, Chief Commerce Strategy Officer at Publicis, Modern Retail 2023
“I hear it all the time from our brand partners: someone is asking, how do we know that sale wouldn’t have happened anyway?” Moti Radomski, VP of Product at Skai, explains in this article. “What if the user walked away from their computer when the YouTube ad came up? What if the user was going to purchase that item anyway and that the ads did help get the user to the website, but didn’t truly influence the sale to occur?”
Another reason for incrementality’s rise in popularity among advertisers is owed to the broader economic environment. Publicis’ Jason Goldberg explains that people get more interested in incrementality when budgets are tight, since it can help control costs by ensuring that every dollar spent on marketing is driving actual, measurable value -- minimizing media waste and concentrating on which ads are truly driving revenue.
Put simply, advertisers care about incrementality because it offers a precise and accurate measure of a campaign’s effectiveness, and helps advertisers make better informed decisions.
Improving incremental sales lift will involve stepping up your overall advertising and marketing efforts. While some factors that impact incrementality are out of your control, like market trends or your competitors, there are some straightforward ways retailers can help increase incrementality.
Here are some of them:
When it comes to measuring the impact of marketing activities, two key concepts often come into play: attribution and incrementality. While both are essential for understanding campaign effectiveness, they serve different purposes and offer unique insights.
Attribution is primarily used for short-term measurement, providing frequent, granular data in real-time. It involves matching two data points -- like clicks to installs, or impressions to installs -- to understand which marketing touchpoints contributed to a conversion. Attribution helps marketers track user interactions across various channels and determine which efforts are driving immediate results.
But attribution has its limitations, focusing more on association rather than causation. This means that while attribution can tell you which touchpoints were present in the user journey, it can’t infer whether those touchpoints were the actual cause of the conversion. This usually leads to questions about the true impact of each marketing touchpoint: what if a tracked marketing touchpoint had no influence on the conversion? Without understanding this, marketers can’t be certain their investments are truly driving value.
Incrementality, on the other hand, is used for mid-term measurement and focuses on the true effectiveness of advertising activities. It can help determine whether a marketing effort has brought additional value that would not have otherwise taken place.
Unlike attribution, which measures association, incrementality measures causation. It helps marketers understand the immediate impact of new campaigns and strategies by evaluating whether observed outcomes are directly attributable to a campaign.
If you’re looking into attribution and incrementality, chances are you’ll also see media mix modeling (MMM) pop up. MMM is used for long-term measurement, allowing marketers to analyze the impact of various marketing channels over an extended period.
Advertisers want concrete evidence that an investment in a retailer’s RMN will bring financial returns. Incrementality metrics are a powerful tool retailers can use to demonstrate the true value of their RMN, focusing on outcomes that are directly attributable to an advertiser’s marketing efforts.
The future of incrementality measurement in retail media is promising. Emerging methods are becoming more sophisticated, measuring the impact of campaigns across multiple channels and touchpoints, and by focusing on incrementality, retailers can help brands optimize marketing spend, minimize waste, and ultimately improve profitability.
For more info on retail media, visit our quick guide here or download our eBook on Launching Your Own Retail Media Network. Interested in learning how Kevel can help you launch retail media advertisers will love? Get in touch today.
