Incrementality's the missing ROI for brands - but what is it, and how can you harness it?

Finding incrementality is crucial for performance marketers to get the most out of their marketing spend and unlock new audiences, says Angus Quinn (director of marketing for EMEA & APAC at Connexity, a Taboola company), but marketers often disagree on what exactly incrementality is and how to harness it.

"Half the money I spend on advertising is wasted; the trouble is I don't know which half." 

- John Wanamaker

Marketers have been haunted by John Wanamaker's words for more than a century.

Perhaps as marketers, our trouble has been focusing on the wrong part of the statement – half the budget being wasted – when we should actually be spending time identifying the half that works and proving the incremental value that spend delivered. 

We know a significant portion of advertising budgets are wasted. Recent reports found that around 23% of advertising expenditure on the internet doesn't yield desirable results, amounting to billions of dollars lost every year. It’s more vital than ever to fix that problem: the drop in retail sales in the US in January was actually worse than forecast and in the UK, retail sales volumes had their largest month over month fall in December 2023, which should be a peak trading period. 

So if we can find incrementality in performance marketing and solve Wanamaker’s dilemma, retailers stand to gain better results and marketing partners can deliver better outcomes for them too. 

So what is incrementality? 

The first issue with incrementality is that marketers themselves struggle to agree on what it really means.

One might think that any positive return on investment (ROI) qualifies as incremental, but the advertising world has a stricter view. An incremental outcome is one that wouldn't have happened without a specific marketing action. In simpler terms, an advertisement must directly lead to a sale or conversion to count as genuinely incremental. And of course, nobody wants to pay for the same result twice.

It becomes more complex talking to retailers. Responses from our clients – department stores, electronic brands, fashion retailers and more – included: 

• Access to new sources of traffic
• Growth in impressions on a particular channel 
• Reaching new shoppers they hadn’t interacted with previously 
• Increasing sales 
• Growing market share 
• Shrinking cost of sale 
• Beating the KPI of a campaign goal 
• Expanding reach to new markets segments  

On paper these outcomes vary widely, but on closer analysis, two common themes of incrementality emerge: incremental opportunity and incremental performance. 

Opportunity refers to expanding potential by accessing new channels, markets or reaching fresh audiences. Performance, on the other hand, is about improving results—increased sales, market share, or improved ROI.

Understanding both aspects, and accounting for them in your performance marketing mix, is crucial for retailers to set themselves up for success, especially in today’s challenging conditions.

Incremental opportunity

Research indicates that brands spend half of their budgets to target only a small fraction of their potential audience. It often comes down to two main issues: the current scope of their marketing activities and how they allocate their budgets. 

Many marketers are reluctant to change up their tried-and-true marketing strategies - why mess with something that works, right? However, by relying on the same channels year after year, brands limit themselves to the same audience pools and miss out on opportunities for additional touchpoints and new audiences elsewhere. 

Moreover, today’s consumers interact with brands and make purchases across a wide range of environments. These include but aren’t limited to social media, online marketplaces, search engines, video platforms and online publishers. Each additional platform unlocks a new audience and drives consumers down the purchase funnel: research shows that customers have an average of eight touchpoints with a brand before making a purchase. By diversifying your channel mix, you increase your chances of exposure throughout the shopper’s journey, and gain more opportunities to influence their purchase decisions. 

Marketers that take a critical approach to diversification stand to gain significant incremental opportunity. For example, mail-order brand Coopers of Stortford grew sales by 32% by diversifying its online marketing mix. With openness to experimentation and a close eye on the results, you’ll be able to prioritize spend based on which channels deliver incremental outcomes, such as new impressions or clicks on your offers. 

Incremental performance

Unlocking opportunity creates a pathway to better performance, but the first step towards enhancing performance should be optimizing existing budgets.

Set clear goals and key performance indicators (KPIs) to allow for systematic testing across channels to gauge effectiveness. This approach not only facilitates internal communication within teams but also fosters better collaboration with external marketing partners to develop a tailored performance marketing strategy.

Reputable marketing partners will engage with you in discussions about how to improve your campaign content and strategy, how your different channels interact with one another, and help you optimize towards your set goals. Furthermore, they can introduce new benchmarks such as increasing average order value (AOV) or reducing the cost of sales. European Home & Garden marketplace vidaXL grew new customer acquisition by more than 300% by collaborating with Connexity’s account management team to optimize their performance marketing campaigns. 

Embracing incrementality reaps rewards

The journey to harness incrementality is by no means over. However, with today’s abundant data provided by performance marketing, both retailers and marketing partners have the opportunity to strive for improvement. 

Incrementality can be broken down into two main components: incremental opportunity and performance. Retailers should actively seek out both aspects within their performance marketing strategies.

Given that consumers shop in a variety of environments and retailers, retailers must incorporate a broad mix of channels into their performance marketing approach. Experimentation with these channels and investment of budget will deliver incremental rewards.

Retailers should challenge and expect their marketing partners to use additional benchmarks beyond standard KPIs to help enhance their performance marketing. 

By focusing on both incremental opportunity and performance, diversifying marketing channels, experimenting with strategies, and expecting elevated standards from partners, retailers can unlock incremental benefits and propel their businesses forward.

By Angus Quinn (director of marketing for EMEA & APAC at Connexity, a Taboola company)