Incrementality testing: solution for measuring effectiveness of ad campaigns

Analytics & KPI
April 7, 2022 / Author: Zhuk Elizaweta

Brands should learn how to know which conversions were made as a result of their marketing campaigns and which would have still occurred organically, without them. It will help them to increase revenue and improve their marketing strategies. What can they use for that? For example, incrementality testing. Let’s learn more about it in our article.

What is it?

Incrementality helps determine the real value of brand marketing efforts, and answer the question “How many conversions or leads would have happened anyway, without any marketing spend?”

On the one hand, incrementality could be hard to measure, because it needs to collect a lot of information, and a lot of time is spent on testing. On the other hand, after testing, brands can get powerful insights. For example:

  • How does advertising affect conversions?
  • What is the real ROI of an advertising campaign?
  • What impact did marketing have on existing customers versus new ones?
  • Which audience segments  have the strongest response?
  • How does marketing efforts influence market share?

Answers will allow brands to optimize their marketing strategy, make more informed decisions and realize where they should focus attention, and budget.

How does it work?

Incrementality testing is a controlled experiment while measuring which conversions were obtained as a result of ad campaigns, and which occurred organically. Brands can test channels, audience segments, whole strategy, etc.

One of the goals of the test is to determine incremental lift — conversions which brands got as a result of marketing effort. To do that, target audience divides into two groups:

  • experimental group A, which will see advertisements;
  • control group B, which won’t see any advertisements.

The next steps are launching a test advertising campaign, and counting conversion in both groups. After that, incremental lift can be calculated by  a formula:

It’s measured as a percentage. The higher of this parameter, the more profitable advertising campaigns — marketing efforts help to increase revenues. 

Let’s understand with an example. Company B decided to measure incrementality for a retargeted ad campaign. After ending test ad campaign, they counted conversion rates in both groups, and calculated incremental lift by the formula:

  • CR в группе А — 0,042%;
  • CR в группе В  — 0,024%.

Thus company B received 42.8% more conversions as a direct result of the retargeted ad campaign. Also, we can say that without running the campaign conversion rate would decrease by 42.8%.

This way, brands can not only observe the influence of marketing campaigns on conversions but also know how many conversions would have happened without any advertising investments.

What should brands remember?

Analytics and testing are components that complement each other to achieve a more effective marketing strategy. But they need to be well-thought-out. Therefore before start incrementality testing, there are a few key things to keep in mind:

  • Purposes of testing. Before running an ad campaign formulate the hypothesis you want to test and the key KPIs that a brand focuses on.
  • Audience segmentation. Without the right segmentation, brands might get incorrect results. Audience segments should have similar characteristics, but not overlap.
  • Seasonality. Black Friday, Cyber Monday, and the holiday season influence users behavior. Conversion rate can be higher in this period. As a result, incremental lift can be incorrect. Therefore brands should carefully choose a period of incrementality testing.

In conclusion

As digital marketing constantly develops and changes, marketers should find ways to identify efficient investments in advertising. Incrementality testing can help measure effectiveness of ad campaigns, budget redistribution and find a real ROI of advertising.