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Knowing is half the battle when it comes to growth marketing. Pinpointing the precise impact of each marketing activity requires more than traditional metrics. That is where the concept of incrementality comes in.

Many have referred to incrementality as the north star of marketing. Any marketing activity that’s measured to be incremental adds value to your business. 

Incrementality measurement helps you clearly see which marketing activities and channels are actively driving value and which ones are getting credit for organically driven values.

In this article, we’ll break down everything you need to know about incrementality, starting from why marketers measure it in the first place, all the way to how you can do it yourself. Without further ado, let’s begin.

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What Is Incrementality?

In marketing, incrementality refers to the improvement in the targeted result (such as awareness, site traffic, conversions, income, or profitability) brought on by specific marketing activity. 

It’s the most correct and precise way to assess the actual value produced by any marketing activity.

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A Closer Look Into Incrementality

Incrementality is a means to quantify an occurrence that wouldn’t have happened without a specific interaction and produced the intended result. 

In a marketing context, it answers questions like- “Are my conversions coming from organic or paid traffic?” or “What happens if I increase or decrease my budget for certain marketing activities?”.

Measuring incrementality helps marketers pinpoint key contributors behind expected outcomes, so they don’t end up paying for something they could have gotten free of charge.

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Why Do Marketers Measure Incrementality?

One key challenge marketers face today is distinguishing organic traffic from paid installs. 

Inability to measure what causes your marketing efforts could lead to serious mismanagement in budget allocation. 

Incrementality can help determine how much an increase/decrease in ad budget will contribute to conversions. 

Measuring incrementality is also needed to know if marketers should focus their budget on retargeting or catering to cold audiences. 

Lastly, measuring incrementality is necessary to keep marketers from wasting and help them place their money effectively.

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What Incrementality Isn’t

Incrementality should not be confused with factors like attribution. Attribution pinpoints the factors behind expected outcomes, such as conversion, while considering several marketing activities.

For settings where tracking impressions is complex (e.g., Facebook, Pinterest), attribution is limited in terms of insights. 

Incrementality measures the expected results gained with and without a specific marketing action. This provides more insights into the value that particular activity generated and if it would have occurred in its absence.  

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Why Is Incrementality Measurement Important?

Incrementality measures can act like compasses to marketers, navigating their efforts in the right direction. 

Measuring incrementality gives you specified insights, leading to effective campaign moderation and optimized strategy. 

It lets you see precisely what impact an activity has on your initiative, and it’s imperative to keep track of that in today’s competitive market. 

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How can I test incrementality?

1. Planning and Defining Incrementality Test Parameters.

The first step is to define and plan the activities we will test incrementality for and the desired outcomes. Target audience and specific KPIs are important parameters we need to set in this phase.   

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2. Segmenting Your Audience into Test and Control Groups.

The next step is creating two groups from the target audience- test and control. The test group is set for performing selected activities, and the control group is kept free of those activities. These two groups ought to be chosen at random and not intersect. 

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3. Launching and Running the Incrementality Test Activity.

Next, we will expose the test group to the marketing activity selected. How long this phase needs to last depends on the individual parameters and requirements. We also need to ensure no other new campaign is launched during this testing period.

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4. Collecting and Interpreting the Incrementality Test Results.

Once you’ve finished testing, the next step is calculating incremental lift in the chosen KPIs. The basic formula for that would be:

Desired outcome in test groups- Desired outcome in control groups Desired outcome in control groups = Incremental Lift

If the lift value is positive, you will know that the activity positively impacted the KPI. If it’s negative, then the activity is bad for your audience. 

However, if it’s zero, you will know that the activity has no significant impact and should be stopped. 

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5. Using Incrementality Test Results to Make Data-Driven Decisions.

Factors like what activities bring real value to the business and profit vs. cost of different marketing channels- are crucial to making sound and effective business decisions. 

Using incrementality test results, you will know where in the business you should focus your efforts and where you need to reduce or remove measures. 

You can also use incrementality test results to derive valuable insights such as return on ad spend vs. organic revenue- which in turn gives you an idea of just how much you need to spend on ads to maintain profit.

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How Does Incrementality Differ from Traditional Optimization Methods?

Comparing with other traditional methods is a good measure of how comprehensive and effective incrementality test results can be for you. Here are a few conventional methods explained for that purpose.

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Click Optimization (CTR)

Click optimization methods focus on increasing ad clicks by placing heavily on high-clickable platforms or aggressively targeting users most likely to click. But studies show that clickers are not necessarily converted, and the amount spent on getting users to click doesn’t necessarily impact overall sales.

Click optimization is also known for creating a bad user experience.  

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Conversion Optimization (CPA)

Conversion optimization focuses on users with a higher likelihood of converting (e.g., warm audiences). For this method, users are identified based on two factors- recent visitors and users who have shown intent to convert. 

After identifying users based on these, these users are heavily exposed to ads to drive them to conversion. However, this doesn’t give any insights into what’s driving the conversion. 

This is because people who were converted through this method were already close to converting. 

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Vendor Accountability

Vendor accountability is holding vendors and publishers responsible for the actual improvement in results and not letting them take credit for conversions where they had very little to do. Concepts like incrementality, by definition, increase vendor accountability to a sizeable degree. However, optimizing CPA or CTR can get in the way of getting accurate, impactful results.

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Incrementality Optimization (iCPA and iROAS)

Incrementality optimization techniques use incrementality testing to make data-driven optimizations and get true indicative. Regular result metrics like ROAS and CPA cannot provide insights showing direct causation between two stages. You can calculate Incremental CPA by dividing the increase in cost by the increase in conversions. 

cost conversions=incremental CPA 

Calculating incremental ROAS helps you eliminate all organic conversions from your ROAS, giving accurate results from your marketing activities.

Test group revenue - Control group revenue

Total ad spend=incremental ROAS

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Last-Click Conversion Optimization (cCPA)

Last click conversion optimization combines click optimization and conversion optimization, based on the assumption that there’s a definite link between click and conversion.

For last-click conversion optimization, users are bombarded with ads right before converting (after the last click), which has negatively impacted conversions in recent years. 

Potential customers can avoid converting with this strategy while damaging their brand reputation.

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The Impact of Incrementality Measurement in Marketing

Results from various incrementality measurement tests gives highly activity-specific feedback, increasing vendor accountability. Incrementality measures give you an idea of what specific outcome is driven by which specific activity, allowing marketers to allocate their resources most effectively.

Also, this can stop previously undetected waste and stop marketers from spending money on areas where you can achieve results organically.  

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Frequently Asked Questions

What does incrementality mean in marketing?

The increase in the targeted result (such as awareness, site traffic, conversions, income, profitability, or any custom metrics) brought on by specific marketing activity.

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What is the difference between attribution and incrementality?

Attribution pinpoints the factors behind expected outcomes in the presence of several marketing activities, whereas incrementality measures the expected results gained with and without a specific marketing action.

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How do you measure incrementality in marketing?

Incrementality is measured as incremental lift on the desired outcome generated by specific marketing activity and would not be generated organically. 

You can calculate incremental lift by incrementality testing.

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What is an Incrementality test/How do you calculate Incrementality?

You can simply visualize incrementality test with this formula:

Desired outcome in test groups- Desired outcome in control groups Desired outcome in control groups = Incremental Lift

First, divide target audience into test and control groups, where test group will be exposed to the specific marketing activity. Then, calculate incremental lift to see how that activity affects your desired outcome. 

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Final Thoughts on Incrementality in Marketing

By adapting the concepts of incrementality and incrementality measurement, you can identify the true impact of specific activities and channels. It will allow you to allocate their budgets to channels that drive results while cutting back on waste. Incrementality is the often overlooked measure whose potential for refining and optimizing marketing operations is becoming evident recently. 

Thanks for reading up, and hopefully, this article equips you with everything you need to start measuring incrementality in your operations.

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Want to know how you can utilize community marketing to grow your brand? Check out this article.

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