Advancing iROAS With an Ensemble Approach for Retail Media Incrementality

ROAS (Return on Ad Spend) has long been a go-to metric for measuring advertising performance, particularly in retail media. It makes things simple: For every dollar you put in, you get X back. This gives marketers a straightforward way to gauge the effectiveness of their ad spend across different platforms, placements, and ad types. For instance, if your sponsored products campaign delivered $5 ROAS and your sponsored brand campaign delivered $4 ROAS, it’s fairly clear which one performed better.

As incrementality becomes a central focus in retail media measurement, iROAS (incremental ROAS) has emerged as a key metric. It provides a more detailed view of campaign success by measuring the incremental impact of advertising—going beyond traditional ROAS by accounting for what portion of sales truly resulted from ad impressions that wouldn’t have occurred otherwise. This makes it a powerful tool for understanding the real value of your media investments.

In today’s post, we’ll dive into how iROAS, already a highly effective and insightful metric on its own, becomes even more powerful when combined with other complementary metrics in an ensemble approach. By incorporating a broader set of measurements, marketers can capture both short-term and long-term impacts, maximizing the potential of their retail media strategies.

iROAS: A fundamental starting point for retail media measurement

Advertisers are facing increasing pressure to accurately measure the true impact of their retail media investments. A recent joint study by the Path to Purchase Institute and Skai found that 70% of advertisers struggle to measure the incremental performance of their retail media, underscoring the need for more accurate and adaptable measurement approaches. The complexity of retail media introduces unique measurement challenges compared to traditional digital channels. Marketers must balance media performance with logistics, inventory management, and joint business plans. For example, a beauty brand may focus on fostering long-term customer loyalty, while a consumer electronics brand might prioritize rapid inventory turnover during product launches.

iROAS (incremental ROAS) has been developed to fill this gap, offering valuable insights into the incremental value generated by advertising campaigns. By focusing on how each dollar spent contributes to new sales that wouldn’t have occurred otherwise, iROAS helps marketers better understand their media investments.

That said, iROAS is only one piece of the puzzle. As discussed on the Retail Media Therapy podcast, hosts Viv Craske and Colin Lewis noted that iROAS can serve “…as a guide and as a help to kind of light you on the way.” While iROAS provides direction, it’s most effective when combined with other metrics to capture a complete view of campaign performance. This ensures that marketers aren’t just chasing immediate returns but are optimizing for both short-term and long-term success across the customer journey.

That’s why marketers should consider incorporating additional metrics in conjunction with iROAS that encompass the entire customer journey, from acquisition to retention. This enables them to make data-driven decisions that foster sustained growth.

The need for an ensemble approach: incrementality indicators 

Marketers need more than just iROAS to fully optimize their efforts. Retail media marketers require a flexible, multi-metric approach that goes beyond immediate results and captures the entire customer journey. By using a mix of incrementality indicators, marketers can analyze both short-term and long-term effects, advancing the value of iROAS with an ensemble approach.

Here are some examples of incrementality indicators that can complement iROAS:

• Incremental Sales/Revenue: Tracks additional sales or revenue generated by the campaign.
• Incremental Customer Lifetime Value: Assesses the long-term value of new customers.
• Incremental Brand Lift: Evaluates shifts in brand perception or awareness.
• Incremental New-to-Brand: Measures how many first-time buyers the campaign attracts.
• Incremental Market Share: Tracks how the campaign impacts brand or category share.

These indicators offer a deeper insight into how retail media campaigns drive long-term objectives. By utilizing a combination of these metrics, marketers can enhance the valuable insights provided by iROAS and gain a more complete understanding of overall campaign success.

Skai’s approach to incrementality: Flexibility and customization

At Skai, we believe that no two campaigns are the same, which is why customization and flexibility are at the heart of our approach to incrementality measurement. While iROAS is an essential part of the toolkit, it works best when complemented by metrics tailored to your unique business needs. That’s why we enable marketers to design their own measurement frameworks with our suite of incrementality solutions:

• Custom Metric Building: Advertisers can blend traditional and incremental metrics allowing them to create tailored measurements that align closely with their specific campaign goals. This flexibility enhances the insights provided by iROAS, ensuring that marketers capture a more nuanced understanding of performance.
• Incrementality Testing and Experiments: Marketers can conduct rigorous tests to uncover granular insights and validate campaign performance. By experimenting with different variables, they can understand how various factors influence iROAS, allowing for more informed decision-making and strategic adjustments.
• Comprehensive Data Integration: Skai aggregates data from multiple sources, including inventory, sales, and media performance metrics. This comprehensive integration enriches the context in which iROAS operates, providing a clearer picture of how each campaign element contributes to overall success.
• Automation and Optimization: Skai enables automated, near-real-time optimizations at the keyword level. This capability allows marketers to make quick adjustments based on performance data, ensuring that iROAS insights are applied effectively and efficiently to drive better results.

These solutions empower marketers to customize their measurement models, enabling them to analyze both immediate and long-term outcomes based on each campaign’s specific goals. By integrating these additional metrics with iROAS, marketers can achieve a more complete understanding of their retail media strategies.

Conclusion: Maximizing the potential of iROAS

In retail media, it’s essential to balance short-term performance with long-term value. While iROAS serves as a vital metric for measuring incremental lift, its true potential is unlocked when integrated into a broader, customizable framework that encompasses the full impact of retail media efforts. By leveraging a mix of incrementality indicators and custom metrics, marketers can gain a comprehensive understanding of their campaigns, ensuring they drive immediate returns while also building a foundation for sustained success.

Now is the perfect time to evolve your measurement strategy. Embracing a more flexible and ensemble approach to metrics allows marketers to adapt to the complexities of retail media. By incorporating various performance indicators, you can gain deeper insights into customer behavior and campaign effectiveness, ultimately enhancing your decision-making process.

With Skai’s incrementality solutions, you can create a tailored measurement framework that aligns with your specific business goals. Moving beyond reliance on single metrics enables you to capture a complete picture of campaign performance, maximizing the full potential of your retail media investments and driving growth in both the short and long term.