Discover the critical role of incrementality in retail media investments and learn about the complexities involved in measuring it. This post delves into the challenges marketers face due to the lack of standardization and offers practical solutions like native metrics, experimental testing, and contextual indicators.
Making the most impactful retail media investment decisions relies on key metrics. And while traditional KPIs like return on ad spend (ROAS) and return on investment (ROI) have their place, they are proving too simplistic for this quickly maturing channel. Instead, advertisers want to go deeper and understand what is truly working or not working to drive performance. In a word, retail media marketers desire incrementality, the lift that occurs due to a specific activity.
This isn’t a new need…
In August 2022, Insider Intelligence polled U.S.-based retail media buyers on the most valuable metrics for assessing performance; 55% stated that incremental sales were most important. Just one year later, the response rate jumped to 74%.
[ROAS is] a metric that doesn’t give you the full picture. You can narrowcast the targeting of a campaign to a small audience, and you can have a very high ROAS, but it might not really move the needle on sales impact that much.
Incrementality is the only way forward
The need for incrementality is growing. As retail media advertising costs continue to rise, it’s more important than ever to optimize spending. However, proving incrementality remains a top challenge for marketers, according to Skai’s 2023 State of Retail Media survey, and it’s inhibiting investment growth in the channel.
Why do marketers have difficulty identifying retail media incrementality metrics and taking action to improve them? Given the complexity and lack of measurement standardization across networks, incrementality is more challenging to define in the retail media landscape than other, more mature channels. The data also tends to be more opaque and harder to get because of this retailer layer between the advertiser and the media impression.
These challenges will continue as long as retail media networks remain in their walled gardens. While there is no silver bullet for retail media incrementality, there are some solutions that advertisers can tap into to unlock incremental insights:
Native solutions within the walled gardens
Some native platforms offer incrementality metrics within their walled gardens. For example, Amazon Marketing Cloud (AMC) unlocks measurement insights beyond last-click attribution, such as the top first-touch campaigns and the top paths-to-purchase to explain the customer journey across Amazon ad types.
While these tools allow for a better understanding of your Amazon Ads program’s interactivity, they only work within the garden’s wall, so you can’t easily compare performance across networks.
Radical experimental testing
In auction-based media, bidding is critical, and it’s not that easy.
If you bid too low, you won’t win the high-value Walmart Connect auctions you want and may have trouble spending your budget If you bid too high, you could overpay, which may waste your budget and not get the impressions you need to drive success Remember, return-on-investment (ROI) is a ratio of how much you make divided by how much you spend. Hitting your ROI or ROAS goals is often more about keeping your costs in line rather than solely focusing on selling more products.
Contextual incrementality indicators
Contextual incrementality indicators are the best path forward. Our guided approach to retail media incrementality is based on key indicators that provide marketing context analysis on your ad activity. We’re using relevant data points to enable a test-and-learn approach in measuring incremental lift. Some key indicators include AMC learnings, share-of-voice (SOV) insights from our Competitive Insights tool, performance metrics like new to brand (NTB), and operational metrics such as inventory and sales.
These indicators allow us to guide you in incrementality improvement flows that suggest enhancements for incrementality indicators.
This solution may be the best currently available, but it’s still far from perfect. For one, retail media incrementality can mean different things to different company types and organizational stakeholders.
Let’s examine the typical stakeholders’ perspectives:
- Practitioners want to know which campaigns have an incremental impact to understand holistic performance.
- Functional leads want to understand the incremental return on investment to identify key areas for reinvestment.
- Data scientists typically want access to raw data to find new opportunities through deep analysis.
- Executives want key insights to inform a holistic media plan.
Success stories: personalizing data to prove incrementality
To successfully prove incrementality, we recommend focusing on the indicators that make the most sense for your business and stakeholder goals.
One Skai client focused on NTB metrics, automating certain optimizations based on the data. That resulted in a 1.3x faster acquisition of new Amazon buyers and a 128% rate lift in NTB buyers.
Another Skai client focused on SOV data to inform and automate workflows, leading to an almost 2x higher ROAS and a 39% higher click-through rate on non-brand campaigns.