What Is Incrementality Testing in Digital Marketing? | (un)Common Logic

Do you know if your paid media (or any advertising efforts) are working? Better yet, can you measure the delivered value of your paid media efforts?

One of the best ways to measure the value of your paid media is through incrementality testing. Incrementality testing is a crucial aspect of paid media campaigns, as it helps to determine the true impact of your ads on business outcomes. It allows you to understand whether the investments you are making in paid media are driving incremental results, rather than simply shifting demand from one channel to another.

Sounds good, right? Let’s dive a little deeper into incrementality testing and how can you use it to improve the effectiveness of your paid media campaigns.

What is Incrementality Testing?

Incrementality testing is the process of comparing the results of a control group (those who were not exposed to your ads) to a test group (those who were exposed to your ads). By analyzing the differences between these two groups, you can determine the incremental impact of your ads on key business metrics such as sales, website traffic, and conversions.

Why is Incrementality Testing Important?

Incrementality testing is important because it provides a deeper understanding of precisely what in your paid media campaigns is working and what is not so that you can optimize your paid media efforts. How is incrementality testing helpful?

1. It helps you to optimize your ad spend: By understanding the incremental impact of your ads, you can make more informed decisions about how to allocate your ad budget and where to focus your efforts.
2. It helps you understand your ads’ true value: Incrementality testing allows you to quantify the value of your ads in terms of their impact on key business metrics. This can be especially useful for demonstrating the value of your ads to stakeholders.
3. It helps you to identify the most effective ad channels: By comparing the results of different ad channels, you can determine which ones are most effective at driving incremental results.

What Types of Incrementality Tests Can You Run?

There are several different methods you can use to conduct incrementality testing, including:

1. A/B testing: This involves comparing the results of two different versions of an ad to see which performs better.
2. Multivariate testing: This involves testing multiple variations of an ad at the same time to determine the most effective combination of elements.
3. Holdout groups: This involves withholding your ads from a certain group of users and comparing the results to a group that was exposed to the ads.
4. Geo-Match Market testing: This involves comparing the results of a defined geographic control group to a defined geographic test group. There is no user-level data needed as this is cohort-based. This allows you to control for factors such as seasonality and economic conditions, as both the control and treatment groups are exposed to the same external influences.

Regardless of the method you choose, it is important to ensure that your control and test groups are as similar as possible in terms of demographics and other relevant characteristics. This will help minimize the influence of factors other than your ads on the results.

Does Incrementality Testing Really Work? Give Me an Example.

Absolutely. In the example below we are comparing revenue for both the Control and Test group. We start by analyzing the revenue data pre-test against the pilot period (the timeframe the test was running) for each group. As we see from the chart below, revenue for the control increased 5% (+$10k) while the test group reported a 20% increase (+$60k). The difference of the two is the incremental revenue driven by the test, in this case +15% or $50,000.

Overall, incrementality testing is an essential tool for maximizing the effectiveness of your paid media campaigns and ensuring that you are getting the most value for your ad spend. It is generally a good idea to use a combination of different incrementality testing methods to ensure that you are getting a comprehensive view of the impact of your paid media efforts. By regularly conducting incrementality tests and using the insights you gain to optimize your campaigns, you can drive better business results and achieve your marketing goals.

Contact us to talk about incrementality testing and other opportunities to improve your digital marketing efforts.

Want to learn about other ways to improve your paid media? Check out our tips for lead validation and working with CRM data and how quality score can reduce cost-per-click and increase ROAS