Preparing for the next generation of ecommerce: Why incrementality is the modern metric brands are chasing
An introduction to incrementality and Retail Media Management
As long as performance measurement has existed for ecommerce, brands have sought to understand the impact of paid advertising on sales growth. And as the digital shelf has grown, so, too has the need for deeper measurement and understanding of which ad campaigns, channels and tactics are providing the most return.
Brands managing major spend on retail media networks, are looking for actionable insights that enable them to make informed decisions about product assortment, pricing strategies, inventory management and operational efficiency—so dimensioning traditional return on ad spend (ROAS) measurements with incrementality has garnered significant demand.
At the core of CommerceIQ’s Retail Media Management (RMM) solution lies the concept of incrementality – and by extension IROAS (Incremental Return on Ad Spend), a powerful concept that revolves around accurately measuring the impact of retail media on sales growth. In this article, we’ll explore the concept of incrementality, delve into the benefits of Retail Media Management, and highlight how CommerceIQ, a pioneering platform in the field, is driving success for ecommerce brands worldwide.
Understanding incrementality for ecommerce brands
Incrementality defined: Although incrementality is a hot topic today, brick-and-mortar points of sale data has given insight into estimated base and incremental sales for decades. So what is incrementality, anyway? In the context of ecommerce and digital marketing, incrementality refers to the lift in sales dollars or conversions directly driven by specific marketing campaigns or activities. Measuring incrementality involves isolating and quantifying the additional revenue generated as a direct result of the marketing efforts, in other words, accounting for shopper conversions beyond what would have occurred organically.
Challenges of attribution: Traditional attribution models (like ROAS) often leave brands struggling to accurately measure the impact of their marketing touchpoints. In ecommerce retail media, this often results in overinflated ROIs that can lead brands to invest in advertising campaigns that are only subsidizing organic sales—as opposed to creating new ones. Incrementality seeks to overcome this challenge by providing a clearer understanding of the true causal relationship between marketing activities and consumer behavior.
Methodologies for measurement: Incrementality is commonly estimated using either manual experimentation or using proxy metrics.
Manual experimentation involves A/B testing, where a control group (not exposed to marketing) is compared with a test group (exposed to marketing). By analyzing the difference in outcomes between the two groups, marketers can attribute the observed changes to the marketing efforts. This method requires significant time and resources, and delivers limited investable scenarios for brands. Proxy metrics like New-to-Brand-Sales are an improvement over ROAS, but still cannot account for organic sales.
CommerceIQ’s proprietary, AI-powered incrementality metric – which is baked into our Retail Media Management solution – is based on a refined data model that’s built across more than 20 categories. Its measurement takes into account multiple factors, including share of voice, buyer propensity, and search term relevance. So how exactly does that help brands become more profitable online?
The benefits of Retail Media Management as delivered by CommerceIQ
Accelerate sales growth through optimization
Leveraging our incrementality model, CommerceIQ clients create product campaigns using real-time data analysis to increase their rate of sales growth. The CommerceIQ platform predicts the incrementality of future keyword advertising so brands can identify the most promising keywords, ensuring that every dollar spent generates maximum incremental revenue. Clients can then turn the optimization over to CommerceIQ’s AI-powered system to continually revise target keyword spend as estimated incrementality rises and falls.
Maintain sales growth, even with reduced spend
In addition to driving incremental sales, maintaining sales growth can be tremendously challenging with flattened or reduced retail media budgets. Our brands have demonstrated the ability to maintain sales growth – even when their media budgets were cut – resulting in tremendous full-year account performance.
Continuous optimization
CommerceIQ’s platform offers real-time monitoring and optimization capabilities. By analyzing data and performance metrics in real-time, brands can adapt their strategies dynamically to capitalize on emerging trends and consumer behaviors, staying ahead in the competitive ecommerce landscape.
Accurate performance measurement
At the heart of CommerceIQ’s approach lies a focus on quantifiable incrementality. We help brands accurately measure the true impact of their marketing efforts, facilitating more accurate ROI calculations and evidence-based decision-making.
Retailer and total business gap closure opportunities
Retailer account teams consistently have one or two objectives to rule them all: Total Net Sales and/or Delivered Profit. When internal sales forecasting models predict the account or total brand will miss one or both of those objectives, they go into “Gap Closure” to focus more resources on delivering that year’s numbers. Typically, this involves seeking highly lucrative investment opportunities across the entire value chain.
CommerceIQ clients are able not only to accurately dimension sales plays at a single retailer, but also estimate performance at multiple retailers like Amazon, Walmart and Target to provide the brand with reliable investment opportunities across the digital shelf.
Is your digital shelf ready for the next generation of ecommerce?
In the age of ecommerce, where competition is fierce and consumer behavior is ever-changing, the concept of incrementality and the implementation of Retail Media Management are imperative for success today, and in the coming years. Brands that embrace these principles will not only improve their advertising strategies but also optimize their entire ecommerce ecosystem—on the digital shelf and within their organizations.
CommerceIQ stands at the forefront of this transformation, offering a comprehensive platform that drives measurable incrementality, empowers data-driven decision-making, and ultimately helps brands achieve their ecommerce objectives
Ready to revolutionize your ecommerce strategy with CommerceIQ?
