Incrementality: Connecting the dots between paid search and sales growth
Paid search is central to most brands’ retail media strategy, but it’s all too easy to waste money on keywords, categories, and products that simply cannibalize organic sales. Clayton Roop, solutions consulting director at CommerceIQ, explains how to ensure your paid search dollars drive incremental growth.
In the world of retail media, few disciplines have as much riding on them as paid search.
For most brands, paid search is going to account for the majority of their retail media activations. This makes for a very busy, competitive, and cut-throat market.
Paid search also tends to act as a retail media test-bed. When brands want to dip their toes in the water with a new retailer or retail media network, chances are they’ll do so with paid search.
As a result, paid search has huge influence on wider retail media strategy. What works well for paid search will often have implications for content and more. It is vital, therefore, that brands have a paid search strategy that delivers the right results for them and their business.
This starts with the right data and insights. One of the reasons paid search is so popular with brands is the level of control it gives them. By bidding on specific keywords, categories, and products, brands are able to be more targeted and granular than with most other retail media tactics.
But with great control comes a need for great insights.
To extract the maximum value from their paid search spend, brands need to understand precisely how and when it drives growth on the digital shelf. Crucially, they need to understand if their paid search is driving net new business. Mert Damlapinar’s survey shows that incrementality is absolutely top of mind when talking about retail media networks and their impact.
Nobody wants to waste money on advertising that isn’t converting. Spending money on advertising that is converting but by cannibalizing organic sales is just as bad. Figuring out if paid search is truly incremental is therefore critical.
Improving organic ranking through paid search
Successful paid search drives incremental growth largely by improving visibility and organic ranking.
While retail media ad networks don’t explicitly state that paid search will influence organic growth, factors such as sales velocity, click-through rate, and conversion rate are well known to drive organic placement.
By using paid search on retailer sites, brands can essentially compensate for a lack of organic visibility. Over time, better visibility should lead to better conversion and click-through rates, which in turn should result in products being positioned higher and higher organically. Once a higher organic ranking has been achieved, investment in paid search won’t need to be as aggressive.
Paid search practitioners have been aware of this dynamic for a long time. However, they have tended to run into several challenges:
- How do you know where your opportunity to do this exists at scale?
- How do you track those opportunities to figure out what’s working?
- And how do you ultimately take advantage of paid search opportunities in a way that drives a profitable return?
Looking beyond ROAS
To overcome these challenges, brands must look beyond traditional paid search KPIs.
A lot of retailers and brands currently use return on advertising spend (ROAS) as their guiding light when making decisions about paid search. A strong ROAS tends to mean more aggressive bids and increased budgets.
This approach isn’t necessarily wrong, but it is far from optimal. The problem with ROAS is it doesn’t tell you if you could have gotten a sale organically instead. Are you spending ad dollars to be paid placement #1 where you already have the #1 ranked product? If you already have strong organic presence, your paid placement is likely cannibalising an organic sale, and mis-attributing the sales to an ad when you would have made the sale anyway! This also applies to spending on branded keywords (for example, Kellogg showing an ad on kellogg cereal) – the shopper has already indicated that you’re likely to win that customer. So while you’ll get a great ROAS, you’re not necessarily moving the needle in terms of total sales.
By contrast, incremental ROAS (iROAS) – a new, proprietary metric developed by the data science team at CommerceIQ – takes signals from the digital shelf to give brands more clarity on where they should be putting their paid search dollars. iROAS enables brands to see where paid search is driving incremental growth, and optimize their retail media marketing accordingly.
Retailers are waking up to iROAS
This model does not just deliver great results for brands, it is also of growing interest to retailers.
Since launching iROAS in the marketplace, we have received a lot of interest from retailers and been asked for the underlying data on several occasions. This is because retailers are facing their own challenges around incrementality.
Increasingly, they are being told by brands that ROAS is not fit for purpose. To keep brands spending on paid search and other retail media, retailers are looking for new ways to prove that investment is worthwhile. Many see share of voice and market share gains as a promising new way to prove the efficacy of their retail media. Instacart addresses this directly to brands, and also highlighted the incremental lift ads are able to drive, in their S-1 filing.
We believe this could be the start of an exciting new era for retail media, where both retailers and brands are empowered to drive media decisions in a smarter manner.
Greater transparency around paid search performance ultimately benefits everyone. After all, brands that have a granular understanding of where the best opportunities are can bring smarter, better-targeted activations to retailers, fill content gaps on the digital shelf, and show up where it matters most to the consumer.
CommerceIQ’s approach to Incrementality
While retailers will create different definitions for how to measure “incremental sales”, there’s an incentives problem – retailers need to prove out incrementality to attract more ad dollars! For brands, its essential to have their own visibility into impact their ads are driving. For this to work at scale, it’s essential to have an integrated platform that combines share of search data from the digital shelf with advertising performance data. Without integration, true automation won’t be possible. If brands rely on separate sources of information that don’t talk to each other, their paid search will run off the rails as soon as they try to optimize more aggressively.
This is what makes CommerceIQ unique. We take the digital shelf at scale – including thousands of keywords – to provide in-depth analysis at the keyword level across retailers. Plus, we then layer in incrementality to drive strategy as well as using inventory-aware automations. This empowers brands to drive strategy based on the metrics that make sense for their business, not the default metrics given to them by the retailer.
The results can be truly remarkable. When we built our incrementality model, we worked in partnership with a Fortune 50 client and their retail media team and regularly tested our approach vs their normal day-to-day operations.
Using our incrementality-focused metrics and smart automations, we were able to increase total advertising sales by 16%, and total sales by 5% – without increasing advertising spend at all!
Curious to find out how iROAS and CommerceIQ’s powerful, unified platform can help boost your paid search strategy? Book a demo with our consultants today!