Understanding Incrementality in Retail Media
This article was based on the interview with Ben Dutter from Power Digital Marketing by Greg Kihlström, AI and MarTech keynote speaker for The Agile Brand with Greg Kihlström podcast. Listen to the original episode here:
In marketing, the quest for true return on investment (ROI) remains a paramount concern for brands and marketers alike. As businesses increasingly allocate significant portions of their budgets to retail media advertising, understanding the nuances of ROI has never been more critical. Incrementality is a term that has emerged as a vital framework for assessing the effectiveness of marketing expenditures in the retail media space.
At its core, incrementality seeks to answer a fundamental question: What portion of a marketing investment genuinely drives new revenue, as opposed to merely cannibalizing existing sales? This distinction is crucial for brands that are investing heavily in retail media networks, such as those operated by giants like Amazon, Walmart, and Target. Traditional metrics often fall short in providing a clear picture of marketing effectiveness, leading to potential waste in advertising spend. As Ben Dutter points out, the marketing industry has long been ensnared in a web of attribution models that, while innovative, have often led to confusion and misinterpretation of data.
Understanding the difference between attribution and incrementality is essential for marketers. Attribution models typically credit a sale to the last touchpoint a consumer encountered before making a purchase. This can create a misleading sense of success, as it does not account for customers who would have purchased the product regardless of the ad exposure. In contrast, incrementality focuses on identifying the actual impact of marketing efforts on sales, isolating the true contributions of advertising from organic sales. This shift in perspective allows marketers to make more informed decisions about where to allocate their budgets and how to optimize their campaigns.
One of the primary challenges that brands face in the realm of retail media is the limited visibility and control they have over the data provided by retail media networks. Often, brands rely solely on the metrics offered by these platforms, which are designed to benefit the retailers themselves. This can lead to a scenario where brands invest heavily in advertising without a clear understanding of whether those dollars are generating new customers or simply redistributing existing sales. Dutter emphasizes that many retail media dollars do not contribute to net new revenue; instead, they serve to inflate the media budgets of the retailers, leaving brands with little to show for their investment.
To combat this issue, marketers must adopt a more holistic approach to measuring their marketing efforts. This includes leveraging advanced analytics and data-driven strategies to assess the true impact of their campaigns. By focusing on incrementality, brands can better understand which marketing initiatives are genuinely driving growth and which are merely a drain on resources. This not only helps in optimizing advertising spend but also enables brands to build more effective marketing strategies that resonate with their target audiences.
Furthermore, the integration of advanced technologies, such as artificial intelligence and machine learning, can enhance the ability to measure incrementality. These tools can analyze vast amounts of data to isolate the effects of marketing efforts, providing brands with actionable insights that can inform future campaigns. As the marketing landscape continues to evolve, embracing these technologies will be essential for brands seeking to maximize their ROI.
The conversation around true marketing ROI, particularly in the context of retail media, underscores the importance of understanding incrementality. As brands navigate the complexities of advertising in a digital-first world, focusing on the genuine impact of their marketing efforts will be key to driving sustainable growth. By moving beyond traditional attribution models and embracing a more nuanced approach to measuring success, marketers can ensure that every dollar spent on advertising contributes to meaningful business outcomes. The path to becoming an agile brand lies in the ability to adapt, learn, and optimize based on a clear understanding of what truly drives revenue in today’s dynamic marketplace.
