Is Incrementality the Key to Measuring Marketing Efforts?

May 24

Marketers have a tough job. Trying to figure out how much ads impact a business is complicated, more so when you're trying to get a closer look at just one ad. It's a little like trying to pick out the best player in an orchestra. But that's exactly what they're looking to do when they calculate incrementality.

Incrementality in marketing refers to the measurement of the additional impact that a marketing campaign has on a particular metric such as return on advertising spend (ROAS), organic traffic, or conversion rates, compared to what would have happened if it had not been run. It is often used in holdout testing to determine the effectiveness of a marketing strategy by isolating the impact of a specific marketing initiative. By looking at the incrementality of a new campaign or ad spend, marketers aim to better understand its true return on investment (ROI).

What Is Incrementality?

Incrementality in marketing works by evaluating the impact of a new marketing campaign on a particular metric—such as sales, website visits, or email lead generations—compared to what you expect from your normal marketing mix. You can only truly look at incrementality if you perform a holdout test, in which a test group seeing a new campaign is compared to a control. The control is a group of people who are similar to the target audience but do not receive the campaign, so any difference in the sales, website visits, etc. can be attributed as an effect of only that new marketing campaign.

You can also look at the incrementality of a new level of ad spend, but you’ll still need a control with which you can compare your results.

Incremental lift ultimately quantifies how successful an effort was (or wasn’t). Let’s put it into context:

For example, let's say a company wants to run a Facebook ad campaign to promote its new product. They create audiences of randomly segmented people with similar characteristics: group A, which will see the ad, and group B, which will not. The company tracks the sales of the new product in both groups during the promotional period and afterwards. By comparing the sales of group A to group B, they can measure the impact of the ad.

If the conversions of group A are significantly higher than those of group B, the company can conclude that the Facebook ad had a positive incremental lift. This information can help the company optimize their marketing tactics, allocate their budget effectively, and make data-driven decisions. It's a lot of effort for marketers to ultimately answer the question, "Did this work?"

Unfortunately, this example is only theoretical, but we hope it imparts how to think about incrementality in context. We’ll touch on this later, but since Meta no longer offers holdout testing, you cannot look at true incrementality on their platforms.

What Is Incremental Profit?

Marketers aren't always looking to answer questions about conversions. Sometimes they're testing what could happen if an ad is shown on one platform instead of another. That's why you may encounter the term incremental profit, which is a way of talking about lift when the measurement is about money the business is making.

Incremental profit is calculated by subtracting the costs associated with the marketing initiative from the additional revenue generated and is a way to prove that it's ROI positive.

For example, if a company launches a new product and invests $50,000 in marketing, and the campaign generates $200,000 in additional revenue, the incremental profit would be calculated as follows:

Incremental Profit = Additional Revenue - Marketing Costs

Incremental Profit = $200,000 - $50,000

Incremental Profit = $150,000

In this example, the company generated $150,000 in incremental profit, indicating that the marketing campaign was profitable.

Incremental profit helps companies determine the true financial impact of their marketing efforts. Businesses may use this type of calculation to try to identify the most profitable marketing channels and campaigns and allocate their marketing budget more effectively.

How Incrementality Differs from Attribution

If the terms are blurring together for you, don’t worry. You’re in good company. It can be helpful to think about attribution, incrementality, and incremental lift in terms of the questions you’re trying to answer as a marketer:

Attribution answers the question, “How much does this campaign or channel contribute toward my goal?”
Incrementality answers the question, “Does this new ad (or ad spend) contribute above what we can count on from our typical marketing mix?”
Incremental lift answers the question, “How much exactly did this new ad (or ad spend) contribute above what we normally achieve?”

So while incrementality and attribution feel related, they’re looking at and measuring two different things entirely. Attribution is mostly focused on one specific campaign or channel within your current marketing mix and how it’s (hopefully) supporting your goals. Incrementality focuses on the new—whether that’s a new campaign or a different level of ad spend—and seeks to identify if this change accomplishes something above and beyond what the normal marketing mix does.

Looking a bit more into incrementality, once you’ve answered the question and you know that, yes, a new campaign did contribute beyond your typical marketing mix toward your goal, you can put a number on its impact. That amount identified is the incremental lift.

How to Measure Incrementality

The process of incrementality testing in marketing typically involves the following steps:

Define the objective: Determine the goal or desired outcome and identify the metric that will be used to measure success. For example, the desired outcome could be to increase purchases, website traffic, or brand awareness.

It also is important to decide how you will measure success. If you’re going to be testing for “brand awareness,” will you use a user survey to determine this? Will you proxy awareness via another metric like social followers or engagements? Make sure you figure the “how” out up front to make your life way easier during the analysis steps later.
Determine the specifics of the marketing activity: This is when ad creative in line with the objective is made, the media channel for the test is selected, and ad spend is determined.
Select the test audience(s): You’ll be able to select your target audience, but true holdout testing is limited if you’re advertising on social media. While Meta used to offer holdout testing with an identified control group, that feature was disabled in 2021. If you’re running an A/B test, this is where you’d divide the target audience into two groups, each seeing one version of your ad.
Launch the campaign: Implement the marketing campaign. We’ll discuss more below on why holdout testing isn’t practical, but let’s assume here that you’re A/B testing. You would launch both versions of your ad and try to ensure that other than the ad differences, what the two groups experience is as identical as possible.
Collect all the data: Measure the performance of the groups using the identified metric from step one. Collect data over the duration of the campaign (in the form you identified in step one) and afterwards to measure the long-term impact. Some platforms like Facebook will let you compare before the campaign duration is over, but it’s important to let the test run for the duration you decided in the beginning.
Analyze the data: Compare the metric performance between the groups. If you were able to perform a holdout test, calculate the incremental impact by subtracting the performance of the control group from that of the test group.
Draw conclusions and take action: Based on the results of the analysis, draw conclusions about the ad's effectiveness and take action accordingly. If it had a positive incremental impact, consider scaling it up or optimizing it. If it had a negative impact, reconsider the strategy or adjust it for future iterations.

Incrementality testing can be conducted on different media channels, such as social media, email, and search engine.

Alternatives to Incrementality

There are several alternatives to incrementality in marketing. Two common approaches are media mix modeling and guess and check.

Media Mix Modeling: Media mix modeling is a statistical technique that measures the impact of different marketing channels on a particular metric, such as sales or brand awareness. It involves analyzing historical data on ad spend and performance to create a model that predicts the impact of changes in ad spend. Media mix modeling can help marketers determine the optimal allocation of their budget across different platforms and optimize their strategy accordingly. There are downsides to MMMs, though, which we discuss at length in our explainer on media mix modeling.
Guess and Check: The guess and check approach involves testing different tactics and analyzing the results to determine what works best. This approach is often used when historical data is not available or when marketers want to test new strategies or a new channel. It involves creating a hypothesis, implementing a test, and analyzing the results. Based on the results, marketers can refine their strategy and continue to iterate until they find the most effective approach. This method is slower, more costly, and—as you may have already guessed—less scientific, but one that can be used in a pinch.

Other alternatives include surveys and focus groups. Surveys and focus groups can provide qualitative feedback from customers and help inform marketing strategy.

Why would you consider an alternative? Incrementality is, in our opinion, not feasible at the scale of most businesses—and there's no value in the findings generated by this methodology if it's not conducted properly.

Is Incrementality Valuable?

There are undeniable limitations to using incrementality as the sole metric to measure the effectiveness of ads. For many companies, it’s just not feasible to use incrementality properly.

It takes considerable time to isolate the impacts of one campaign. To truly do that, you would have to perform holdout testing, turning off each channel or platform for long enough to be able to state that no leads have seen an ad here in their memory. And, yes, that's lost potential revenue—which is exactly why this doesn't scale. As we mentioned, some social media platforms don’t offer a control group with which you can compare your test, so performing holdout testing is logistically impossible on these channels.

To do incrementality right, you’d need to extendedly turn off every other channel, which marketers usually aren’t allowed to do because it affects the bottom line. Anything less, though, isn’t true incrementality.

It Doesn’t Capture the Full Value of a Campaign

We believe one of the biggest limitations of this method is that it doesn’t take into account second-order effects, such as the impact of a campaign on brand awareness or customer loyalty.

It’s not that incrementality denies the existence of halo effects, but it does ignore them. When you’re running a holdout test, you’d need to extend the testing window to capture how the campaign (or increased ad spend) you’re looking at affected direct, paid search, and organic traffic, which takes longer to trickle in. Since true holdout testing isn’t feasible for most brands, extending the testing period is even further out of the question.

Most measurements of incrementality also look only at the revenue impacts of the campaign in question from its channel. While some halo effects from within this testing window could be included in this calculation, they generally aren’t. If you’re not considering second-order effects of a campaign, you’re not capturing its full value.

Here at Prescient, our dashboard not only reports on these halo effects—and, therefore, the holistic value of your campaigns—but also provides dollar values on them to help you understand the ecosystem of your marketing budget.

Incrementality FAQs

What is incrementality in marketing?

Incrementality in marketing aims to quantify the effect on company growth or sales of specific marketing efforts above what it would have achieved otherwise. It works by evaluating the impact of a new marketing campaign on a particular metric—such as sales, website visits, or email lead generations—compared to what you expect from your normal marketing mix.

What is the difference between lift and incrementality?

Incrementality is a way of quantifying the impact of just one ad in your marketing mix. The incremental lift is how many more conversions or how much more revenue your brand made because of that ad alone. But you don't have to look at revenue or purchases. You can measure incrementality in whatever way is most relevant for your business goals, whether that's purchases, organic traffic, social media follower growth, or newsletter signups.

What does incrementality mean?

In marketing, incrementality refers to the additional value or outcomes generated by a specific marketing activity, campaign, or advertisement, beyond what would have occurred without it. It aims to measure the direct impact of marketing efforts on consumer behavior, such as increased sales or conversions, distinguishing between results driven by the marketing action and those that would have happened anyway. The goal of this concept is to help marketers understand the true effectiveness of their strategies and optimize their spending for maximum ROI.

Jimmy Marsanico