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The lessons brands can learn from high-growth businesses that measure incrementality

The lessons brands can learn from high-growth businesses that measure incrementality

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This post is sponsored by Epsilon.

Ecommerce has been transformed dramatically in the past five years, but the methods for measuring marketing effectiveness have remained the same. Continued use of outdated attribution techniques are giving marketing teams an inaccurate view of their progress and encouraging them to waste money by chasing customers already intent on purchase.

Why is this important right now?

Marketers face real budgetary challenges in the year ahead, with significant headwinds in terms of costs. Rather than seeing an uptick in post-pandemic marketing spend in the past 12 months, there was actually a drop, and this is likely to get worse. 

Epsilon recently conducted a survey, which revealed that 78% of companies are spending more money on digital marketing – but that means even more pressure on digital to get results. 

Deeper dive

Ben Foulkes, commercial director of Epsilon, recently explained it is time brands move on from measuring attribution. Instead they should follow the example of high-growth businesses that rely on measuring incremental outcomes.

“Attribution is a great method for measuring marketing success if you are a start-up. No one knows your brand and all your target customers are low propensity, so it works well,” he said.

“If a marketing team can prove their campaign has touched a customer, then they can claim credit if that individual progresses along the sales funnel. However, as brands grow, evolve, attract new customers and operate across offline and online channels, accurate measurement becomes much more difficult.”

Rather than incentivising real marketing success, he said attribution merely incentivises teams to prove they were in the path of the customer journey at a point as close to conversion as possible.

These kinds of last-touch metrics may look good on Google Analytics, and they may win kudos with finance teams, but they ultimately encourage marketing teams to invest in their current cash flow, rather than investing in new customers. 

Why incrementality is the answer

Instead of focusing on attribution, high-growth brands such as fashion retailer Pretty Little Thing, are now switching their attention to measuring marketing effectiveness and growth using incrementality. This metric is ideal for revealing which marketing measures achieve the biggest impact on the customer journey, rather than simply proving a customer touch-point.

Having measured and identified which actions are the most effective at moving customers towards a purchase, marketing teams then have the confidence to invest more of their budget in the same area. 

Incrementality may involve analysis of a larger audience cross section, and the technique may be more complex, but the return on investment is greater and the results are significantly more powerful.

Pretty Little Thing, for example, initially approached Epsilon in 2019 because the brand wanted to leverage its CRM data and pivot away from re-targeting because it did not consider it effective. 

However, by harnessing customer recognition technology and always-on test-and-control techniques, Epsilon was able to transform re-targeting into a channel that talked more effectively across the brand’s sales funnel and drove powerful incremental sales. This gave Pretty Little Thing the confidence to invest 20 times more in re-targeting and achieve a significant return on its investment.

Bottom line

When marketing teams achieve a fully valid table and transparent view of incremental growth they are able to understand their exact return on ad spend.

In Pretty Little Thing’s case this was backed up by rigorous test-and-control checks. This level of incrementality enables sales teams to work high up in the sale funnel, identifying and targeting key customers using personalised, one-to-one conversations. 

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