What is Incrementality Testing in Marketing?

Incremental Testing in Digital Marketing

During a stable economy and somewhat predictable market, a combination of various marketing activities such as activation campaigns, running banner ads and promotional offers can yield great results. The real challenge is when you’re marketing products and services during unpredictable times to markets with low consumer confidence. This is where incremental testing for marketing comes into play.

Instead of spending large marketing budgets at the top of the sales funnel, or focusing solely on how to improve conversion rates at the end of the funnel, incrementality testing allows marketers to rethink on a broader term. That perhaps, there isn’t a single best solution to improve marketing performance and sales during trying times, but a ‘weighted combination’ of several solutions.

Finding that fine balance between all the possible solutions and their incremental cost, may provide the most beneficial outcomes for businesses.

What is Incrementality Testing?

Incrementality testing is a mathematical approach to testing various increments to a certain state by measuring the incremental lift provided by each increment.

For example: Let’s say whenever you’re hungry, you eat the same meal every time and realize that you’re never really satiated. You might try to add an apple next time and note just how much more satiated you feel after that apple. Then, you might try having an extra bowl of soup the next time instead of an apple and again note how much the extra bowl of soup helped you feel full. In comparison, you realize that the apple has higher incremental lift but it’s apparently more expensive than the soup by so and so increments. Hence, you come to the conclusion that one and a half bowls of soup is probably the best solution in terms of cost and incremental benefit.

In the business and marketing world, it all boils down to number crunching. 

How to apply the concept to marketing?

When you apply an incrementality testing approach to marketing, it will quickly become apparent that it’s characterized by a high level of granularity. 

Defining incrementality in marketing: the incremental benefit (by units) to the results of the original marketing plan that is generated by certain actions (also measured in units). For example, for every additional 100 THB spent on ads, how much probability of return in revenue does it generate. Or another example might be, for every additional newsletter you send out per week, how many extra opens are you getting and what is the cost of that incremental lift.

Benefits, challenges and measuring incremental lifts.

There are some obvious benefits as follows:

  • Given that you are measuring the outcomes in incremental units, you can easily optimize your digital marketing spends and avoid overspending.
  • Besides optimizing spends for individual channels, the incremental benefits allow you to make informed decisions to better allocate and distribute budget to the various channels.

And how would you go about measuring incremental lifts?

Here’s a simple example:

(Test CR – Control CR) / (Test CR) = % Incremental Lift

*CR = Conversion Rate

As for the challenges of this sort of testing:

  • Like all other tests, it’s not always easy to have a constant environment. There will be factors that you cannot control such as seasonality, that may taint the test results.
  • Incrementality testing also challenges marketers’ ability to keep a big-picture and holistic view in order to avoid oversights, because the nature of the test itself can be very granular. 

While incrementality testing is mathematical in nature, the concept itself is highly useful when applied to the entirety of marketing during a recession and uncertain times.