3 Reasons Why CFOs Love Incrementality Measurement and Reporting

Why CFOS love incrementality Testing

James Bance, Head of Growth and Expert in Marketing Strategy

Published 04/06/2022

In hyper-competitive consumer markets, it is not unusual for high growth brands to spend up to 30% of sales revenue on advertising. Finance executives need assurance from marketers that these significant investments are money well spent. Incrementality is the ideal measurement currency for DTC brands because it creates a common language between marketing and finance and reveals the impact media investments have on business metrics the CFO cares about.

Here are three ways Measured provides marketing and finance leaders with actionable, business decision-making power.

1) Calculate the true business impact of your brand’s paid media

Finance executives don’t care about impressions and clicks. They need to understand the true opportunity cost of media investments. Did ads drive revenue or waste money? Relying on measurement that requires tracking users and pixels, like last touch attribution from ad platforms, is reckless in today's privacy-restricted environment and leads to poor business decisions.

If measurement isn’t based on actual transaction data from sales or a commerce platform like Shopify, Bigcommerce, or Salesforce, misguided brands could mistakenly cut high-performing channels or miss an opportunity to diversify into a more lucrative one. Incrementality testing can answer key questions about media impact like "if I cut my Facebook budget, how many sales/orders/subscriptions would I lose?" or "how far can I scale into TikTok while maintaining my ROAS targets?"

Even Facebook is acknowledging that last touch platform reporting is unreliable and that brands should use incrementality testing. It’s convenient for platforms to highlight the issue when they are under-reporting performance, however, we’ve found that they are over-reporting conversions just as often. Either way, last touch is flawed and shouldn’t be trusted.

  • Watch our most-viewed Incrementality Insights Video / Slides demonstrating how a brand would have been severely misguided had they trusted Facebook's reporting, and the importance of measuring with incrementality. While the webinar demonstrates geo-testing in a Facebook environment, these concepts apply to all walled garden media platforms today.
  • Shinola Case Study (referenced in the webinar above) shows how incrementality measurement revealed that Facebook's reporting undervalued the brand’s awareness campaigns by 413%!

2) Measure across all channels holistically

Incrementality is a universal, business-impact metric, enabling apples-to-apples comparisons across a brand’s entire media portfolio. Platform/vendor metrics cannot be compared against each other, because each media platform measures attribution within the confines of its own platform. If you add up all platform-reported conversions, they will never reconcile with the actual sales numbers from a brand's transaction system of record.

Having a cross-channel view that reveals the true business contribution of media spend as a whole and down to the channel, ad set, and tactic level, informs smarter budget allocation decisions. What CFO wouldn’t love that?

Incrementality Dashboard showing ad spend and sales

 

* Note the difference in actual sales compared to sales conversions reported by ad platforms. Incrementality calculates the actual contribution of each platform individually and altogether.

3) Forecast and optimize business health by viewing marketing spend through a customer lens

In addition to validating media spend through revenue impact, CFOs are working to strike a balance between the cost to acquire new customers, and maximizing long term margin. Measured’s Customer Reporting Module includes four reports that help executives track and plan budgeting using a customer-centric lens.
LTV: The LTV dashboards allow CFOs to track customer lifetime value (LTV) on every channel, segmented by customer characteristics. By comparing it to the customer acquisition costs (CAC) of those segments, executives can evaluate and optimize media spend to fine tune business growth.

Retention: The retention dashboard helps track customer behavior over time, allowing brands to determine who is worthy of continued media investment (eg: Do my Black Friday customers become regular buyers and should I use marketing to develop loyalty, or are they simply one-and-done buyers who won't come back?

RFM: Recency, Frequency, Monetary reporting identifies similar characteristics in customers that tend to be the most loyal or spend the most money, which enables brands to customize media strategies for specific customer cohorts.

New vs Existing: A view into new vs. returning customers helps brands monitor the mix of loyal vs new customers, enabling more consistent growth forecasting.

Customer Reporting Webinar (Video / Slides) for more information about how CFOs can use these tools to accurately tune brand growth to their needs.

Additionally, here is an email we recently sent to clients highlighting several Customer Reporting use cases. These were specifically tuned to Q4 analysis, but the approach can be applied to a variety of business programs (sales, seasonality, etc).
Working with 100+ DTC brands, we’ve seen the growth impact reliable media insights based on useful business metrics can have well beyond the marketing organization. CFOs, executive teams, investors and more are adopting the shared language of incrementality reporting and embracing a test and learn culture and mentality.

If you want to learn more about incrementality measurement and how brands use it, please read our new Guide: Incrementality Measurement for DTC Marketers.

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