Geo-Matched Market Scale Test Yields 42% Higher Return on Ad Spend for Digital Retailer
The Client’s Backstory:
An online optical provider has consistently experienced strong performance from their retargeting providers. During their previous geo-matched market scale test, the company achieved an incremental return on ad spend (ROAS) that was 42% higher than their portfolio average. Due to their long conversion cycle and high rate of returning customers, the company has made significant investments in retargeting across multiple channels. However, the high investment has raised concerns regarding audience overlap and over-reported revenue on platforms. These concerns require further attention to ensure that the investments made by the company provide optimal returns.
This Begs The Question:
"Is our retargeting investment across multiple channels leading to a higher audience overlap and over-reported revenue on platforms?"
The Test Setup:
To answer this question, we decided to implement a full holdout of all retargeting tactics, including social, display, and video. We excluded brand search from this experiment under the assumption that an active brand search effort would be a sufficient baseline. The objective of this test was not to land an individual incrementality metric across each retargeting platform, but rather to understand the aggregate value of retargeting across their business.
We were surprised to find that a simulated cut of all retargeting spend (roughly 5% of total paid media budget) only led to a 0.02% drop in overall sales. This aggregate retargeting incremental lift test was analyzed separately from any individual retargeting tests previously executed.
Faced with conflicting test results, we were able to move forward with a data-driven approach. We concluded that retargeting does drive value in a scale environment but investing in retargeting across multiple vendors does not necessarily drive conclusive lift. Therefore, we recommended to cut spend from walled garden platforms where ads are unlikely to reach new users and concentrate their retargeting investment in whichever channel is able to drive the highest volume of new user reach at the most efficient cost. By focusing on the data and making informed decisions, we can optimize their retargeting efforts for maximum ROAS.
Through their holdout experiment, the online optical provider discovered that cutting all retargeting spend (roughly 5% of total paid media budget) led to only a 0.02% drop in overall sales. While this result suggests that retargeting does drive value in a scale environment, investing in retargeting across multiple vendors does not necessarily lead to conclusive lift. By reallocating their retargeting investment to channels that drive the highest volume of new user reach, the company can achieve maximum ROAS. This data-driven approach will help the company avoid audience overlap and over-reported revenue on platforms while continuing to achieve strong performance from their retargeting providers. By making smart and strategic decisions, the online optical provider is well-positioned to stay ahead of the competition and emerge as a leader in their industry.
It's important to understand that incrementality is not static, and it actually will change based on business conditions, presence of competition in the market, changes in your target strategies, and numerous reasons outside your control.
Therefore, regularly testing and optimizing ad spend allocation is critical. Measured offers a solution to help businesses make informed decisions and optimize their advertising efforts for maximum ROAS.
This customer story highlights the importance of data-driven decision-making when it comes to advertising spend allocation. While retargeting does drive value in a scale environment, investing in it across multiple vendors does not necessarily lead to conclusive lift. By reallocating their retargeting investment to channels that drive the highest volume of new user reach, the company in question was able to achieve maximum ROAS and avoid audience overlap and over-reported revenue on platforms.
That’s why Measured gives customers access to a database of thousands of incrementality tests we’ve already run for 100s of brands on 65+ channels and tactics. You can use the Measured platform to view weekly incrementality benchmarks in spend, costs, and ROAS that may be a result of industry-wide trends. With Media Plan Optimizer you can compare multiple spend scenarios in minutes and continuously optimize your full portfolio for incrementality during the periods between running in-market tests.
Are you confident that your advertising spend is being allocated to the right channels and campaigns for maximum ROAS? Only independent incrementality testing using geo-matched market experiments can reveal the real impact of your advertising efforts.
If you want to make data-driven decisions and optimize your advertising portfolio, it's time to try Measured, click here.