Understanding Incrementality and Its Misconceptions

Understanding Incrementality and Its Misconceptions

Nick Stoltz, Expert in Cross-Channel Measurement Strategy and Adoption

Published 06/14/2023

Welcome back to our Video Explainer series on incrementality. This week, we'll delve into the murky waters surrounding the term 'incrementality', aiming to clear up some common misconceptions and provide clarity on how the term is being used in market.

Incrementality, a term you may have frequently encountered, often leads to confusion due to the diverse contexts in which it's used. It's crucial to note that anytime you come across the term, it should ideally be followed by 'testing'. This refers to a robust and well-structured in-market experiment involving clearly defined test and control groups.

Avoid falling into the trap of standard attribution approaches and those using synthetic controls calling themselves 'incrementality.' While these methods may seem tempting, they fail to provide accurate incrementality measurements and may lead to inaccurate results and incorrect marketing decisions.

In this blog post, we'll outline common misconceptions related to incrementality. Let's get started.

1. Incrementality and Testing Go Hand in Hand

Whenever you come across the term 'incrementality', make sure it's coupled with 'testing'. This refers to a properly designed in-market experiment with distinct test and control groups. Beware of standard attribution approaches and those using synthetic controls, falsely labeling themselves as 'incrementality'.

2. Incrementality Modeling Must Be Based in Testing

Advanced techniques such as counterfactual models, causal inference, lift models, and propensity models are often pivotal when designing and analyzing test outcomes to ensure the rigor of your incrementality tests. Using the most advanced techniques available help ensure accurate insights and actionable decisions come out of every incrementality test.

3. Incrementality is Different Than Traditional Attribution Modeling

Common attribution modeling techniques, like multi-touch attribution or marketing mix modeling, don't measure incrementality. Instead, they estimate marketing’s impact on sales, ultimately measuring correlation, not causation. In future discussions, we'll cover valuable methods to integrate results from incrementality tests into attribution models. But for now, remember, these models do not inherently measure incrementality by themselves.

4. Be Wary of Misleading Usage of Incrementality

Incrementality is frequently misapplied in several ways. One such misuse includes the creation of synthetic control groups retroactively, without conducting an actual in market test and control experiment. These methods look for naturally occurring variations in customer behavior — such as variations based on attributes, purchase history, geographical, and temporal factors — to attempt to estimate incrementality. Beware of these approaches, because they lack grounding in authentic test and control experiments, they can often lead to inaccurate results and invalid conclusions.

5. Misinterpreted Incrementality in Marketing Strategies

Subtle variations in marketing strategies, like increasing marketing spend in some geographies by 30% and decreasing spend in others, are often misconstrued as incrementality. While it's a clever strategy to enhance the quality of your marketing mix models if done correctly, this represents an enhancement to marketing mix modeling, not incrementality.

6. The Key Takeaway: The True Meaning of Incrementality

If there's one thing to remember, it's that whenever you see 'incrementality' being used, it should refer to an actual in-market experiment. Taking standard attribution approaches and calling them “incremental” by using naturally occurring variation or applying forced variation used to create a synthetic control is not measuring the true incrementality of your media.

To continue exploring incrementality and how to correctly leverage it in your marketing strategies, make sure to follow our ongoing Video Explainer series. If you're new to our series or want to revisit some fundamental concepts, check out our previous blog post for a comprehensive understanding.

Stay tuned for more insights and clarifications on these pivotal concepts and their impact on your marketing strategies. Or schedule a demo today and see how Measured can help you drive incremental sales and business growth.