By Skye Frontier, SVP, Incremental

Consider a consumer searching for sunscreen in May. She may begin with a general search for products to protect against the sun. She may see an ad for a product on TikTok or Instagram,  before researching, and ultimately purchasing the product when it goes on sale from Amazon. What part of the customer journey can be ultimately attributed for her purchase?

It depends on how your advertising is being measured. Was it the last ad? Was it the first ad? Was it because it was on sale? Was it because it was summer?

The rapid growth of retail media — expected to make up ⅕ of global digital advertising spending this year — cannot be overstated, however, within this rapid acceleration, last touch measurement has become the de facto way to measure this growing investment.

One of the great promises of retail media was stronger measurement. With retailers already having direct access to sales via their point-of-sale sales, they could track the consumer’s interaction with ads running across their network and close the loop. The most common way of attributing credit across those touch points is based on the “last-touch”, where the last exposure or click before a sale gets 100% credit for the sales.

Returning to our sunscreen example, Amazon advertising would likely receive credit for the purchase, despite the consumer having initially seen and researched the brand across multiple other platforms, the product also being on sale, and seasonality playing a considerable role in creating the demand for the product in the first place.

Defining Incremental Sales

Incrementality measurement attempts to overcome this by isolating the impact of a particular advertising campaign or marketing strategy. The IAB and MRC define incrementality in their recent Retail Media Guidelines as follows:

“Incrementality is the potential causal impact of marketing…Incrementality measures the true value created by any business strategy, determined by isolating … the related results, independent of other potential business factors.”

Incrementality measurement hangs on the ability to isolate marketing from other relevant factors. This can be done through a combination of experimentation and modeling. The key is determining what those relevant factors are and ensuring they are controlled for.

What makes retail media so much more difficult to measure than other ad types is that those factors must include both media and retail factors. Particularly for shoppable media, where you can transact directly through the ad-unit or onsite search-based retail media, those retail components are as important if not more important to control for than the media factors. Not only does this introduce a broader set of factors that need to be controlled but also a set of highly dynamic ones. Price is typically one of the most important factors to control for – just think about what happens when running a campaign at list price vs. a 30% discount. In today’s competitive marketplace, it is even more transitional — price changes every 10 minutes on Amazon.

Beyond SKU-level pricing, competitive factors like their promotions, product ratings, and even the organic ranking of your products need to be considered. On the media side, you need to consider not just other retail media but outside upstream media running across Google, Meta, TikTok, and others which drive traffic to these marketplaces.

Ad-Attributed Doesn’t Mean Incremental

Last touch attribution doesn’t control for outside media or these retail factors. For this reason, there can often be a significant difference between the ad-attributed sales and incremental sales of a campaign. Analyzing billions of dollars of retail media, there is often no correlation between these two.

The implication of this is that optimizing towards ad-attributed sales or ROAS will not necessarily drive incremental sales for the business. This can contribute to stagnating growth as advertising dollars are less likely to contribute to top line growth and declining profitability as these investments in retail media act as a tax, subsidizing otherwise organic sales

Creating Competitive Advantage Through Better Measurement

Retail media has tremendous potential to unlock sustainable profitable growth for brands but only if those investments contribute to incremental growth. With nearly all retail media being measured via ad-attributed, there is potential for brands to create significant competitive advantage by adopting a stronger measurement strategy.

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