The Essentials of Incrementality

The Essentials of Incrementality: Why It Matters and How It Works

Posted January 24, 2019 in ,
Last updated: February 22nd, 2021

Data-driven performance marketing taught me that while it’s impossible to know everything about a given purchase and channel, there are many things we do know.

Gaining sales through a channel may be the first, easiest and cheapest way to measure performance – but can also present you with the least accurate numbers and insights.

While it’s impossible to know everything about a given purchase and channel, there are many things we do know.

I began my journey into data-driven performance marketing in 2001.

Prior to that, I was a performance marketer specializing in SEO (I had the hip title of “Search Engine Guru” for Netivation.com, a company out of Post Falls, Idaho), then focused on affiliate marketing and customer retention at TeamOn.com.

I settled in for a longer haul managing Coldwater Creek’s affiliate channel, email marketing and paid search campaigns.

It was at Coldwater creek in (2001) where I was introduced to data-driven performance marketing and the importance of accountability to numbers.

Insights from numbers. The holy grail of data-driven performance marketing.

When insights are backed by sound data, they can uncover answers to crucial questions.

Why are the things that are happening, happening?

Where should I invest more money?

Which marketing activities are increasing my cost but not my reach, margin and market share?

How do I know that I need this marketing campaign, but this other campaign is redundant?

The Search for Incrementality

While at Coldwater Creek I was introduced to the concept of incrementality. Incrementality is the idea that even though a sale was attributed to “X” channel, that doesn’t mean “X” channel was necessary for the sale to happen.

Just because a sale is attributed to a channel does not mean that we should incur that cost going forward to ensure we acquire that customer or sale.

As digital marketers, we need to identify the tasks that bring new, incremental orders and customers.

What is Incrementality?

The Business Dictionary has a great definition: “Number of units sold through a sales promotion offer (that is) in excess of the estimated number that would have been sold without it.”

They pretty much hit the nail on the head.

For the affiliate community, this question often comes from executives.

IE: “What is the number of sales I would have lost – if it weren’t for my affiliates and their marketing of my company and products?”

In essence, what are the sales that only happened because I have an affiliate channel and am working with that particular affiliate.

While the incremental sales strategy article is a great read in my opinion (I may be slightly biased), I’m going to update and condense that information for you in this blog post.

Attribution

You can not discuss incrementality without talking about attribution. These two aspects are 100% related.

Attribution and incrementality are related in their “why,” the intended outcome of instituting initiatives in both areas, and the execution of strategies.

Attribution is an attempt to “attribute,” or give credit to the proper channel for the sale and cost of the sale.

While at Coldwater Creek, we had an initiative we called “Lumberjack.”

The title came from the idea that a sales order was a tree. And, we were attempting to “chop” that order into the pieces (channels) that were involved in the sale.

It was a way of identifying the channels and campaigns that were needed, in order to efficiently deploy business resources and generate more incremental sales.

Ah, see? We’re back to incrementality.

There is one real problem with incremental sales that I have found to be true in each and every one of the 19 years I’ve been doing digital marketing: the answer isn’t knowable.

We will never fully know which channel was needed – as an absolute – in the sales funnel.

I know, I know; earlier I said that many things can be known. But you can’t ever truly know which channel was absolutely necessary in the sales process.

It comes down to intent, the path to purchase and human beings.

Sometimes we don’t even know why we do something – why we bought this over that, from this or that store.

Improving the ability to track incrementality allows companies to be more efficient with crucial resources.

While we can’t “know” – as an absolute – what is incremental, we can give ourselves the greatest chance at increasing incremental sales.

Before we go there, let’s talk more about why this is important.

Why is Incrementality Important?

  • Adequate deployment of resources
  • Lean and mean cost structure
  • Highest ROI

Adequate Deployment of Resources

Business resources are finite. Working hours, staff, budget, creative etc. – all these things are in limited supply. You only have, or have access to, so much of each.

If you have no idea where you should be spending these resources, you undoubtedly will be spending them poorly.

Improving your ability to track incremental sales will allow you to be efficient with crucial business resources.

Cost Effective

As an affiliate marketing company, JEBCommerce is always searching for ways to cut costs and increase revenue for our partners. Focusing on incrementality is a proven way to get there.  It’s about efficiency of your spend.  If you can only spend $50 to acquire an order, but you are spending money on paid search, SEO, display and affiliate for the same order, your cost for that order will increase.  So, ensuring incrementality and increasing it, will allow you to identify areas, partners, and promotions you do not have to work with our utilize to get that order.  So if you can remove one channel from the stream for that particular order and customer, your cost goes down.  When your cost decreases, you can re-deploy that budget to another area to gain more customers.

ROI

Always be measuring your return-on-investment. Incrementality campaigns naturally yield a high ROI – and higher ROIs keep everyone happy.

All pretty good things right? Definitely worth the effort.

How Incrementality Works

Once you have decided incrementality is worth the effort – and it is – the next step is defining incrementality for your business and putting it to work for you.

Get incremental sales for your business using this 4-step method:

  • Data
  • Technology
  • Benchmarking
  • Incentivize Affiliates

Data

Incrementality is different for every business.

Data will help you form a definition. You have to be realistic. Knowing what data you have available will help you put handles on what your definition could be.

If you have minimal data to work with simply use the formula of new customer = incremental.

Is every new customer incremental? No.

Is every existing customer non-incremental? No.

But in a pinch, calculating that every new customer = incremental will help get you started in the right direction.

Technology

I speak and write often about technology. Knowledge is king and incremental sales data can help you paint a broader picture.

Almost all affiliate networks offer a way to differentiate a particular transaction as new or incremental and others as existing or non-incremental.

The opportunities within technology is a very large topic and this much data takes time to wrap your head around and develop a plan.

If you are looking for help getting to a better platform of profitability, call me at 800-208-6215, or email. Would love to help you become more profitable.

Benchmarking

Many people want to see how they stack up against competition and where the opportunities are for increasing incrementality. JEBCommerce has a benchmarking tool to help with that!

This is a 7 step assessment that will show you how your program stacks up against some of the leading affiliate programs in the world.

After filling out each section, you will get a detailed report highlighting the areas you are well positioned for profitability and opportunities to improve incrementality.

Use the Incremental Benchmarking Tool by JEBCommerce.

At this point you have collected the right data, set up the technology and have a benchmark.

Now, to answer the golden question, how do you increase incremental sales?

How to Increase Incremental Sales

At the core increasing incremental sales comes down to what your data can tell you.

When you can identify new customers at checkout, you can pay higher for new customers.

When you batch upload your affiliate sales, you can look at all sorts of demographic data about that order and commission accordingly.

To increase incremental sales, you will commission affiliates in relation to the incremental qualities of the customer.

For example, you may choose to pay out more for incremental customers, new or high LTV customers – and pay a lower affiliate commission for low tiers of customers.

JEBCommerce follows two rules to follow when incentivizing affiliate partners for incremental sales:

  1. Measure and Report
  2. Keep it simple

Measure and Reporting Incremental Affiliate Sales

Do not commission on something you can’t measure and report.

We’ve had partners that have tried to commission on aspects of an order that they themselves aren’t sure they can track or report.

If you can’t track it, you can’t report it – and you shouldn’t be commissioning on it.

The affiliate industry is very much built on trust and relationships. At the end of the day (actually, all throughout the day) you should be focused on building relationships.

Go back to the data section and ask yourself what things you can track and report to the networks.

Keep it Simple

Be careful not to make this so complicated that your affiliate partners are unable to actually target that segment of customers.

Over complicating will unravel your mission to increase incremental sales.

A good rule of thumb is, if you can’t explain it to someone outside the industry – so they can understand it quickly – then go back to the drawing board.

You see, it’s not just about commissioning on the right sale; it’s about convincing the affiliate base that it can drive those types of sales and make money.

When affiliates are able to fully understand the mission, they are able to target those types of customers efficiently.

Incrementality Mistakes

Mistakes are truly important.

I still remember the meeting, the room it was in and the individual who questioned not only the affiliate channel, but seemingly my value to the company completely.

He had data that showed only a small amount of affiliates sales were incremental, according to his definition and data.

I was unprepared. I was devastated. I almost lost my job. I could have gotten pissed at him. I could have done whatever I could have thought of to make him look ignorant, etc.

I didn’t, though.

At the root, I wanted to know if all the work I had done for almost my entire career was adding any value.

Imagine that: you dedicate your career to a discipline and then find out it isn’t worth it at all to anyone.

I didn’t want that to happen, so I learned from him and his team. I taught them quite a bit about affiliate marketing, as well.

In the end, affiliate channel sales were way more incremental than they originally thought.

The channel persisted and I was able to prove the affiliate channel increases incremental sales.

In fact, every time we do this, we prove to our advertisers that they indeed get customers through affiliates that would not be acquired anywhere else.

We do that by facing the data head on.

Essentials of Incrementality Key Takeaways

  1. If you do not know where to spend, you will spend poorly
  2. Always be measuring ROI
  3. Use the Incremental Benchmarking Tool by JEBCommerce
  4. Commission affiliates in relation to incrementality
  5. Measure and Report
  6. Keep it Simple
  7. Face the data head on
Was this article helpful?
This field is for validation purposes and should be left unchanged.
Comments (1)

1 thought on “The Essentials of Incrementality: Why It Matters and How It Works”

  1. Pingback: Affiliate Marketing Industry News Roundup 1-30-2019

Leave a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

About the author

Jamie Birch

Founder/CEO

Connect with me on: Skype
Jamie is the owner and principal of JEBCommerce. His extensive Internet marketing experience includes all facets of online marketing: email, paid search campaigns, customer retention programs, and much more. This wide range of disciplines has enabled Jamie to excel as a business leader and JEBCommerce to realize a great level of success for its clients. Jamie cut his “affiliate marketing teeth” managing affiliate programs for many well known companies before spending several years at Coldwater Creek, a Top 5 nationwide women’s clothing retailer. While at Coldwater Creek, Jamie established and managed affiliate campaigns, email campaigns, and SEO campaigns – an opportunity that allowed him to develop many of the proven processes JEBCommerce successfully employs today. In recognition of his professional leadership, the affiliate marketing industry has consistently nominated him for Annual Pinnacle Awards over the years. In addition to individual accolades, JEBCommerce is gaining momentum within the Internet marketing industry and is experiencing positive, exciting growth. This is a direct result of Jamie’s positive leadership, integrity, and earned respect – from his clients and industry peers. Need a speaker for your next event? I can do that, too!