What is Incrementality?
Answering the question, “What is incrementality,” is like trying to define the word “warm.”
In short, it depends on who you’re asking.
Just as a person raised in Minnesota is likely to have a different perspective about what it means to be warm than a person raised in Singapore, so will one brand have a different point of view about incrementality than another brand.
Instead of understanding incrementality as a term with a rigid definition, it’s far more useful to perceive it as a concept.
The concept of incrementality is as follows:
- The ability to directly tie spend (or some other input) to a specific outcome in an effort to identify effectiveness of a marketing channel, a partner, and/or optimisation tactic.
- The process of identifying specific interactions that propel consumers from a passive state to an active state in any given desired action.
- A way to measure an event that wouldn’t have occurred unless a certain action or interaction was taken.
How do you define incrementality?
How brands define incrementality varies; it is not a one-size-fits-all approach. This is because a “desired outcome” is different from one brand to the next.
For example, some actions that brands may look at within their affiliate programme to assess “incrementality” include:
- Increase in new customer acquisition
- New products purchased that had not previously been purchased by that customer
- Basket size increases
- Orders that had no other channel or partner involved in the conversion path
- New email signups
- Increased brand exposure from a specific channel
- Increase in leads within a purchase funnel
- Increase in sale-active partners in a revenue driving programme
- New-to-channel revenue driven through optimisation efforts
- Increase in projected key performance indicators (KPIs) as a direct result from the affiliate programme
- Increased adoption and sales of additional product lines or business units
- Increase in traffic tied back to affiliate promotions and activities
These are just a few ways brands evaluate incremental actions within their programmes. The key point is that it’s ultimately up to the brand to determine what action/actions they deem incremental.
Once that’s decided, that definition can be used to set incrementality goals, track efforts, allocate spend towards those actions and even reduce spend in areas that don’t meet that criteria.
How can I determine what incrementality means for my affiliate programme?
Establishing what incrementality means for your affiliate programme starts with asking the right questions. Here are a few we ask to our clients to help them define incrementality for their affiliate programme:
- How is incrementality defined by your company?
- What is the desired action you want your affiliate partners to deliver?
- Are there specific partner types (e.g. content, loyalty, coupon) that you feel are driving more/less incremental value to your programme right now? If yes, why?
- Are you viewing incrementality at a macro or micro level for your business?
- What metrics/variables are considered most important to your affiliate programme?
- Have you performed any incrementality testing internally before? If yes, what were the results/learnings?
- How are you achieving desired incrementality in other channels (e.g. paid marketing, email, etc.)? How does your brand track this incremental revenue internally?
- How would you define your current customer?
- What is the typical purchase cycle you see for your product(s)?
- At which point in the purchase path do you see the highest cart abandonment rate?
Every brand will have their own unique perspective on and answers to these questions based on what they value and based on what their data shows, be that provided by their affiliate network or Software as a Service (SaaS) platform or what they’ve gathered internally.
Once your team has enough perspective and data to answer some of the aforementioned questions, you’ll be able to establish a performance baseline by channel and by partner vertical (e.g. content, loyalty, mass media, coupon/voucher, brand-to-brand, mobile, etc.).
From there, all partner activities and initiatives can be focused around maintaining or improving those incremental KPI’s—and perhaps even optimising away from partners who do not meet those standards.
These insights can also help ensure your affiliate programme remains credible and efficient, both with internal stakeholders and with external partners.
Too often, brands claim that their affiliate partners aren’t driving incremental value. However, in most cases, those affiliate partners don’t have a clear understanding of what the brand’s definition of incrementality is or how it’s being measured/evaluated. This missing information makes it difficult for them and the programme management team to support those outcomes.
In addition, some brands perceive certain partner types (e.g. content, coupon, loyalty, etc.) to be more incremental than others, which may or may not be accurate. It all comes back to what the brand’s unique definition of incrementality is for their affiliate programme, their business, etc.
Each affiliate partner contributes to a piece of the marketing pie. Therefore, it’s important to maintain a healthy balance of partners within your affiliate programme as they each can add value in their own way. This balanced approach can also help reduce programme contribution risk and maintain healthy sales from different audience groups driven by the portfolio of partners in a programme.
It is also necessary to communicate incrementality goals to your affiliate partners so they understand why certain decisions are made, and what success looks like for both themselves and the brands they are working with.
With better alignment, open communication and clear objectives – even when business goals shift – brands will realise better incrementality—not just within their affiliate programme, but from all their marketing channels.
To learn more about how to effectively define incrementality for your affiliate programme, download our Global Guide to Incrementality in Affiliate Marketing.