It’s common in marketing to measure the success of a campaign based on the ROI – the return on your investment. And in display advertising, this is usually calculated by looking at how many consumers viewed or clicked on ads, and how much money came back via purchases.
But this calculation is flawed, and the resulting conclusion meaningless. Why? Because this calculation doesn’t measure how many sales would have taken place anyway without the advertising.
The truth is that some of the sales that you are attributing to your campaign would always have happened, even if you hadn’t spent a penny on ads. And by including them in your ROI, you’re getting an unrealistic picture of what actually happened.
You’re also skewing your decision-making going forward. Because, with an artificially high ROI, you may have decided to invest more money in an ad campaign that’s not actually delivering the results you think.
And if that campaign doesn’t work as well next time, you’ll have no idea why, because all your attention is focused on the very end of your marketing funnel.
So what should you do instead?
What you should really be measuring is your incremental ROI. That’s how much unique value your display ad campaign is genuinely delivering – the number of people whose behaviour was changed by seeing the ads.
How do you measure this? To discover true incrementality you need to split test your campaign into two groups:
• One group who sees your ads.
• A second group who doesn’t.
This allows you to tell how much additional revenue you have generated by running your ads.
What difference can measuring incrementation make to your ROI?
Incrementality helps marketing teams to serve ads to people who are likely to act as a result of seeing them – and spend less (or nothing) on people who will probably make a purchase without seeing an ad.
To give context for this, we recently ran a highly successful display ad campaign for a top retail brand.
While the rest of the retail market struggled with a festive season that saw a 3.1% drop in Boxing Day shoppers and 75% clothing discounts before the peak shopping season, our client’s e-commerce sales for the 23 weeks leading up to 5 January were up 27.8% on the previous year.
30% of this growth can be directly attributed to our activity. Indeed, we delivered an ROI of 9, with a new customer rate of 43%.
However, our incremental ROI was actually 5.4-6.4. This is the actual ROI based purely on the ads we ran. The difference between the two figures are the people who would have made their purchase whether they’d seen our ad or not.
This is the only honest and accurate ROI that companies should be talking about when it comes to display advertising campaigns. A company that wows you with an ROI that doesn’t measure incrementality isn’t showing you the whole picture, and is taking credit for sales that had nothing to do with their campaign.
If you’d like to learn more about increasing your own incremental ROI, or discuss how we can help plan a lifecycle marketing campaign for your business, please get in touch.