The term ‘incrementality,’ a buzzword that’s getting plenty of renewed attention in the affiliate marketing industry, has been around for quite some time. In a nutshell, incrementality refers to the value or sales generated by the marketing efforts that would not have otherwise been generated. If the value was truly driven by the affiliate, for example, we can say that their efforts were incremental to our brand’s marketing performance.
There are generally multiple touchpoints that a consumer interacts with before converting, and because of this, determining incremental value can be complex. How incremental value is measured is also determined on a case by case basis depending on what the brand sees as the most valuable benchmark.
The possibilities for what a brand considers valuable are as nuanced as a brand’s unique marketing strategy. For this reason, it’s also important for brands to be able to track, measure, and then test affiliate performance that is consistent with their attribution values. Tracking and reporting solutions aside, because of these inherent nuances, incrementality testing is an important aspect of figuring out which partners add the most value.
Running incrementality tests is important because one of the most common ways that brands lose revenue is by paying for sales that they would have gotten anyway — be that because those are returning customers, or because other channels (like organic search, for example) are truly what drove the sale. This is one of the most common ways that ROAS is negatively impacted in the affiliate channel.
It’s important to keep in mind, however, that there is no black and white in determining incrementality; we cannot measure with 100% certainty whether or not each affiliate touch point made a difference in making a sale. But, at a higher level, incrementality testing can give us a solid view of trends in our strategy and whether or not we are closing more sales because a particular affiliate is involved, than if they were not involved.
What is an incrementality test?
Incrementality testing, at a basic level, is essentially a form of A/B testing. The point is to measure the incremental value of your ad spend so that you can understand the true impact of your affiliate marketing program.
Here is a simple example of an incrementality test: Say you segment two audience groups, Group A and Group B. Group A can act as your control group, while Group B can be the group to which your affiliate ads are run.
If Group A (a control group without ads) had 200 conversions, and Group B (the exposed group with ads) had 250 conversions, then the percentage of incrementality sales is the percentage of Group B that converted due to marketing spend (so, 50 conversions or 20% of Group B total).
Keep in mind that the primary outcome you test for does not have to be sales, it can be any benchmark that you desire to test, but the point is to use the results of your tests to determine how best to invest in your affiliate channel. Once you can understand what works best for your affiliate programs, including which affiliates perform best, you can figure out how to invest in the channel optimally.
Whether or not you choose to implement incrementality testing in your affiliate channel, the take-away for affiliate marketing leaders is that we don’t have to accept the status quo if it’s not working. We can choose to ask new questions and use new tools to find the answers. Incrementality testing is one of the tools that can empower brands to measure the results of their affiliate channels differently. Part and parcel with testing for incremental performance is the ability to track partners on your own terms.
For so long, the affiliate marketing industry has played by essentially the same set of rules. A future-forward approach to the affiliate channel asks us to raise our standards for affiliate marketing programs so they can operate optimally and cost-effectively. Using incrementality testing, brands can determine which partners add the kind of value that they want to pay for and thus attract the kind of partners that are best suited to providing that value. It’s a win-win for both parties and it starts with expanding our ways of thinking about the affiliate channel and innovating accordingly.
Understanding incremental contribution is only part of the picture in rewarding affiliates; contribution within each attribution model is the other half.
Contact Pernix today to see how our solutions can align your affiliate channel to attribution value.