Questions of incrementality are becoming more pertinent to advertisers and the performance marketing industry is getting better at responding to them. With margins becoming tighter and questions continuing to be asked, it is important that the channel is able to demonstrate that sales being driven are incremental. Matt Swan, Client Strategist at Affiliate Window writes…
So what constitutes incrementality and how can the publishers that operate within the performance marketing space demonstrate incremental sales are being delivered? It is important to understand the customers’ path to conversion and how the performance channel’s involvement within this can benefit advertisers.
The simple principal of incrementality suggests that by ‘turning off’ an affiliate campaign, the advertiser would lose a proportion of sales – these sales being incremental with the suggestion the customer has only arrived at the advertiser site as a direct result of the publishers involvement. If there wasn’t a significant drop off in sales volumes then it could be argued that the performance channel is not incremental at all. However, this is taking an oversimplified view of incrementality and ignores the complex nature of a consumer’s decision making process.
Advertisers should look beyond just sales volumes demonstrating incremantality. While volume is one indicator of whether or not the channel is incremental, other metrics should also be considered. Are the customers being referred through the channel new or existing? Are they purchasing more frequently or spending more within each transaction? These are just some of the additional attributes advertisers should consider when questions of incrementality arise.
There will always be a proportion of customers that would have transacted without the involvement of performance marketing – but would they have spent as much or have returned as frequently?
Cashback and voucher code sites come under the greatest amount of scrutiny with regards to incrementality but with the rise of the deal conscious consumer, these sites have given a reason to purchase rather than opt to purchase from a competitor. Some of the major publisher sites are larger than the advertisers they promote and consumers are regularly using them as the first port of call rather than an afterthought to receive a discount. They have become loyal to the concept of cashback rather than the advertisers themselves.
Questions of attribution go hand in hand with those being asked of incrementality within the channel. This is about identifying the touch-points involved in a customer’s path to conversion and understanding how they combine. This allows for advertisers to effectively apportion their spend in order to deliver profitable customers. This can’t be based on guess work and is fundamentally driven by data.
Working closely with a number of advertisers, it has been possible to identify how the performance channel fits in with other online marketing channels in the path to conversion. This provides a platform to understand incrementality within performance marketing while also realising the channel plays a role earlier on in the user journey – adding value beyond purely being the last click.
Analysing the data from one of our advertisers within the telecoms sector, allowed us to investigate the customer journey and the touch-points interacted with on the path to conversion. The chart below indicates that the performance channel was involved in 57% of all their online sales.
By focusing on this 57%, it is possible to see whether there has been another channel involved in the sale. For this advertiser, 31% of sales only had involvement with the performance channel. With no other touch-point in the customer journey it is possible to say that 31% of sales are truly incremental – i.e. without the involvement of a publisher, this advertiser is likely to not have received these sales.
19% of the time, another online channel has been involved prior to the performance channel ‘winning’ the sale on a last click basis. In essence, it’s been assisted by another channel 19% of the time – but the performance channel has ultimately converted the customer.
It is also important for advertisers to understand the role publishers play in a customer journey before the final click. 7% of sales had a publisher involved before the sale had been closed by another channel. The role of the publisher could have helped the customer decide on a product whether this was through a product review or price comparison tool. Without this activity, would this customer have converted anyway? In order to understand the incrementality of the channel, advertisers need to gain insights into the multichannel customer journey to be in a better position to analyse this.
It is also possible to take a closer look at sales that have come through the performance channel and how many publisher referrers there are in place. Contrary to popular misconceptions, on the majority of instances there was only a single publisher referrer in the user journey. For this advertiser we see 92% of sales with just a single referrer.
This will vary from sector to sector but typically, the vast majority of sales will have a single referrer. For this advertiser, the highest number of publisher involvement is three. Where there is more than one referrer we can take a closer look at the publisher promotional types that are involved, who are overwritten and who is doing the overwriting.
The nature of the products available from this advertiser lends itself to price comparison – price comparison is typically the most overwritten promotional category but it is also the one that does the most overwriting. The category that typically overwrites more than it is overwritten is loyalty/reward, with these channels primed to close.
Advertisers are able to use this data to understand the promotional types and indeed the individual publishers that are offering value beyond simply being the last click. For example, price comparison sites are adding value earlier on in the user journey and could be offered tenancy deals or hybrid payment models to reflect the value they are adding beyond purely being an acquisition channel.
Data from this advertiser has also allowed us to look at how individual publishers fit within the wider online mix and how consumers interact between various touch points. In this it is possible to see where the performance channel was the only touch point, where the performance channel won the sale where another channel had been involved, and where the publisher was involved in the user journey but did not win the sale on a last click basis.
Where the performance channel was involved but another channel ultimately won the sale – it is possible to see which channel the sale was attributed to.
The first publisher type investigated was a price comparison site. Half of their sales only involved the performance channel – indicating that 50% of all sales through this publisher are truly incremental.
Only 6% of the sales the publisher won on a last click basis had another channel involved earlier in the user journey while the publisher contributed to 44% of sales before the final click took place. This again highlights the value of the channel beyond simply being the final click.
Of the 44% of sales where the publisher has assisted we are able to see which channels the sales were attributed to. 61% of sales were attributed to search (predominantly brand search), 32% to display and 7% to another partner.
This publisher clearly demonstrated the ability to deliver incremental sales on behalf of this advertiser and also highlighted the channel adding to the customer journey earlier on in the path to conversion.
It is important to understand how different promotional types fit in within the customer journey.
While price comparison sites may typically be used in the research phase, incentivised sites such as cashback are typically used at the end. The offer of an incentive encourages the customer to transact. As a result, cashback is one of the promotional types that come under increasing scrutiny in terms of incrementality.
Looking at the data below, this cashback publisher has demonstrated the ability to deliver incremental sales with 49% of all sales having them as the sole click. As mentioned previously, consumers are no longer using cashback sites as a means of purely gaining their cashback, they are often using them as the first, and only, port of call when deciding to make a purchase. This publisher has also been involved in 22% of sales that were attributed to another channel.
This paints a different picture to that the price comparison site. 78% of sales where this publisher assisted were attributed to another partner. Typically, consumers are aware of the concept of discount or cashback and will compare offers before transacting. Typically, the majority of sales awarded to another publisher will be another form of discounted site.
As well as looking at an advertiser within the telecoms sector, we also investigated an advertiser in the travel sector to look at the similarities.
Firstly we looked at the performance channel as a whole. Again, this demonstrated that the channel was the only one present in the majority of sales driven by this advertiser. 69% of sales only had involvement from the performance channel. In addition, it assisted in 20% of sales, while it was assisted in 11% of sales.
Again, we analysed the channels that ‘won’ where the performance channel assisted, and also the channels that assisted before the performance channel won the sale.
As with the telecoms advertiser, we typically see PPC activity winning a sale where the performance channel has assisted with brand PPC being the dominant channel. Other partners that this advertiser works with directly such as some of the largest price comparison sites in the sector also benefitted from initial publisher involvement.
In terms of assisting the performance channel, the most overwritten channel was a display impression. This is not too surprising considering this is traditionally a branding tool rather than an acquisition channel.
Both of the examples that we have explored indicate that the performance channel is effective at generating incremental sales. It is important for advertisers to understand the metrics that constitute incrementality beyond purely being an increase in sales volumes.
The topic of incrementality is a complex one and advertisers should consider where the channel is adding value beyond simply being the final click. By analysing data, advertisers will be in a position to understand the publishers that are not only delivering significant sales volumes but also driving incremental value and continue to invest in these to ensure they are reaping the benefits the channel offers.
By Matt Swan
Client Strategist
Affiliate Window
