Optimising, not cutting, marketing spend is the key to riding out a recession
2022 has set the teeth of marketers and markets alike on edge. Months of political fumbling and ongoing economic uncertainty have made forecasting consumer behaviour more challenging than ever. Heading into the holiday shopping season, retail spending seems somewhat steady for now, but hiking interest rates and ongoing inflation make it feel like we’re teetering on the edge of a precipice.
2022 has set the teeth of marketers and markets alike on edge. Months of political fumbling and ongoing economic uncertainty have made forecasting consumer behaviour more challenging than ever. Heading into the holiday shopping season, retail spending seems somewhat steady for now, but hiking interest rates and ongoing inflation make it feel like we’re teetering on the edge of a precipice.
It’s understandable that many retailers, bracing for the worst, are “playing it safe” by slashing ad spend. But, if consumers are still collecting paychecks and spending their money, then marketers need to optimise rather than cut their budgets to reach these customers and maximise return on ad spend (ROAS).
How we got here
The rise of digital advertising came with the promise of easy, reliable measurement by connecting people to the ads they clicked on and the products they purchased. For years, marketers have quietly tolerated the inherently flawed performance metrics being reported by digital platforms. It was possible some of them were taking more credit than they deserved, but at least the numbers looked good!
Then, in 2021, Apple exposed the flaws of platform reporting when it rolled out the new app tracking transparency (ATT) policy – and kicked off the endless stream of data-privacy regulation and policy updates we are seeing today from businesses and governments around the world. Restrictions on user tracking and data collection have wreaked havoc on targeting and measurement systems at most ad platforms. Unable to identify and track a significant portion of users, platforms started underreporting on campaign performance, and they were quick to sound the alarms.
Media companies like Meta insisted their reports showing a large drop in conversions from Facebook and Instagram ads were wrong, and assured advertisers that their campaigns were indeed still working. They were right. Our testing showed that Facebook was significantly underreporting ad performance after ATT went into effect – in some cases only reporting 1 in 4 conversions that should be credited to the platform.
As more and more limitations are put on consumer data collection, click-based measurement methods like last-touch and multi-touch attribution (MTA) become less viable. Marketers need accurate, ongoing insight into paid media performance to continuously improve efficiency and maximise ROAS. And they need to rethink how they track and measure results to make that happen.
Incrementality is the future of media measurement
Marketers have long been led to believe that media performance can only be ascertained from knowing who converted and all the ads they saw on the path to purchase. But following individuals around the internet is not necessary to connect an ad to the conversions it created. By observing how much conversions go down when a channel or ad is taken away, we can calculate incrementality – the percentage of total conversions that were contributed by that media.
While traditional attribution methods attempt to assign a fraction of the credit to various touchpoints on the path to conversion, incrementality measurement calculates the true contribution of media to business results. Incrementality can be measured using cohort-based test and control experiments that don’t rely on user-level tracking – meaning brands using incrementality-based attribution don’t have to fear the pending death of the cookie and they won’t lose valuable insight when more restrictions come into play.
How does incrementality testing work?
Incrementality testing is anchored on long-proven experiment methodology. At the simplest level, the ad or treatment is presented to one segment of the intended audience (the test group) and withheld from another (control group). The difference in sales reveals the incremental conversions that specifically resulted from the ad being tested.
While the example above is quite simple, successfully running clean experiments for accurate ongoing insights – across the entire media mix – is extremely difficult. At Measured, we’ve spent years developing the data science and technology to automate the complex experiment designs required for the nuances of every platform. We’ve run thousands of tests for hundreds of brands, resulting in the world’s largest collection of incrementality intelligence. With access to this data and the Measured platform, retailers can easily test different media scenarios to optimise their spend allocation and explore the potential of new channels.
Understanding how to get the most out of every available dollar isn’t a choice right now for most marketers – it’s necessary for survival. And as Meta recently acknowledged, only testing can validate the true contribution of advertising. When the future is unknown and visibility is waning, taking the “safe” option by halting advertising may be tempting, but it’s actually the riskier choice.
By Trevor Testwuide, CEO, Measured
