Incrementality is not all about new customers

There is a common misconception in the affiliate channel that incrementality means new customers. Sure, the affiliate channel is a wonderful channel for acquiring new customers because the excellent ROAS it presents. However, there are other ways to measure the value of the channel when it comes to incrementality.

In this article we will give examples of what incrementality looks like within the channel and touch upon some of the misconceptions of certain publisher types where incrementality is challenged.

Firstly, it is a good start to understand what incrementality is as a concept which can then be applied across the affiliate channel with examples below.

Incrementality (using revenue as the metric) is simply revenue that is generated from activity in a channel that would not have happened if that activity had not taken place. In the complex purchasing behaviour of online shoppers, it is safe to say that the incremental value is usually shared between more than 1 channel or touchpoint. It is not too common to have a channel responsible for 100% of the incrementality.

It is important to differentiate incrementality: It is not sales from new customers only, but sales from any customer that would not have happened if it were not for that interaction. This essentially means that incrementality can also be seen as a touchpoint influence measure.

Take someone going on to Google, searching for a brand, clicking through to that brand’s store and instantly making a purchase. It could be argued that Google is rewarded 100% incrementality in this ‘session’. However, how does that consumer know about the brand in the first place? Did they read about them via some online content that was produced by a publisher?

Historically it has been a topic that has been discussed widely but not measured or studied enough to provide quantitative results. This has changed over the last decade as more and more developments in the ability to measure metrics such as attribution touchpoints in a consumer journey have become available.

 

Research Findings

Commission Junction (CJ) published a white paper which studied the incremental value of the affiliate channel for brands. They split the control group into 2 segments: the first segment purchased with an interaction with an affiliate publisher and the second segment which had no interaction with the affiliate channel. The results were both interesting and positive towards the channel overall:

46%

Higher Shopper to Customer Conversion

29%

Higher Spend Per Customer

88%

Higher Revenue Per Shopper

What is incrementality if not only new customers?

These findings also show that incrementality can be measured in different ways – not just new vs existing customer sales. It could be measured on KPIs such as whether they spend more on a purchase, do they come back and how many times do they come back (Life Time Value or LTV).

It could also be argued that the affiliate channel can be used as an effective channel to defend market share. Incrementality has been proven to help influence a customer to shop with that particular brand rather than going elsewhere. If an advertiser works closely with publishers to ensure their brand comes before any competitors on that site, this should attribute a level of incremental value to the purchase journey, essentially diverting that customer away from a competitor. The affiliate channel therefore plays its part in driving incremental revenue because it helps to influence the purchase decision of a consumer.

However, the argument that certain publisher types offer no incremental value and shouts of ‘they were going to purchase anyway without that publisher interaction’ are still thrown about frequently. Which leads to the second point of discussion:

Do coupon and loyalty platforms drive incremental value for advertisers?

Despite what advertisers may think, through years of research and data, the resounding answer is yes!

Let’s firstly debunk the myth that customers referred from coupon sites were ‘going to make a sale anyway’. A recent study by CJU and released by Google and Comscore indicated that 94% of sales driven by coupon publisher paid ads on google were incremental. What this means is that only 6% of customers were on the site before clicking through via a coupon advertisement.

Some more findings for chosen incrementality:

New Customers: Coupon site-originated purchases were 57% more likely to be new users

Basket Size: AOV is 14% higher when a coupon is used, network-wide. In addition, 31% of the purchases made by customers referred by coupon sites were full-price buyers.

Customers that did click through from a coupon ad were more than twice as likely to make a purchase.

New Customers: Coupon site-originated purchases were 57% more likely to be new users

Basket Size: AOV is 14% higher when a coupon is used, network-wide. In addition, 31% of the purchases made by customers referred by coupon sites were full-price buyers.

Customers that did click through from a coupon ad were more than twice as likely to make a purchase.

With this valid support for the incrementality of coupon sites, think about how they can be used to maximise your incrementality metrics – for example:

  • If AOV is a metric, why not offer a % off with a minimum spend
  • If new customers is the metric, offer a discount for new customers only
  • If lifetime value is a metric, communicate offers and discounts at key times to entice them back.

Final note:

The affiliate channel drives incremental sales for advertisers – that has been proven time and time again. The important aspect is to determine what incrementality looks like and focus the program strategy around maximising those KPIs but at the same time keeping publishers interested. Publishers are partners and should be compensated fairly. Without that fairness, there is no longer a worthwhile partnership. This is something I cover in more detail here.

If you would like to discuss launching a new affiliate program or optimising an existing program, get in touch!

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