How effective was your last campaign? Can you justify your next investment? The topic of ROI, from both online and offline marketing campaigns, is a key concern. Thankfully, incremental revenue is here to help. Read on to find out how you can master this concept and put it into practice.
Optimize your marketing mix with incremental revenue
Whether you’re a pure e-commerce player or not, the question remains: what return do you really get from your marketing budgets when it goes to online advertising, CRM or elsewhere? When you’re investing a lot of money and when marketing is increasingly focused on ROI, marketers have more questions to answer. They have to:
- justify new investments
- approve the allocation and distribution of existing budgets
- measure the profitability of each campaign or marketing solution.
Calculating incremental revenue can help you do all of this and stay objective. You can work out the sales figures generated by a particular campaign or marketing solution (such as a predictive marketing solution). This revenue is the incremental revenue, or that which wouldn’t have been generated without sending this particular campaign or using this solution. You can then use these concrete figures to justify your ROI.
Measuring the incremental revenue, which was once confined to online, easily trackable campaigns, now also applies to offline marketing. This is because loyalty schemes are now linked to CRM. For example, when FNAC used Tinyclues’ solution on their subscriber base, they managed to calculate the sales figures generated in store as a result of distributing print magazines. FNAC then had irrefutable evidence to prove how well this expensive marketing campaign worked – and it was all down to incremental revenue. But just how do you measure it?
Assessing marketing performance is a tricky business. And there are many ways to work out how to divide sales among various campaigns running simultaneously.
For online campaigns, the most common attribution model is “last click over 30 days”. When customers buy something through a website, you can look at their history over the 30 days before the sale. You can see the source of their last click and allocate the sale accordingly. This model is well established and pretty easy to use. But its limits are well known.
For example, if you track an internet user’s online activity on your site, you can see that they came via Criteo and then completed a purchase. So the revenue is attributed to Criteo. But there’s a problem: before their last click, users might have also searched on Google for your products or clicked on a link in your latest newsletter. This model doesn’t consider the impact of relationship marketing, advertising and other communications.
To offset these drawbacks, variations of these models have since been developed to focus on “weighted attribution”. They try to assign relative importance to each point of contact with the customer. That means that the sales figures generated are split across all sources. Why? Because weighted attribution considers all of your marketing campaigns and doesn’t just rely on the last click. But the key question about incremental revenue remains: what would have happened if you hadn’t spent this marketing budget?
Incremental revenue 101
Thinking about incremental revenue helps you to shake off complex attribution models. But how do you go from theory to practice? Actually, it’s easy to do, although marketers seldom take this path. By using control groups, a technique which isolates a sample of your targets from your push marketing campaigns, you can measure the difference in sales figures between the two groups and prove how effective your strategy is.
Since a sample of your customer database (the control group) is not receiving your campaign messages, they effectively become guinea pigs. You can precisely measure the revenue generated by not exposing these customers to any of your campaigns.
Control groups have two advantages:
- You can calculate reliable figures for the incremental revenue for each campaign. It doesn’t matter whether you’re looking at retargeting or targeted campaigns because any attribution errors for the test base are eliminated. You know for sure how much of your sales figures come from a particular campaign or solution.
- You can now precisely measure the long-term impact of your marketing investments.
Predictive marketing solutions help you generate pure incremental revenue. Want to see exactly how this incremental revenue is directly linked to your new tools? With Tinyclues, this feature is natively integrated into the solution and you can begin to measure your incremental revenue from the launch of your first targeted campaigns.