Setting the scene
Marketers have been given an impossible task. They are being asked to grow the business in the face of a shifting landscape and terrifying amounts of uncertainty. CEOs and CFOs want certainty and an inexorable march of growth, but they don’t give marketing teams the tools and support they need to achieve it.
It is time for a new system that harmonizes reporting, experimentation, validation, optimization, and planning – one that continuously forecasts, recommends testing and expansion opportunities, and validates itself in real-time.
How did we get here?
Marketing teams are under immense pressure to grow efficiently. CEOs and investors demand accountability and consistent growth, while CFOs and COOs want certainty: they want a budget they can stick to and feed into their operational plans.
Marketing leaders get caught in the crossfire – marketing teams have not been armed with the tools they need to effectively collaborate with the rest of the executive team. There are two core problems:
- The marketing landscape is constantly changing, and much more rapidly than ever before as new marketing channels come onto the scene and dynamic algorithms can dramatically change performance over the course of just a few days.
- Growth brings uncertainty: growth means new channels and new scale and new tactics and in the world of marketing those things are all inherently uncertain.
The metrics that marketers are armed with are fuzzy, mismatched relative to what they are actually trying to measure, and incomplete. Impressions and clicks don’t measure what the business actually cares about (usage, sales, and profit). Even worse, too much of marketing measurement is purely focused on trying to explain what happened in the past (what was our cost per impression last month?) instead of what’s going to happen in the future and how that gets linked to the core business outcome.
And executive teams have caught on: marketers who bring “impressions” to the discussion about revenue projections are now getting laughed out of the room. Vanity metrics aren’t good enough anymore. The best marketing leaders recognize this but still don’t feel armed for that meeting – advertising platforms are stuck in the past showing reporting on clicks, impressions, and digital-tracking based attribution measures, none of which really speak the same language as your CFO or CEO.
What does that lead to?
Because of this, marketing teams get stuck in a doom loop where they don’t trust their measurement so they can’t make changes to their marketing program. This stagnation and inability to respond to changing marketing conditions will ultimately cause growth to completely stall.
Without measurement, there are no feedback loops for marketing performance – it’s difficult or impossible to tell what works or what doesn’t, and so marketing teams choose the conservative path – they keep doing what they’ve been doing since no one wants to rock the boat.
Eventually, the rest of the executive team loses faith in the marketers and we see why CMOs have the shortest tenure in the executive suite.
A better way
We believe that the only way forward is for marketing teams to re-think how they approach planning, experimentation, validation, and optimization. Instead of focusing on backwards-looking reporting and so-called “insights”, marketing teams need to take a more proactive role in how they approach their strategic initiatives – intentionally pushing the boundaries and attempting to validate or disprove their assumptions and hypotheses about what really drives their business.
Marketing teams need to focus on incrementality – that is, the causal relationships between marketing and the important outcomes the business cares about. Digital-tracking methods like touch-based attribution or metrics like impression volume may not represent the true impact that marketing is actually having and can end up misleading the business by focusing on activities that are correlated with revenue, but aren’t actually causing it.
We call this approach as a whole the “incrementality system”. In simple terms, think of it as a way to harmonize the planning and optimization process. At a deeper level, an incrementality system is a scientific method for constantly generating and validating hypotheses related to marketing performance, while simultaneously continuously optimizing your marketing budget so that every dollar is driving the maximum amount of profit possible.
An incrementality system is a continuous process of planning, experimenting, validating, and optimizing.
- Plan: the most pressing question facing any marketing team is always: what can we do next week / next month / next quarter to best drive the business forward? That is, we have to plan what we’re going to do next.
- Experiment: as part of our plan, we want to be continuously experimenting – this might mean testing new marketing channels, scaling up existing channels that seem to be working, or pulling back on channels that seem to be underperforming.
- Validate: we need to be continuously validating what’s working and what’s not – was our hypothesis correct about our under-performing channels? When we scaled up spend in streaming TV did we see a commensurate increase in revenue to the extent that we were expecting?
- Optimize: now that we have our learnings from these validated experiments we need to apply those learnings to our current program and start the cycle over again – make our plan for next week / next month / next quarter and continue on from there.
Incrementality does not just mean GeoLift experiments. While different types of structured, controlled experiments can and should be a part of an incrementality system, geo-holdout experiments alone do not constitute an incrementality system.
The point of an incrementality system is to take a more systematic and thorough approach to experimentation across everything a marketing team is doing, not just running one geo-experiment in easily testable channels every quarter. Instead, marketing teams today need a coherent system for incorporating all of the evidence they have on incrementality into one single tool that can also be used for forward-looking planning – helping shape the budget and operational plan in future quarters as well as suggesting the most high-leverage experiments the brand can pursue.
