x
READY TO BECOME A MEMBER?
Stay up to date on the digital shelf.
x
THANK YOU!
READY TO BECOME A MEMBER?
THANK YOU!
"Incrementality, by the way, is just a word in our industry. I don't think you'd find it in the dictionary, but it's a very, very common question … ‘Ecommerce often requires a lot of additional investment. Is this going to ultimately result in additional revenue and/or profits for our business?’"— Russ Dieringer, Founder and CEO, Stratably
To invest or not to invest? For many brand manufacturers today, that’s the question.
With new channels sprouting up almost as quickly as consumers can add items to their online shopping carts, brands are increasingly facing a choice: continue to pump money into established channels or invest in new ones.
But a sale that results from investments in existing or new channels — also known as “incrementality” in industry parlance — is still difficult to measure. Fortunately, Russ Dieringer, founder and CEO of the digital commerce consulting firm Stratably, has created a new incrementality measurement framework to help brands assess where to best spend their dollars.
Dieringer joined a recent episode of the “Unpacking the Digital Shelf” podcast to give an overview of the new framework. In the episode, titled “Establishing New Frameworks for Incrementality,” he shares his perspective on how brands should think about incrementality in today’s omnichannel environment.
Dieringer defines incrementality as a sale that otherwise wouldn’t have occurred if not for an investment in a given channel.
“This could be looking at a particular retailer, [and saying] ‘if we don't expand, we're not going to miss out, or if we do expand, we are going to get an incremental sale,’” he says. “Or you can apply it to things like advertising. That's often a big question around incrementality. ‘Should we be advertising? If someone's searching for our brand, won't they buy our product anyway?’”
Dieringer says brands often ponder a similar question when it comes to ecommerce, asking, “Is this going to ultimately result in additional revenue and/or profits for our business?”
To help brands decide whether to invest in a particular channel, Dieringer has established a framework centered around six critical questions:
Amazon is the prime example of the kind of incrementality that enables net new offerings. The company’s marketplace model allows brands to create different assortments of products, bundle options, and other online-only offerings that are distinct from what consumers would find in-store.
“That offer allows you to create net new assortment, which can then drive different shopping behavior,” Dieringer says.
Quick commerce and super-fast delivery channels offer incrementality for brands because they make it simple for consumers to get what they need when they need it — rather than encouraging the consumer to forego the purchase altogether.
“[It’s] very low friction when you can order an item and have it show up at your door 15 minutes later or 30 minutes later. That reduction in friction has the power to change shopping behavior,” Dieringer says.
The third part of the framework focuses on whether a channel allows a consumer to buy a product in a manner they previously couldn’t.
Take alcohol as an example, Dieringer explains. There are often time and day restrictions on when consumers can purchase these products in-store (no Sunday purchases in some states or no purchases after 11 a.m. in others, for example). A channel that bypasses these traditional restrictions, however, creates new opportunities for incremental consumption.
New channels are often closely aligned with certain demographics — such as Gopuff, a grocery delivery service that targets millennials.
“If you're an incumbent brand, maybe you over-index to older demographics and you want to tap into that younger demographic to drive new consumption,” Dieringer says. “There are certain accounts that allow you to do that.”
A brand with a strong direct-to-consumer (DTC) presence that wants to increase visibility within new audience segments could also drive incremental sales by expanding to certain retailer marketplaces, like Walmart.com.
At a basic level, this pillar of the framework is all about whether the channel allows you to get in front of shoppers who otherwise wouldn’t know your brand.
Live streaming, social commerce, and influencer marketing allow brands to deliver a different customer experience than they can in-store, on marketplaces, or their DTC site.
Through these channels, brands can add more information about a product to further influence a shopper’s buying decision and generate a sale that likely wouldn’t have happened without these new mediums.
In today’s hyper-competitive ecommerce environment, there’s often the misconception that a brand must be everywhere to win on the digital shelf. But that’s not exactly true.
Instead, brands should be where their competitors are — if the channel isn’t too costly to serve, Dieringer says.
If brands aren’t proactively seeking out the channels in which their competitors are selling, they could risk losing market share to competitors and jeopardizing future growth.
Dieringer says that, along with following his six-part incrementality measurement framework, brands must consider other factors when deciding whether to invest in new channels.
Zero-party and first-party data, for example, are critical because they give brands valuable information to better understand their customers. With these rich data sources, brands can make more informed decisions about what investments to make and when — whether it’s to expand into new markets, target different audience segments, or deepen existing customer relationships.
Engagement and community are two other X factors. Dieringer says true community goes beyond having a robust email list. Rather, it’s about creating sustained engagement. Some brands, for example, are using Roblox, an online gaming platform, to cultivate a sense of community with their customers. The Metaverse may offer other opportunities for brands to engage virtual audiences and connect with their customers.
Creating a faster feedback loop is another consideration.
“Certain channels give brands a very tight feedback loop around whether products are working or not.” — Russ Dieringer, Founder and CEO, Stratably
No ecommerce partner rivals the capabilities that Amazon has in this area, with millions of customer reviews and other rich performance insights that allow brands to better assess what’s working, what’s not, and how they can improve.
Overall, Dieringer says it’s important for brands to not take a solely sale-oriented view when thinking about incrementality. Investing in new channels can offer other benefits, too.
“It's not always just about sales and profits,” he says. “There are also these indirect benefits that need to be accounted for.”
When all else fails, brands ultimately need to be where their customers are.
“We're not suggesting that companies bet the farm on new accounts, but [the framework] is saying, ‘Look, the market is not static. The market is dynamic,’” Dieringer says. “Our brand is not bigger than the market. Our brand does not necessarily shape consumer behavior and shopping patterns. We have to go where the consumer is going. If there's new channels that emerge, even if they threaten our incumbent accounts that we do business with, we have to be there because our ultimate goal is to grow the value of our firm.”
To learn more about Dieringer’s incrementality measurement framework, listen to the full episode.
