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• Biz Hack: Dodging the ROAS marketing trap

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•  🤖 Partners in AI

  World’s largest chipmaker Nvidia Corp. has discussed joining a funding round for OpenAI that would value it at more than $100 billion. Apple Inc. and Microsoft Corp. also have been in talks about participating in the financing.

• 🤖 📩 Finally, a bot that sorts your email

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  The percentage of tariff imposed by Canada on imports of Chinese electric vehicles. Justin Trudeau said Ottawa was acting to counter what he called China's intentional, state-directed policy of over-capacity. "I think we all know that China is not playing by the same rules," he said.

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Dodging the ROAS Marketing Trap

If seasoned marketers at Nike, a global company worth $125 Billion, can be blindsided by the ROAS trap of marketing, so can you. In one day, Nike lost $25 billion of their market cap. Is there a lesson? 

Nike Learnt the Tough Way…

• As of 2021 to drive traffic to nike.com, Nike invested in programmatic advertising and performance marketing (double or more of the share of resources usually invested in other brand activities)

• Newly appointed CEO John Donahue alongside Heidi O’ Neill, President- Consumer, Product & Brand were unaware of inefficiencies of investment in performance marketing (fraud/ declining consumer response, rising costs of mediators). 

• This departed from Nike's marketing strategy for half a century which involved investing one-tenth of revenues into demand creation and sports marketing.

• Investing in brand marketing focused on innovation, inspiration, creativity, and storytelling.

ROAS Is Old-School

ROAS is this ‘less effective but easier to measure metric’ which can dampen your marketing efforts in the long run. While valuable, ROAS only captures some of the impact of your marketing strategy.

Marketers nearly always saturate this bucket because they can track their profit.

Incremental Model to the Rescue 

• It’s true, that a huge percentage of conversions driven by paid media efforts are not incremental. (increasing conversions with increasing spending) 

• An incremental marketing strategy allows advertisers to determine whether customers will remain receptive to their product/ service. 

• Incremental marketing strategies, using conversion lift studies, help determine if ads on untrackable channels (like YouTube or social video) drive new customers.

Testing for Incremental Lift & Incrementality 

Incrementality testing follows the same concept as A/B testing. 

For the sake of an example, imagine you are running a marketing campaign for an app. You want to test its incremental life on installs. 

• Control Group (A): These users have not been exposed to your marketing campaign. They represent the baseline.

• Test Group (B): These users have been exposed to your marketing campaign. We want to measure the impact of this exposure.

• Incremental Lift: This is the difference in performance between Group B and Group A.

• Incrementality: This is the percentage of Group B's performance can be attributed to the marketing campaign.

Example: App Installs

Let's use the example provided:

• Group A (Control): 100 installs

• Group B (Test): 120 installs

Calculating Incremental Lift:
Formula: (Installs in Group B - Installs in Group A) / Installs in Group A * 100
Calculation: (120 - 100) / 100 * 100 = 20%

Interpretation: The campaign led to a 20% increase in installs compared to the control group.

Calculating Incrementality:
Formula: Incremental Lift / Installs in Group B * 100
Calculation: 20 / 120 * 100 = 16.7% 

Interpretation: 16.7% of the total installs in Group B can be directly attributed to the marketing campaign.

What Does This Mean?

• Positive Incremental Lift: The campaign is effective in driving additional installs.

• Incrementality: The campaign is responsible for a significant portion of the installs in the test group.

Key Takeaways:

• Comparison: Incrementality testing compares a test group to a control group to isolate the impact of a marketing campaign.

• Metrics: Incremental lift and incrementality are key metrics to measure campaign effectiveness.

• Decision-Making: These metrics can help you determine whether a campaign is worth the investment and inform future marketing strategies.

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