According to performance advertising software Nanigans, retail marketers upped the cost of doing business last year by continuing to deploy outdated legacy software. Because of this, retailers lost out on $5 billion in net-new revenue.
“CMOs are allowing their marketing vendors and teams to focus on advertising metrics that may not mean anything for their business,” said Ric Calvillo, cofounder and chief executive officer of Nanigans. “Optimizing for incrementality could be the difference between a profitable and an unprofitable quarter. It’s the only metric that truly maximizes revenue profitably. At a time when the retail industry is facing major pressure from customers and competition, it’s critical that remarketing budgets are not wasted on consumers who didn’t need the advertising nudge to begin with.”
Citing eMarketer, the software company said that in 2017, total U.S. retail digital ad spend amounted to $18.2 billion; approximately 14 percent — about $2.5 billion — of that was designated to remarketing efforts. “If all U.S. retailers had embraced incrementality, that would have resulted in an additional $5 billion in net-new revenue,” said Nanigans.
To calculate the loss revenue, Nanigans data scientists reviewed revenue data when moving customers to their new platform that’s centered on incrementality. Data was then compared to existing stats to configure the potential lost revenue.
According to the company, current legacy systems target media spend on consumers with the largest organic conversion rates. “This artificially inflates the impact of an advertiser’s returns and wastes budget by serving ads to users who would have purchased without the advertising,” the company said. This results in certain consumer sets being ignored due to prescribed — and inaccurate — anticipated low purchase rates.
Incremental marketing requires that remarketing be measured and analyzed — revenue collected from consumer groups who see, and those who do not see, ads should be compared. Finding this disparity provides the ability to inform ad placement to avoid brand burnout among frequent shoppers and strategically place marketing campaigns in front of fresh prospective shoppers.
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