How to test for new channel launch

Problem

• When you launch a new channel, the lack of historical performance makes it difficult for MMM to provide useful insights.
• For the MMM model, these new channels may seem statistically insignificant and might not allocate enough resources to them, leading to inefficient spending and potential over-reliance on existing channels.
• Modern brands often allocate only a small portion of their marketing budget to new channels because they are typically testing them out or are uncertain of their effectiveness. This conservative approach, while logical, can make it harder to gauge the true impact of these channels. A key reason for this difficulty is the adstocking effect: where the full impact of advertising spend doesn't happen immediately but builds up over time. As a result, the performance data collected early on may not fully reflect the channel’s potential, leading to incomplete insights.

Example

Imagine a brand that primarily advertises on established platforms like Facebook and Google but decides to test a new channel, such as TikTok. Since TikTok is unproven for this brand, they allocate only 2% of their total ad budget to it, while the remaining 95% goes to their traditional channels. However, the full impact of the TikTok ads may take several weeks to show up due to adstocking, where repeated exposure to ads is needed before consumers respond.

In the early days of the campaign, the initial data may suggest that TikTok is underperforming compared to Facebook and Google because the brand hasn’t spent enough for the ads to reach a critical mass or account for the delayed effect. As a result, the performance data might be misleading, causing the brand to under-invest in what could eventually be a high-performing channel. This makes it hard to get accurate insights about the new channel’s true effectiveness, and the brand might prematurely pull resources from it.

Solution: Incrementality Testing

At Lifesight, we offer two types of Incrementality Testing that can be seamlessly conducted from our platform:

1. Geo-Testing: This method evaluates the impact of marketing tactics by adjusting media delivery in specific geographic locations. By comparing changes in advertising sales across these areas, we can determine the true value of the media efforts.
2. Split Testing: This approach allows for detailed experiments by leveraging specific audience segments. It helps us understand how different media treatments influence conversions among distinct groups, providing granular insights into campaign effectiveness.

Why Incrementality Testing is Useful for Measuring the Impact of a New Channel Launch

Incrementality testing is a crucial method for measuring the impact of a new channel launch, offering several key benefits that enhance marketing effectiveness:

1. Isolating Effects

Incrementality testing allows marketers to isolate the effects of the new channel by comparing consumer behavior between a test group (exposed to the new channel) and a control group (not exposed). This comparison helps determine the specific contribution of the new channel to sales or conversions, distinguishing its impact from other factors influencing customer behavior.

2. Data-Driven Insights

By employing a data-driven approach, incrementality testing provides clear insights into how much additional value the new channel generates. This helps in understanding whether the observed changes in performance are genuinely attributable to the new channel or merely coincidental.

3. Optimizing Resource Allocation

With insights gained from incrementality testing, marketers can make informed decisions about budget allocation. They can identify which channels yield the highest return on investment (ROI) and adjust their spending accordingly, ensuring that resources are directed toward strategies that drive real results.

4. Avoiding Wasted Spend

Incrementality testing helps avoid wasted ad spend by revealing non-incremental activities that do not contribute to business goals. By identifying these ineffective strategies, companies can refine their marketing efforts and focus on initiatives that truly enhance performance.

5. Continuous Improvement

Finally, incrementality testing fosters a culture of continuous improvement. By regularly conducting these tests, marketers can refine their strategies over time, adapting to changing market conditions and optimizing campaign performance.

Conclusion

In summary, incrementality testing is invaluable for assessing the impact of a new channel launch. It enables marketers to make data-driven decisions that enhance overall marketing effectiveness and improve resource allocation.