Retail Media's New Secret Weapon Is Incremental ROAS

Retail media is having a moment. Global spending in the category is expected to hit $140 billion in 2024, per eMarketer. That's a 22% increase versus 2023, and it's predicted to jump another 18% to nearly $166 billion in 2025. To give those numbers some context, retail media now makes up roughly one-fifth of global digital ad spending. While these trends indicate that brands increasingly see the value of retail media in driving sales, major challenges remain. One of the most common is understanding how ad spend is allocated to true performance drivers. Successful brands are increasingly leaning on incremental return on ad spending (iROAS), an attribution metric that estimates the sales you would have lost had you not spent that money on ads. iROAS helps brands identify keywords with the largest opportunities for incremental sales that won’t also cannibalize organic sales. Shifting budgets to high-iROAS retailers One of the first things brands should understand is that retailers inherently possess varied ROAS metrics due to diverse attribution models, fluctuating costs per click, and varying traffic and assortment levels. Despite these differences, many brands rely on ROAS to guide allocation decisions and compare retailer media ROI—which may result in costly mistakes. While introducing a new brand or even doing some rebranding may contribute to growth, it's not a consistent sales driver. Major players like Amazon, Walmart and Instacart provide insights into new brand metrics, but their data doesn't always translate to meaningful incremental growth. For instance, a sale attributed to a new brand on a retailer's platform might not necessarily result from advertising efforts; it could stem from organic factors such as a shopper's first-time purchase or a competitor's product being unavailable. In this case, traditional metrics like ROAS may not accurately reflect the impact of new brand initiatives. This gap underscores the need for a more nuanced approach to measurement and optimization. By analyzing digital shelf data across retailers, iROAS transcends attribution methodologies and provides a consistent framework for evaluating advertising effectiveness across ecommerce platforms. At its core, the metric considers the organic share of voice for a brand or product on a retailer's platform to optimize advertising efforts. It also isn't limited to overarching marketing strategies and can be applied at the retailer level to optimize advertising efforts on specific platforms. Shifting the retail media paradigm Let’s look at an energy bar brand aiming to optimize retail media spending on Amazon. The brand’s expenditure across various keyword categories containing the term “bar” exhibit considerable variance, with an emphasis on breakfast bars. Initially, assessing ROAS for “breakfast bar” seemed favorable, ranking second-highest among all bar-related keywords. However, a deeper dive into incrementality (i.e., the lift in metrics that would be verifiably credited to marketing efforts) and organic share of voice revealed that “granola bars” and “protein bars” held greater potential for incremental growth, as the brand’s products were not prominently featured in search results for these terms. Transitioning from ROAS to iROAS provided a clearer picture of advertising effectiveness. With these insights, marketers can optimize their ad campaigns, reallocating resources toward keywords with higher incremental potential and ensuring that advertising efforts align more closely with growth objectives. Expanding incrementality across keywords and retailers Imagine a shopper is hosting a March Madness watch party, and in preparation, they search a retailer's site for "Lay’s chips." The search term indicates high intent to buy the Frito-Lay brand, but that intention also leads to low incrementality. Conversely, if the shopper searched for Lay’s but then purchased Pringles instead, the incrementality for Pringles would be very high because the shopper originally intended to buy another brand. This approach, tailored to mitigate seasonal variations and capture diverse buying behaviors, showcases the potential for impactful, data-driven decision-making in marketing strategies. How Hellmann’s Expands the Funnel Through Retail Media Factors such as share of voice, propensity to buy, relevance and the impact of new brands collectively inform the dynamic iROAS model. Crucially, it's not a static assessment but a continuously evolving process that adapts to shifting market dynamics and evolving consumer behaviors. Ultimately, embracing an incremental approach to retail marketing not only maximizes ROI but also fosters sustainable growth and market share expansion. By leveraging sophisticated analytics and experimentation, marketers can navigate the complexities of the digital retail media landscape with confidence, driving meaningful outcomes and delivering exceptional value for their brands.

Voice

Retail Media's New Secret Weapon Is Incremental ROAS

Traditional metrics may not accurately reflect the impact of new brand initiatives

Himanshu Jain

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Himanshu Jain