Measuring Retail Media Effectiveness: Keys to Unlocking Growth

As retail media usage grows, the need for strong measurement strategies is becoming more and more apparent. Closed-loop attribution, incrementality testing, and media mix modeling (MMM) offer powerful frameworks to help overcome retail media’s ambiguity, providing clarity on how campaigns perform across the entire customer journey. These methodologies enable marketers to unlock deeper insights, allowing them to make data-driven decisions and truly understand retail media’s impact on brand investment. By leveraging these advanced attribution frameworks, marketers can gain the comprehensive understanding they need to optimize campaigns and budgets, ultimately driving sustained growth in an increasingly competitive landscape.

Closed-loop attribution: linking sales to media to further optimize campaigns

Closed-loop attribution is a technique used to directly connect media spend to specific consumer actions — most notably, offline sales. Being able to provide media platforms with a complete picture of marketing through to sales is especially valuable in retail media because brands can then see the full journey of a customer, from ad exposure to in-store or online purchase. This granular tracking of the holistic customer journey allows marketers to measure ROAS more accurately and provide marketing platforms with more data they can use to optimize current and future digital campaigns.

A key benefit of closed-loop attribution is that it addresses one of the main challenges in digital marketing: determining whether an ad truly influenced a sale. Many traditional attribution models stop at clicks or impressions, but closed-loop attribution enables advertisers to track the customer’s actions across the entire funnel, providing visibility into which ads resulted in conversions and how effectively different touchpoints contributed to the overall campaign.

Advancements in data integration and AI-driven attribution models offer the potential for more nuanced understanding and better future outcomes. Considering the ever-changing privacy landscape, marketers must continue to stay ahead of the curve to address data availability and update their methodologies in order to continue to drive meaningful optimization opportunities. The first step is to improve first-party data collection so advertisers might gain deeper insights into the customer lifecycle, helping them further refine targeting strategies. Additionally, privacy regulations are driving innovation in anonymized data collection and analysis, ensuring attribution methodologies remain viable and reliable while complying with regulations like GDPR and CCPA.

Incrementality testing: proving true media impact

While attribution models can show where conversions are coming from, they do not always explain whether those conversions would have happened without media intervention. That’s where incrementality testing begins to play a major role. 

Incrementality testing allows marketers to measure the additional impact their media spend has on sales by comparing audiences exposed to the media with control groups that are not. A well-designed incrementality test will allow marketers to measure the true impact of retail media campaigns by isolating the effect of ads from other independent factors such as seasonality, organic demand fluctuations, and external market conditions, allowing for a clearer understanding of the incremental value driven directly by your advertising efforts. This form of testing can be conducted using A/B testing, where a randomized group of users is exposed to ads while a control group is not, or through geo-experimentation, which compares media performance across different regions.

One of the key advantages of incrementality testing is that it delivers tangible proof of your campaign’s impact, making it particularly valuable when presenting results to stakeholders. Additionally, it helps optimize budget allocation by identifying which media strategies generate the highest incremental lift. As a result of recent technological advancements, automated incrementality testing driven by machine-learned algorithms is beginning to allow for faster and more meaningful measurement results. These algorithms can dynamically identify the optimal test/control groups and even predict incrementality in real-time, enabling marketers to adjust strategies for better performance and the resulting measurement and optimization outcomes more quickly.

MMM: evaluating retail media’s impact within broader strategy

Media mix modeling (MMM) takes a broader approach, helping brands understand the impact of retail media within the context of their overall marketing efforts. MMM uses years of historical data to estimate the contribution of different marketing activities — such as digital, connected/linear TV, and retail promotions — to sales, allowing brands to make more informed decisions about budget allocation.

MMM is crucial for understanding retail media, particularly for brands that want to track its impact relative to other channels. MMM typically works well for understanding long-term effects, whereas methods like closed-loop attribution and incrementality testing often focus on short-term campaign results. However, by incorporating retail media variables into the model, marketers can gain a clearer view of how the channel influences not only direct sales, but also brand awareness and consideration across the customer journey. This holistic view is essential in today’s fragmented media environment where customers are exposed to messaging from multiple platforms.

An additional benefit of using MMM is that it allows marketers to develop alternative media scenarios where the retail media spend can be adjusted. At present, most retail media budgets are being funded from other channels. Developing scenarios with incremental budget can help marketers build their case to show the value of retail media without taking budget from existing channels. This will provide some degree of confidence before entering the retail space.

What this means for marketers

Today’s rapidly evolving retail media landscape has made the need for precise measurement and attribution critical. As marketers face increasing pressure to justify their media investments, a strategic approach to measurement can make all the difference. To get started, marketers should first establish clear objectives tied to their overall business goals. This might include defining KPIs such as sales lift, ROAS, customer acquisition, or improvements in brand perception. Identifying these goals helps set the foundation for choosing the appropriate measurement frameworks.

Investment in these advanced measurement frameworks may pay dividends for your business if properly implemented, with potential benefits including:

1. Improved budget allocation: With a precise understanding of how each channel contributes to marketing objectives, these frameworks empower marketers to allocate budgets more effectively. Whether it’s shifting spend toward high-performing tactics identified through incrementality testing or optimizing the entire media mix based on MMM insights, data-driven decision making leads to better ROI.
2. Enhanced cross-channel effectiveness: Retail media is often just one part of a larger integrated marketing strategy. By utilizing these frameworks, marketers can understand how retail media works in conjunction with other channels such as digital, TV, and paid social, creating effects that amplify the overall impact. This cross-channel understanding is crucial for optimizing the entire customer journey and driving cohesive brand messaging.
3. Adaptation to a privacy-first world: With increasing privacy regulations like GDPR and CCPA reshaping data availability, leveraging first-party data and anonymized, aggregated insights is absolutely vital. MMM and incrementality testing provide a privacy-compliant way to measure effectiveness without relying on user-level tracking methodologies. 
4. Proving the value of retail media: Retail media often competes with other established channels for budget, making it essential for marketers to demonstrate its incremental value. By employing these measurement methodologies, marketers can build compelling evidence to show how retail media contributes not only to direct sales, but also to long-term brand equity, customer retention, and overall marketing effectiveness. This comprehensive understanding helps make the case for increased investment in retail media as a driver of incremental business growth.