Incrementality Is Capital Allocation | Paul Boruta, Founder & CEO, Slingwave

Amy McCarty: Welcome to the incremental marketer, a content series where we meet with top marketing executives and leaders across industries to help you drive growth in your business. Welcome to the incremental marketer. I'm Paul Beruta, CEO, founder of slingwave, and I'm here to talk about incrementality is not a tactic. It's capital allocation. Let's get into it. Let's start with the simple but important idea. Most marketers think about incrementality as a tactic. It's a something you measure on a point solution occasional basis. You test a few times a year. You prove that media was working and then you go on. You move on. You maybe. reduce or increase a single channels investment. But the companies that are actually winning right now, take it a step further. They don't treat incrementality as a tactic. They folded into a capital allocation system. And that's a very different mindset because at the end of the day, marketing is one of the largest discretionary line items on the P and L millions, sometimes billions of with the B of dollars. Being deployed across channels, platforms and campaigns. How many organizations actually don't use incrementality? Quite a few. And they are likely using a platform reported ROAS number, last click attribution, or whatever dashboard happens to be in front of you. And that's, you know, built by somebody who's maybe not as familiar with the complexities of marketing and for sure is missing the concept of a foundational model. in most organizations. The real question isn't just what performed. The real question is which dollars actually created new growth and that's where incrementality comes in. Which dollars actually created new growth? So let's define it simply. What is incrementality actually mean? Incrementality is just this. What would not have happened otherwise if I hadn't spend? Would anything have changed? That's it. If I did spend, did I get it a lift? It's something that caused growth. It's not just something that captured demand that was already there, that was built up in previous periods, previous brand campaigns, previous influencer pushes or organic or product launches. That's demand that was in the system. And it's very easy for paid media to take credit for it. As people are walking in the door, this is where a lot of marketing breaks down because attribution, especially in the digital world. does a great job of telling you what happened as in I passed by your pixel and I converted, but it doesn't tell you that I caused that actually to happen. A classic example here is branded search. It's almost always looks amazing in your attribution model, branded search, high ROAS, high conversion rates. But the question is, would those customers have converted anyway? In many cases, the answer is yes. You're not just creating demand there. You're, you're, ⁓ You're really just capturing somebody walking by. have a product in my hand. I walked to the cash register, the ad platform sitting right next to the cash register and saying, I saw that person just bought it. Look, I gave them an ad and I take credit. The reality is that person was influenced five weeks ago by an ad they saw on a sports program or whatever brand campaign that brand had in market. And influence them. And then along the journey, they were influenced by other touch points. The last touch literally just is because they're standing closest to the cash register. Most of the time. Now there is an argument to defend your brand share and keep competitors away. And you will want that placement. So there's some incrementality to brand for sure, but most marketers are significantly over invested in that as a channel. And they want to move up upper funnel. They want to move mid funnel, but they're not confident in how to do that. So it's easiest to just default to that thing that seems to be working. And when you don't distinguish those two things, you start making really bad investment decisions, which is chasing the thing that is not building new business. It's literally just taking credit for existing business. And that leads to that 30 % waste that we see in organizations. So the problem, misallocation, this is where we really see the issue showing up. You don't have an incremental lens at your company. You're not using a foundational unified model marketing. Then naturally over invest in things that are easy to measure retargeting. It's too much credit, lower funnel tactics get overfunded platforms who by the way, grade their own homework. They would love to be able to give you an incrementality model, but structurally that's not how the industry's built platforms. See what they are given and they're just usually given a pixel that credits all revenue. So they try to allocate that within the platform, but they're grading their own homework and doing it and they don't have an incrementality adjusted version because you're not providing that to them. You, you need to be able to give them that signal so we can get to that in the next episode or discussion. There's a lot of ways to do that, but in the same time, you know what you sacrifice is things like brand building, upper funnel, new customer acquisition. He's trying to get underfunded. It's not because they don't actually work. It is because it's hard to see that they're working. It's harder to measure. It's really hard. You know, you don't have a pixel on connected TV. That's giving you a signal of a point by point conversions. And if you do, I've seen solutions out there where they're basically crediting every visit to your site as having been influenced by them, which is also not an incrementality adjusted view of the world. It's an overstatement. So you end up optimizing for metrics that you can see metrics that appear in your dashboard, but they're not incrementality adjusted and they're not showing you true impact. And when we look at that across companies and across industries, it's very common to see 10, 20, even 30 % or more spend misallocated. Once you evaluate it through an incremental lens, you've seen that you've been wasting that budget. You've been under investing in the things that would actually drive growth. It's not just inefficiency, that's missed growth. And if you're putting dollars into things that aren't actually driving new outcomes, you're not just wasting money, you're capping your upside. What it should look like is every year you're reducing that waste and you're reinvesting in the thing that's growing the business, you're building a stronger foundation, and every year you're finding 10 to 30 % new inefficiencies that you can reallocate to growth. And when you don't have this system in place, you're missing that compounding effect. You're missing the learnings. You're missing that, that system. That's really become a growth engine for you. So the shift from tactic to system, what changes when you start thinking about incrementality the right way, you stop treating it like a tactic. You start treating it like a system for making decisions. And one of the most important ways to think about this is across what we call the optimization stack and. Incrementality doesn't at all just exist at the channel level. It's the optimization stack. It exists across every layer of how marketing works, and so let's walk through that first inventory. Where are you showing up? And that's the tick tock, the meta, the Google, the Amazon discussion. Traditional linear TV radio print out of home. Where are you showing up? How did you allocate on those placements, formats? And are you present in the places that really? drive incremental reach for your brand. So that's inventory stack. That's the easiest one to think about. And it's so funny how often that is the least allocate, at least properly allocated. There's a bunch of reasons, historical learnings, teams, comfort level with platforms, fear of testing something new. So let's move from the first level of the second targeting across all of the inventory that you're working on. Who are you reaching? Are you finding new audiences? Or are you just hitting the same people over and over again? You see it all the time with Shopify new versus existing customers. You're looking at your data in aggregate. You're not segmenting by what type of customer is it that I have and I'm getting so much of the attribution from the existing customers coming back to buy. And it's amazing how oftentimes. Organizations haven't separated that out. The new versus existing customers and treat them differently. You may even have other signal noise in that revenue stream, like supplier orders, wholesale orders, B2B orders, things that you wanted to strip out, but your team has not been able to correct. So you need to really understand who you're targeting, which audience is it a new versus existing customer. And to the extent that you have other segments, you've, Got them defined and you're really understanding that you're actually hitting them on these platforms. Targeting is the second timing is the third. When are you influencing decisions? Are you showing up early enough to shape behavior? And this becomes complexity beyond a human team's ability to calculate each one of these, by the way, is complex. If you, if you do the math beyond a human analyst team's ability to not just calculate, but execute on. Timing becomes a issue where you take the media plan, the inventory, the targeting, and you multiply it by every day between here and the end of the year, you flighted it out. And then you've subsegmented that into not just daily, but hourly day part nights versus weekends, morning versus evening, when's the right time to be spending. And are you properly influencing decisions? Are you spending early enough? ahead of an Amazon Prime Day or cyber week or any of the big events that are coming up. So you think about timing and it's added a third layer of significant complexity to your media allocations. And then fourth creative, what are you actually saying? Does it change behavior or does it just reinforce existing intent? Is it fresh? Is it standing out? Is it fatigued? Is it video? Is it, is it a sound on you're seeing your logo in the first few seconds you have voiceover or is it a brand spot user needs to be in front of the screen and needs to be paying attention? What are you actually saying? There's so many dimensions to creative and it significantly matters. Part and parcel with creative is a close cousin. 5th layer is product and offer. What are you putting out into the market? Sometimes the biggest lever isn't just media, it's what you're actually selling. And strong products. Maybe don't need as much media support. They need to light a fire and extend that reach, but it doesn't need to be a sustained effort to keep people excited. And then other products may need more of a media push. It means more of a burn in. have long sales cycles. You multiple proof points, multiple touch points. You need that orchestra working together to showcase this product before users are willing to take it. Take a chance. Buy it. That fifth layer is complex and. Fourth creative fifth product and offer go hand in hand. And then finally a large and constantly changing sixth layer is the marketplace dynamics. What's happening competitively? Pricing availability, competitive pressure, all of that impacts incrementality. And it's not just a turn based game where I make a move that my competitor makes a move. It's happening in real time. Everybody is in this real simulation in real time making their decisions. And if you're not thinking about and responding to what's happening competitively, you're missing a significant. Optimization and capital allocation layer. All of this impacts incrementality. So the key idea here is incrementality exists at every layer of the system, which means you don't optimize channels in a vacuum. You want to take the full view of how the system works together. And that's fundamentally a different way to run marketing. It's very difficult for. A human team that doesn't have a foundational model. I'm saying a human team because I'm alluding to AI and agentic being able to help you solve this, which we'll get into in a future episode. But just a combination of all this complexity makes it very difficult to just model in and of itself, let alone act on, you know, people need to take a break every once in a while and leave it to machines to optimize. So how do you embrace that? system and build that system as your fundamental operating system for your brand. So the model, what what do we unlock when you actually operationalize this? When you build a foundational model around incrementality, a few really important things happen. First, you start to understand true incremental ROI. It's not just what looks good in a dashboard, but what actually drives growth. And second, you start to simulate decisions. You have a predictive model. you can ask what happens if I move budget from here to here, from meta to tick tock, from Google to Amazon, and you'll have a real answer. And it's an answer that's a statistical prediction. It has a range of confidence in terms of whether or not it will be a point that you have high confidence in, or if there's a wide potential range of outcomes, you'll have an answer. And that's something that's not a guess. It's an actual data-driven. asset for you to have that conversation. It's not a platform recommendation that was produced in a silo without your incrementality, incrementality signal, but it's a modeled data driven expectation. And this is the big one because with that third, you can create a common language between marketing and finance. And now you're not just talking about impressions and reach and clicks and view through rates and these front end metrics that may or may not matter. Or even just conversion count. may or may not have been influenced by media. What you're talking about is the return on invested capital. Did marketing actually drive the outcome, the dependent variable, sales, conversions, subscriptions, leads, and that changes the conversation. Marketing stops being a cost center and it starts behaving like a growth engine. And this is where it gets bigger than analytics. So talking about the organizational impact. When you adopt an incremental mindset and a unified modeling mindset, it changes how the organization operates. Budget conversations shift from how much should I spend to what growth can I create? And marketing and finance get aligned. Decision making gets faster. And the best teams start to emerge out of this system because the best marketing teams today are well integrated with their financial counterparts. They don't defend budgets. It's not a defensive stance, they deploy capital, they're confident that their moves will make an impact. They're also able to take risks and do testing where you maybe don't have the right model in place yet, but you need data points to be able to strengthen your organization. And I love, spoke to a great marketer recently who said that their organization literally set aside a mandatory very large, a bucket of capital to just test things that. most likely weren't going to work, but they needed to because they wanted to be there first and they needed to be there in a highly competitive market before others found out. So think about this as the connection between you and finance to be able to give that confidence and not just be defensive about my budget matters. Just trust me. It's here I can show you. And this 10 sound like a big shift and it is, but the way to start can actually be pretty simple. You don't need to boil the ocean out of the gate. Start with one of the major levers of unified measurement. And we talk about it as three key points. have real time data that's coming in from the platforms. You have a media mix model running. That's a long time series view of a top down user agnostic did paid media and other external variables impact sales or the dependent variable. And last geo holdout or experimentation levers. So you can just take one of those three. do a geo experiment to start a holdout test, several markets. It'll give you a clearer read on the incremental impact of an existing or a new channel. And then take that learning and use it to inform a broader model. Use your media mix modeling as an always on component, not just a every six months rubber stamp from a major vendor or an agency that you may or may not use. Oftentimes it's just a board meeting, check the box kind of ⁓ exercise. It should be a foundational part of how you deploy capital and you bring all of those signals together into an incremental unified measurement approach. The key is you build from evidence and remember, this is not a one-time project. It's not something that the smartest person in the room builds and then they move on. It's that the team rallies around, you bring all the smart people to the table. They are now understanding. A model and they're working around it. It's a muscle. And your organization, the more you build it, the better your decisions will get. So to close, to bring it all together, we think most marketers today are optimizing for signals that aren't adjusted for incrementality. We see it all the time. They're optimizing to what they can see. It's oftentimes last click. It's oftentimes something that's not upper funnel friendly. It's a very lower funnel biased. They're optimizing to what's easy to measure. But the marketers who really driving growth, they are optimizing outcomes. They're asking what actually moves the business and what incrementality gives you is not just better measurement, but better decisions. And we call it unified measurement at SlingWave. If there's one thing to take away, it's not about proving marketing works. It's about making marketing work better. And if you're not thinking about it that way, you're not allocating capital, become a capital allocating organization. Brands that win aren't the ones who just spend the most and maybe they are, but they are usually the ones who allocate the best. It's about making marketing work better. We'll see you next time on the next episode of the incremental marketer until then keep optimizing. If you enjoyed this conversation, don't forget to subscribe, like and share and join us for more episodes with the leaders shaping the future of marketing.