Maximizing Incrementality : Measuring True Value in Affiliate Marketing

Understanding Incrementality

Incrementality measures the true impact of an affiliate marketing program by determining what sales would not have occurred without the channel. This concept is particularly important because not all attributed sales are truly incremental. For instance, if a loyal customer already planning on purchasing happens to have a cashback extension installed on their browser, the subsequent sale isn't truly incremental despite being attributed to the affiliate channel.

The term "incremental" may also be used in a generic sense to imply additional units above some baseline measure, but for affiliate marketers, incrementality has a very specific, technical definition that is critical for affiliate marketers to understand.

"Understanding incrementality is essential for optimizing affiliate programs. While maximizing incrementality is important, it shouldn't come at the expense of program growth and sustainability. Many successful programs maintain a mix of both high and low incrementality partners, with commission structures and resource allocation reflecting their relative value."

Measuring Incrementality

Brands typically measure incrementality through several methods:

Hold-out Tests

Creating control groups by temporarily removing certain partners or commissioning structures to measure impact on overall sales. While this provides the clearest picture of true incrementality, it can be challenging to implement effectively.

For example, a brand like Xero, newly working with lower-funnel deal and coupon sites, could take this approach by temporarily pausing commissions for all US-based deal partners, allowing them to measure the true impact on conversion rates compared to markets where the program continued unchanged.

Matched Market Analysis

Comparing performance in markets with and without affiliate programs helps estimate incremental impact. This method works particularly well for brands with clear geographic separation of markets. 

A global D2C brand - for instance Allbirds, might apply this technique when expanding an affiliate program into new territories, using an established market like the US as a benchmark for any incremental lift provided by a new UK-based program.

Customer Behavior Analysis

Examining metrics like new versus returning customer rates, average order value differences, and purchase frequency patterns provides insights into program impact.

In 2024, digital asset marketplace Creative Market tracked new and returning customer rates alongside respective average order values. The resulting insights painted a clear picture of the value of net-new customers finding Creative Market via affiliate content. 

Partner Types and Incrementality

Different partner types demonstrate varying levels of incrementality, which should inform your strategy and commission structure:

Content Partners

Content partners typically show high incrementality as they often introduce products to new customers and influence purchase decisions through detailed reviews and comparisons. Their traffic usually shows higher new customer rates and stronger incrementality signals.

Xero’s partnerships with small business blogs demonstrate this value, with top content partners consistently driving traffic and conversions from audience members not previously familiar with the software.

Coupon Partners

Coupon partners present mixed incrementality. While they can drive significant volume and attract new customers through deal discovery, they also capture existing customers who are simply seeking discounts.

Invideo manages this dynamic by creating exclusive promotional offer codes for select coupon partners, allowing them to track the incremental lift of specific campaigns rather than applying a program-wide coupon strategy. 

Cashback Partners

Cashback partners generally show lower incrementality since they typically engage with customers who have already decided to purchase. However, their volume and customer loyalty can provide other strategic benefits that make them valuable partners when managed appropriately.

Brands in particularly competitive niches may partner with cashback sites as a way to gain a competitive edge in the space.

Optimizing for Incrementality

The most successful affiliate programs balance incrementality with overall program goals through thoughtful strategy development:

Commission Structure Design

Rather than implementing flat rates across all partners, successful programs create tiered commission rates that reflect incrementality potential. Content and review sites often receive higher rates to reflect their upper-funnel influence, while coupon and cashback sites receive lower rates aligned with their typically lower incrementality.

Xero’s commission structure is a prime example of this differentiation, with lower funnel partners receiving smaller commissions and upper funnel partners earning larger commissions to reflect their high incrementality. 

Partner Mix Management

A diverse partner portfolio remains important, but commission allocation should reflect both volume and incrementality potential. Investing resources in recruiting and activating upper-funnel partners helps balance the natural gravitational pull toward lower-funnel partners that often occurs in affiliate programs.

Performance Measurement

Performance measurement must extend beyond basic metrics to truly understand incrementality. This means tracking new versus returning customer rates by partner type, monitoring average order value differences across partners, and analyzing customer lifetime value by acquisition source. These deeper metrics provide crucial context for program optimization decisions.

Advanced Incrementality Considerations

Different business models require different approaches to incrementality. Subscription-based services like MasterClass might value new customer acquisition more highly than one-time purchase retailers selling higher-priced goods. Similarly, businesses with high customer lifetime value might be willing to accept lower initial incrementality in exchange for long-term customer retention.

Seasonality can significantly impact incrementality measurements. During peak retail shopping periods like Black Friday, the concept of incremental sales becomes more complex as consumer behavior shifts dramatically towards deals and discounts. Understanding these patterns helps inform both measurement approaches and strategic decisions around these seasons. 

Client Discussions and Strategy

When discussing incrementality with clients, three key principles should guide your approach. First, acknowledge that perfect attribution doesn't exist. All attribution models have limitations, and understanding incrementality requires multiple measurement approaches working alongside one another. 

Second, emphasize that balance is key to program success. While maximizing incrementality is important, it shouldn't come at the expense of program growth and sustainability. Many successful programs maintain a mix of both high and low incrementality partners, with commission structures and resource allocation reflecting their relative value.

Strategic recommendations should focus on concrete, actionable steps to improve program incrementality while maintaining performance:

• Commission structure adjustments based on incrementality analysis
• Partner recruitment strategies targeting underrepresented high-incrementality segments
• Testing and measurement plans to validate incrementality assumptions

Conclusion

Understanding attribution and incrementality is essential for effective affiliate program management. While neither concept is an exact science, having a strong grasp of both helps you make better strategic decisions and have more productive client conversations. The goal isn't to achieve perfect attribution or 100% incrementality, but rather to optimize programs for sustainable growth while demonstrating real value to clients.

Success in affiliate marketing requires balancing multiple competing interests: maximizing incremental value, maintaining program growth, and keeping partners engaged and productive. By understanding these concepts, you can guide your programs toward this optimal balance while providing clear value to all stakeholders.