In this article, you will discover how to effectively make informed decisions and enhance the performance of your channels by leveraging Contribution and Marginal values.
How to choose a channel to Optimize?
We recommend to choose channels to optimize based on your main KPIs, that you also utilize for internal optimization. For instance, you can analyze the INCREMENTAL Contribution (ROAS D7) alongside the Marginal (ROAS D7) performance of various sources within the country.
The channels that have Contribution ROAS D7 on your benchmark or above are a good candidates to scale up, those channels that have ROAS D7 below your benchmark might be candidates either for scaling them down and shifting budgets from them to the channels with better performance.
How to decide on the size of each change?
- The main driver for the size of the change per channel is the Marginal (or Additional) value (for instance mROAS D7), which tells you how much ROAS D7 you will get from the next user if you increase the spend. Marginal value helps you to understanding the next expected outcome.
- Another driver for the size of the change is the percentage of spend from total of the specific Channel.
How to make Decision with both Contribution and Marginal values.
The rule of thumb is:
- If both Contribution and Marginal values are looking well, on or above your benchmark - scale up.
- If Contribution value is looking well, but the Marginal value is below your target - consider keeping its spend as is, it is possible that you are now in the "sweet spot"and increasing spend will bring you users that are too expensive.
- If both Contribution and Marginal values are looking below your goal - consider scaling this channel down, or optimizing.
How to look at Marginal value?
Marginal Values for ROAS indicate the expected revenue generated from acquiring the next user. As spending increases, acquiring new installs becomes more expensive, and the revenue per user tends to decrease,
For optimal analysis, it is advisable to compare the Marginal values of a specific channel not only against those of other channels but also against its own historical performance over different timeframes.
Example: the relatively good marginal values for Marginal ROAS D7 are in a range of ± 40%
How to implement changes?
In general, we recommend to do the changes in steps, i.e. increase by 15-20% every step. Keep monitoring the Marginal values after 1-2 weeks from the change to see if you have more room to grow.
For any question please contact onboarding@incrmntal.com , or open a support Ticket here