Maximizing Media Efficiency: A Geo-Test on Paid Social Spend

Industry: Home & Lifestyle
Objective: Optimize paid media investment by understanding the impact of platform spend on key conversion metrics.

Background

A leading retail brand sought to refine its media strategy by running a geo-based paid social ( specifically Meta) test. The primary objective was to measure the impact of increased and decreased spend on key customer actions, particularly leads and final purchases. The test was structured to evaluate efficiency and incrementality, ensuring spend was driving meaningful revenue.

Test Design

The geo-test was structured as follows:

• Zero-Spend Group: Ad spend was completely shut off in select states.
• Increased-Spend Group: Budget was doubled in a separate set of states.
• Control Group: Other states served as a benchmark for expected performance.

Excluded from the test were the three largest revenue-driving states to ensure the results were not overly skewed by high-volume regions.

Key Performance Indicators (KPIs)

1. Leads and incremental cost per lead (iCPL): Measured as an initial engagement metric.
2. Purchases and incremental cost per purchase (iCPP): Evaluated to determine ultimate revenue impact.

Findings

1. Leads Increased with Spend, But Conversion to Purchase Lagged
   • The increased-spend group saw a ~20% lift in leads compared to the control group.
   • The zero-spend group experienced ~45% fewer leads, indicating a strong dependency on paid media for driving initial engagement.
2. High Incremental Cost Per Lead
   • The cost per incremental sample order in the increased-spend group was ~$30*.
   • In the regular-spend control group, the estimated cost per incremental sample order was ~$20*, highlighting diminishing returns at higher spend levels.

*Randomized to protect customer identification

1. Minimal Impact on Revenue
   • Despite the increase in sample orders, there was no statistically significant increase in purchases in the increased-spend group.
   • The zero-spend group unexpectedly showed a moderate revenue lift (~15%),  but it was also not statistically significant.
2. Paid Social Showed Low Sample-to-Purchase Conversion
   • A separate analysis of a full calendar year of conversion paths found that sample orders driven by paid social converted to purchases at a much lower rate (~1%) compared to other paid and organic channels, so we cannot assume that the increased leads eventually led to purchases after the conclusion of the test.
   • Alternative channels, such as search and affiliate, demonstrated significantly higher conversion rates.

Key Takeaways for the Brand

• Paid social effectively drives top-of-funnel engagement but does not necessarily translate to direct revenue.
• Conversion-focused tactics (e.g., search, promos) may yield higher efficiency in terms of driving purchases.
• Always on testing may be needed for long purchase cycles to ensure a full view of incremental impact.

Next Steps

• Refine audience targeting to focus on segments with higher purchase intent.
• Expand testing to other channels such as search and affiliate to compare efficiency.
• Calibrate measurement frameworks by adjusting multi-touch attribution models based on real-world incrementality findings.

By leveraging geo-testing insights, this brand is better equipped to make data-driven media investment decisions, balancing customer acquisition with efficiency in spend.