Classifieds

How Instacart Has Become a Retail Media Power Since Its IPO

A challenge and an opportunity 

One of Instacart’s major successes is the foresight it took to understand it wouldn’t survive in the market by simply focusing on its core offering. Looking at the broader landscape, Amazon’s success in retail media is attributed to its extensive customer shopping data and ability to cater to diverse income groups. For Instacart to replicate this success, it faces the challenge of expanding its user base; while it can leverage its targeted data-driven approach, its primary audience consists predominantly of grocery shoppers. This poses a unique challenge and opportunity. 

Instacart excels in understanding the intricacies of grocery purchasing behavior, which differs from shopping on platforms like Amazon. With the high frequency of repeat purchases and the concept of basket building, where shoppers continually add items to their cart, the ad strategies to drive purchases are different from Amazon’s. Recognizing these distinctions, it becomes crucial to integrate metrics such as “share of wallet” and “new to brand” indicators. Brands seek to attract new customers who haven’t previously discovered their products, then aim to retain these customers over time to grow share. Achieving this incremental value is essential, and many prominent brands, such as Pilgrim’s Pride—one of the largest chicken producers in the U.S.—have successfully adopted metrics strategies that account for incrementality to boost their media spending on platforms like Instacart. These efforts result in substantial year-over-year spending increases, driven by the tangible incremental value produced from these investments. 

Incrementality: a rising force in retail media 

The ultimate goal for a marketer is to grasp the impact of their marketing spend on sales. They want to determine whether their dollars result in incremental sales and profitability. This knowledge enables them to optimize their marketing budgets effectively, which could result in substantial ad spending to drive greater profitability. 

Traditionally, return on ad spend served as a metric for assessing marketing performance. However, this often falls short in the context of retail media. Consider a scenario involving a shopper searching for Kellogg’s cereal on Instacart: If the shopper was already planning to buy Kellogg’s cereal, an ad click and conversion may appear to yield high ROAS, but it doesn’t indicate real incrementality—Kellogg’s would have gotten that sale anyway. This complexity intensifies when dealing with more diverse product categories. Promoting niche products like keto or protein cereal, for instance, could yield a smaller ROAS, but the incrementality—the actual boost in sales—might be higher. 

Calculating incrementality involves intricate data science techniques, incorporating factors like attribution, shopper behavior and search patterns. Industry leaders are continually refining these practices to optimize their marketing strategies, and Instacart is one of them. Helping marketers prove the value of their investment with more scientific techniques helps justify larger ad investment on that channel versus deciding to spend incremental dollars elsewhere. 

One method is to specifically calculate “incremental ROAS,” which combines digital shelf data with advertising performance data to determine how incremental an ad sale is, for any keyword on a given retailer. It represents the amount of sales that would not have taken place in the absence of advertising activities. This is done by evaluating three key factors:

Previous page 1 2 3Next page

Related Articles

Back to top button