A Step-By-Step Guide For Mastering Geo Experiments

Published On: 28 Feb 2024


Learn the step-by-step strategies, case studies, and best practices to conduct effective geo experiments that lead to profitable growth for your business.

Geo experiments, such as geo scale testing and geo holdout testing, play a crucial role in modern marketing by providing valuable insights into the effectiveness of advertising in specific geographic areas. These experiments help marketers understand the impact of their advertising on overall revenue, channel-specific revenue, and the halo effect on other channels.

While geo-testing has been historically seen as complex and expensive, advancements in the field have made it more accessible and cost-effective, leading to a resurgence in its importance.

The results of these tests essentially show whether the advertising is contributing to revenue or whether the revenue would remain the same even if the advertising was stopped.

Picture this: You're responsible for allocating a substantial chunk of your company's budget to various advertising channels like Facebook, Google, TV, or catalog ads. Your mission?

To figure out how much of an impact these ads truly make on your bottom line.

In essence, you need to answer the question: "If we were to pull the plug on our ads, what would we stand to lose?" That's where geo-experiments come into play.

This information is crucial for making informed decisions about advertising strategies and budget allocations.

In this deep dive, we'll delve into the intricacies of geo-experiments. We'll cover the essential steps, strategies, and tools that can help marketers like you gain a deeper understanding of your advertising's true impact.

The Basics: What are Geo-Experiments?

At its core, a geo test, geo-experiment, or Matched Market Test (MMT), is a marketing research method that allows you to analyze the real impact of your advertising efforts within specific geographic markets. In simpler terms, it's like running a controlled science experiment in the world of advertising.

How Geo experiments are conducted leading to incremental sales

Here's how it works: you choose a particular geographic area or market where you plan to alter your advertising strategy in some way. This might involve increasing or decreasing your ad spend in that area, targeting a different audience, or even halting your advertising altogether. You then only closely monitor the changes in sales, sign-ups, downloads, or any other relevant key performance indicators (KPIs) within this market. This data helps you understand the true effect your advertising has on your desired outcomes.

The Role of Geo Tests in Measuring Advertising Impact

Now, you might wonder how geo tests fit into the grand scheme of measuring advertising impact. Traditional methods like multi-touch attribution (MTA) are losing their effectiveness due to stricter privacy regulations and the impending third-party cookie phase-out. Geo-tests fill this gap.

They are reliable tools for measuring causal impact or “incrementality.” This concept is at the heart of advertising impact assessment. It helps you answer a fundamental question: How much of your KPIs can be attributed to your advertising efforts, and how much would you have achieved without them?

They enable you to differentiate between the audience that was exposed to your ads and the audience that would have acted the same way without them.

And the best part? They can be run on both digital - social media, paid ads, and offline mediums - TV, radio, OOH, mail, etc.

For instance, a Texas-based women's lifestyle and personal care brand was facing an issue of stagnant growth and was struggling to quantify the real impact of its diverse media channels and tactics on the business's bottom line. They opted to conduct Geo tests and understand the true revenue drivers for their brand.

The result? A 3.1x uplift in their marketing efficiency. We recommend you read the full case study to understand how they did it.

How to Prepare and Execute a Geo Experiment?

Step 1: Define your objectives

The first aspect of defining objectives involves identifying Key Performance Indicators (KPIs) that align with your overarching marketing goals. These metrics can vary depending on the nature of your business, the specific campaign objectives, and the stage of the customer journey. Common KPIs however include sales uplift, website traffic, and brand awareness.

Once KPIs are identified, the next step is to set clear and actionable goals for the Geo Experiment. These goals should articulate what you aim to achieve through the experiment and provide a framework for measuring success. When setting goals, consider the following:

  • Specificity: Ensure that goals are specific and clearly defined, leaving no room for ambiguity. For example, instead of aiming to "increase sales," specify the desired percentage or dollar amount of sales uplift.
  • Relevance: Align goals with broader business objectives and strategic priorities. Each goal should contribute to the overall success of the organization.
  • Achievability: Set realistic and attainable goals that are within reach based on available resources, market conditions, and historical performance.
  • Time-bound: Establish a timeframe for achieving goals to create a sense of urgency and accountability. This helps maintain focus and drive momentum throughout the experiment.

By setting clear and measurable goals, marketers can effectively track progress, evaluate performance, and make informed decisions to optimize campaign outcomes.

Step 2: Select geographic regions

When choosing geographic regions for the experiment, it's essential to consider various factors that influence the effectiveness and representativeness of the results. Some key criteria for selection include:

  • Market size: Evaluate the size of the target market within each region to ensure an adequate sample size for meaningful analysis. Larger markets may offer greater potential for significant insights but require more resources.
  • Customer demographics: Understand the demographic characteristics of each region's population, such as age, gender, income level, and lifestyle preferences. Select regions that closely match the demographics of your target audience to ensure relevance and accuracy.
  • Prior marketing performance: Review historical marketing performance data for each region to identify areas with higher engagement, conversion rates, or customer loyalty. Prioritize regions that have demonstrated favorable outcomes in past campaigns, indicating potential for success in the current experiment.

Once the regions are identified, it's crucial to establish control and test groups to facilitate comparison and analysis. The control group consists of regions where no marketing intervention will occur, serving as a baseline for measuring natural fluctuations in performance. On the other hand, the test group comprises regions where the marketing campaign will be implemented, allowing for the evaluation of the campaign's impact.

Splitting of geographic regions in geo experiments into control groups and test groups

To ensure the validity and reliability of the experiment results, it's essential to carefully balance the composition of control and test groups. Factors to consider include:

  • Randomization: Randomly assign regions to control and test groups to minimize selection bias and ensure that both groups are representative of the overall population.
  • Equivalence: Ensure that control and test groups are comparable in terms of demographic characteristics, market size, and other relevant factors. This ensures that any differences in outcomes can be attributed to the marketing intervention rather than external variables.
  • Geographic proximity: Consider geographic proximity when selecting regions to minimize potential confounding variables such as regional economic conditions or cultural differences.

Step 3: Ensure data readiness

The first aspect of data readiness is confirming that robust data collection mechanisms are in place to capture relevant information throughout the experiment. Depending on the objectives and scope of the experiment, data collection methods may include in-store sales tracking, online interaction monitoring, or survey instruments.

By ensuring comprehensive data collection mechanisms are in place, marketers can capture a holistic view of customer interactions and campaign performance across different channels and touchpoints.

In addition to data collection, it's crucial to assess the quality and integrity of the data to be used in the analysis. Poor data quality can undermine the validity and reliability of experiment results, leading to inaccurate conclusions and flawed decision-making. To ensure data integrity, ensure that your data is accurate, complete, and consistent.

Regular data audits and validation checks should be conducted throughout the experiment to identify and address any issues promptly.

Step 4: Design the experiment

This step involves ensuring consistency in campaign execution across regions while allowing for the manipulation of the variable being tested.

While the experiment may focus on testing a specific marketing intervention or strategy, it's important to keep all other aspects of the campaign uniform across both test and control groups. This includes elements such as messaging, channel selection, and offer and promotion.

The timing of the experiment is another crucial consideration that impacts its validity and relevance. You must decide on the duration of the experiment, taking into account factors such as seasonality, campaign objectives, and the expected timeframe for observing results. Key considerations include:

  • Duration: Determine the length of time over which the experiment will be conducted. Ideally, the experiment should run for a duration that allows for sufficient data collection and observation of meaningful trends or patterns. Shorter experiments may fail to capture long-term effects, while overly prolonged experiments may incur unnecessary costs or delays in decision-making.
  • Seasonal factors: Consider any seasonal variations or trends that may influence campaign performance. For example, a retail promotion targeting holiday shoppers may need to be timed to not coincide with peak shopping periods to maximize effectiveness.
  • Lead time: Factor the lead time required for campaign planning, implementation, and data collection. Depending on the complexity of the campaign and the channels involved, sufficient lead time may be necessary to ensure smooth execution and accurate results.

Step 5: Execute the campaign

Launching the campaign simultaneously in both the test and control regions is essential to avoid time-based biases and ensure the integrity of the experiment. By initiating the campaign at the same time across all regions, marketers minimize the risk of external factors influencing the results. Here are some things to consider while rolling out the campaign:

  • Coordination: Ensure proper coordination and synchronization of campaign activities across all regions. This may involve aligning timelines, communicating with stakeholders, and coordinating with internal teams or external partners to ensure a smooth launch process.
  • Rollout strategy: Develop a rollout strategy that outlines the specific tactics, channels, and messaging to be used in the campaign. Consider factors such as audience segmentation, channel preferences, and messaging tone to tailor the campaign for maximum effectiveness in each region.
  • Testing procedures: Conduct thorough testing and quality assurance checks to ensure that all campaign elements are functioning correctly before the official launch. This includes testing links, verifying tracking codes, and reviewing creative assets to identify any potential issues or discrepancies.

Once the campaign is underway, it's essential to monitor its progress closely to ensure that it aligns with the planned strategy and objectives. Continuous monitoring allows marketers to identify any deviations from the plan and make timely adjustments to optimize campaign performance.

Step 6: Collect and analyze data

Collecting and analyzing data is a critical phase of the Geo Experiment process, as it allows marketers to assess the impact of the campaign and derive actionable insights for optimization.

Thanks to all ad platforms, your marketing data might be spread across as many platforms as you can imagine. This might lead you to wonder whether you can get all your data in one place and if yes, how.

You would be glad to know that there is an answer, or rather a product that can help you collect data from various sources, including online and offline channels, to gain a comprehensive understanding of all your campaign performance.

It's called Lifesight.

Lifesight enables seamless integration and aggregation of data from sources such as:

  • Online interactions: Data from digital platforms including website analytics, social media engagement metrics, and online advertising impressions.
  • Offline transactions: Such as in-store sales transactions, store visits, and direct mail responses.
  • Third-party sources: Such as demographic data, market research insights, and competitive intelligence.

Data unification capabilities of Lifesight

By aggregating all these data points from various sources, Lifesight helps marketers obtain a unified view of campaign performance and customer behavior, enabling more informed decision-making and optimization.

Step 7: Interpret results

One aspect of interpreting results involves evaluating the incremental impact of the campaign by comparing key performance indicators (KPIs) between the test and control groups. Marketers should analyze the KPIs set in step one and see how the test has impacted them.

By comparing the KPIs between the test and control groups, marketers can quantify the impact of the campaign and determine its effectiveness in achieving the desired objectives.

In addition to evaluating KPIs, marketers should also look for trends or patterns that emerge from the data. Analyzing trends can provide deeper insights into customer behavior, market dynamics, and campaign performance. Key considerations include:

  • Seasonal variations: Seasonal variations in consumer behavior, market demand, or external factors can influence campaign effectiveness and should be taken into account during analysis.
  • Geographic differences: Compare performance metrics across different geographic regions to identify regional variations or trends. Understanding regional differences in customer preferences, behavior, and market conditions can inform targeted marketing strategies and tactics.
  • Campaign segmentation: Analyze performance data by segmenting the audience based on demographic, psychographic, or behavioral characteristics. Identifying high-performing segments or audience segments with unique preferences can guide future targeting and messaging strategies.

Step 8: Apply learnings

You've finally completed the experiment and unearthed some interesting insights that can lead to better ROI. Now, you need to apply them strategically.

One aspect of applying learning involves using the insights gained from the experiment to adapt and refine future marketing strategies. Analyze the experiment results to identify successful tactics, audience preferences, and campaign elements contributing to positive outcomes.

This can help you increase efficiency and drive better results in future marketing campaigns.

Another aspect of applying learnings involves deciding whether to scale the campaign to other regions or make modifications based on the results. If you do decide to scale it to other regions, consider the following:

  • Scaling success: If the experiment results indicate a positive impact and strong performance, consider scaling the campaign to additional regions or markets. 
  • Modifying strategies: If the experiment results reveal areas for improvement or indicate suboptimal performance, consider making modifications to the campaign strategy, tactics, or execution.
  • Piloting new initiatives: Use learnings from the experiment to inform the development and piloting of new marketing initiatives or innovations.

By scaling successful campaigns and modifying strategies based on experiment results, you can drive continuous improvement, optimize resource allocations, and maximize the impact of your marketing efforts.

Step 9: Document and share findings

Documenting and sharing findings from the geo experiments is essential for capturing insights, facilitating knowledge transfer, and informing broader marketing decisions.

The first aspect of documenting findings involves creating a detailed report that outlines the experiment process, methodology, analysis techniques, and key findings. The report should provide a comprehensive overview of the entire experiment lifecycle including experiment objectives, methodology, data analysis, insights and recommendations, limitations, and considerations.

By documenting the experiment process and findings in a comprehensive report, marketers can ensure transparency, accountability, and replicability of the experiment results.

Once the report is prepared, the next step is to share the findings with relevant stakeholders to inform broader marketing decisions and strategy development. Stakeholders may include:

  • Senior leadership: Present the findings to senior management and executives to communicate the impact of the experiment and its implications for overall business strategy and objectives.
  • Marketing team: Share the findings with the marketing team to disseminate learnings, foster collaborations, and align future efforts with experiment results.
  • Cross-functional teams: Engage cross-functional teams, such as product development, sales, and customer service, to ensure alignment and integration of marketing insights into broader organizational initiatives.
  • External partners: Collaborate with external partners, such as advertising agencies, media partners, or vendors, to share learnings and optimize collaboration for future campaigns.

Step 10: Plan for future experiments

Planning for future experiments is essential for continuous learning, improvement, and innovation in marketing strategies.

One aspect of planning for future experiments involves using the learnings from the current experiment to inform and guide the design and execution of future experiments.

Adopt an iterative approach to experimentation, systematically testing and refining hypotheses based on learnings from previous experiments. This approach can help marketers build on past successes, address shortcomings, and continuously improve their marketing strategies through experimentation.

Another aspect of planning for future experiments involves considering opportunities to expand the scope of experimentation by testing different variables or exploring new geographic regions.

You can either experiment with different variables, such as messaging variations, offer types, pricing strategies, or targeting criteria, to understand their impact on campaign performance. Or you can consider expanding experimentation to new geographic regions or markets to test the scalability and transferability of marketing strategies.

Actionable Strategies from Geo Experiment Outcomes

1) Translating data into marketing strategies:

Marketers can pinpoint the specific tactics that drive success by comparing the performance of test and control regions. This could involve identifying the types of promotions that resonate most with certain demographics or understanding the impact of ad placements on consumer behavior. The key is to dive deep into the data, looking beyond surface-level metrics to uncover actionable insights that can inform more targeted, effective marketing strategies.

2) Calibrating MMM with the experiment result:

Marketing Mix Modeling (MMM) is an invaluable tool for optimizing marketing spend across various channels and strategies. By incorporating the insights gained from geo experiments into MMM, marketers can achieve a more nuanced understanding of their campaigns' effectiveness. This involves using geo-experiment outcomes to adjust the weights assigned to different marketing channels within the MMM. For example, if a geo experiment reveals that in-store promotions significantly outperform online ads in certain regions, this insight can be used to recalibrate the MMM, potentially allocating more budget to in-store activities in similar markets.

Best Practices for Running a Geo Test

Running a geo test effectively is crucial for gaining accurate insights into the effectiveness of your marketing strategies. Whether you're conducting a holdout test (suppressing ad spend) or a growth/scale test (increasing spending), following best practices is key to ensuring meaningful results:

Decide on the Type of Test:

Holdout test: This involves reducing or completely halting ad spend in a selected market to observe the impact on performance metrics like sales or conversions. This test helps in understanding the baseline performance of a market without the influence of specific advertising efforts.

Growth/Scale test: Contrarily, this test requires increasing the ad spend in a market to assess the impact on the same performance metrics. It's useful for understanding the scalability and effectiveness of your advertising strategies.

Measure the Lift Accurately:

During and after the test, focus on measuring the 'lift' – the change in key performance indicators (KPIs) due to your testing strategy. This involves closely monitoring metrics like sales volume, conversion rates, and customer engagement in both the test and control markets.

Accurate measurement of lift is critical to determine the success of the test and to gain insights into market responsiveness to your advertising efforts.

Analyze Incremental ROAS (iROAS):

Incremental Return on Ad Spend (iROAS) is a vital metric that measures the additional return generated for every extra dollar spent on advertising in the test market.

For example, if TOF (Top of Funnel) Meta ads in the test market show an iROAS of 3.5, it indicates a higher efficiency compared to BOF (Bottom of Funnel) branded Google search ads with an iROAS of 1.0.

Consider Incremental CAC (iCAC):

Incremental Customer Acquisition Cost (iCAC) should also be evaluated, especially for acquisition channels. This metric helps in understanding the cost-effectiveness of acquiring new customers through different advertising channels during the test.

Monitoring iCAC alongside iROAS provides a comprehensive view of both the cost and return of your advertising investments.

Apply Insights to Budget Allocation:

Use the insights gained from the geo test to make informed decisions about budget allocation across different advertising tactics.

For instance, if the test reveals that TOF tactics yield a higher iROAS compared to BOF tactics, consider reallocating your ad budget to prioritize TOF strategies.

Maintain Rigorous Data Monitoring and Analysis:

Throughout the test, maintain a rigorous approach to data collection, monitoring, and analysis. Ensure that the data is accurately captured and reflects the true performance of the test.

Ensure a Fair and Unbiased Test Environment:

Avoid any external influences that could skew the results. This includes maintaining consistency in other marketing activities across test and control markets to ensure that the observed effects are solely due to the changes in ad spend.

Post-Test Analysis and Continuous Learning:

After the test, thoroughly analyze the results to understand the broader implications of your findings. Use these insights for continuous improvement in your advertising strategies.

Geo-testing, while a powerful tool, is not without its risks. The larger the test market, the greater the potential loss of sales during the testing period. Add to this the challenge of inconclusive results, contaminated data, and the significant investment of time and resources, and you're navigating a complex landscape.

The traditional approach often involves holding out a substantial portion of the country for testing. This can lead to a substantial volume of lost sales. The bigger the market size for testing, the higher the stakes.

Also, unsophisticated design and analysis techniques may yield results prone to contamination, noise, and lack of representativeness. Inconclusive or misleading results can leave marketers in a state of uncertainty, impacting their confidence in making significant media investment decisions.

Executing a testing practice that neither yields the volume of tests per year nor the accuracy of conclusive tests can also be a silent killer of time, effort, and resources. Brands might revert to less superior forms of media measurement, stalling progress and hindering strategic decision-making.

Advanced practices to the rescue

Advanced geo-testing practices shine as a beacon of efficiency, providing a roadmap to minimize these risks and amplify business impact.

1) Reducing market size with predicted counterfactuals:

The most sophisticated geo-testing involves predicted counterfactuals. By creating models based on trends in control markets, only 5-10% of markets need to be used in a treatment group. This drastic reduction in market size significantly decreases the risk of lost sales during testing.

2) Automated deployment for precision:

Fully automated testing platforms, like Lifesight, streamline the end-to-end process. Automated deployment via APIs ensures precision in trafficking treatments to campaigns, reducing the likelihood of human error and providing early visibility into test performance.

3) Efficient reporting and analysis:

Automated reporting and analysis further contribute to efficiency. Brands can leverage sophisticated analytical practices with standardized visual formats, ensuring precise results and freeing up time for strategic decision-making.

Concluding it

Since we delved into everything of geo-testing–from design to execution to analysis, we wanted to also stress some takeaways that can lead to sustainable growth and performance.

  • Embrace change with confidence: Rather than being reactive, become proactive. Anticipate shifts and stay ahead of the curve.
  • Build a culture of learning: Foster a mindset where every test is a lesson, and each lesson contributes to a collective pool of knowledge.
  • Stay ahead in the competitive landscape: Consistently optimize your strategies. Ensure your brand is not just keeping pace but leading the charge.
  • Elevate customer experience: Tailor your strategies to evolving customer needs, providing an elevated and personalized experience that resonates.

As we end the geo-testing guide, we invite you to consider the impact of geo-testing on your marketing endeavors. Precision is not just a strategy; it's a journey, and with each geo experiment, you refine your path to excellence.

With that being said, you can take your first step towards geo-testing by requesting a personalized demo with Lifesight which offers fully automated geo-testing capabilities.

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