"Data Driven Thinking" is written by members of the media community and contains fresh ideas on the digital revolution in media.
Today’s column is written by Andrew Shebbeare, founding partner and global chief strategist at Essence.
I’ve warned before that digital marketers spend too much time chasing conversions that were likely to happen on their own, at the expense of generating truly new business.
Now let’s put a spotlight on the most extreme example: retargeting. It is one of our industry's most overvalued and under-optimized tactics. I’ve measured anywhere from 20% to 75% of retargeting spend to be going to waste.
At its best, first-party segmentation, of which retargeting is one branch, can transform digital display, turning advertising into conversation. This is the beginning of a new level of personal relevance and contextualization in media. At its worst, however, the same technology creates a zero-sum game where audiences are hammered with repetitive ads desperately trying to intercept a purchase and earn some credit for something that was going to happen anyway.
1. Understand What’s Really Incremental
I recommend using marketing experiments to verify that retargeting is genuinely adding conversions that wouldn’t have happened otherwise, or is at least accelerating conversions that would have taken longer to materialize. Some insight may come from a sophisticated attribution model, but the best read will come from a dedicated experiment.
Make sure your experiment is persistent and delivers sufficient samples to get the read you want with a statistical power and significance you are prepared to accept. It should also be media addressable and deliver granular reads that can be sliced and diced for different types and combinations of exposure.
Once this is done, you can measure the conversion rate of the control and exposed populations and attribute the difference to your retargeting. Compare this aggregate result to the total conversions you currently credit to retargeting for an interesting starting point and overall feel for the true value of your retargeting campaigns.
2. Timebox And Know When To Quit
To get from interesting to actionable, cut the results from the analysis above by recency. The value of retargeting will vary depending on the amount of time elapsed between the action used to retarget and time the retargeting ad is served.
For most online retailers, conversion likelihood decreases over time after an initial indication of intent. The more recently someone came to your store, the more likely they will still want what you sell. But the most recent aren’t always the best candidates for retargeting; you should optimize retargeting based on incremental conversion propensity, not absolute purchase likelihood.
Some brands are wise to hold cookies out for a few hours before setting their ads on them. For others, the time window is shorter and you need to get right in there or miss the boat. For any product, there comes a point where it is too late. When conversion likelihoods taper off to the same level for both groups, it’s time to stop.
3. Cut It The Other Way
Recency is just the beginning. Your incrementality experiment will tell you which retargeting events and audiences are worth pursuing and which aren’t. Lapsed customers, periodic renewers, browsers, toe-dippers, window-lickers, brand loyalists and comparison shoppers might all have different optimal treatments. Slice and dice the results to find the important axes and plan campaigns and investment accordingly. Since conversion rates among these populations are high, you should get more granular reads than you’d expect from incrementality experiments you might run for prospecting efforts.
4. Be Interesting
Since retargeting looks so good on the surface, the creative for these campaigns often gets neglected on the assumption that it is doing a great job already. In reality, this should be one of the areas you work hardest to deliver messaging that tips the balance. These audiences know who you are; it’s time to tell them something they don’t know. Talk about a product feature they didn’t read about last time they visited your site, give them a special offer, tell them a joke, whatever. Be interesting. Content is more important than concept here. That cool brand message has played its part already; you are moving into CRM mode.
5. Choose One Platform, Carefully
You don’t want to bombard your customers from all sides or compete with yourself in RTB auctions. So pick one platform for retargeting for one set of frequency caps and one set of auction bids.
Make sure the platform has huge reach and capping that is appropriate and under your control. It should access all important inventory sources, support the right brand protection tools and you should trust it/them with your data. Make sure you have the right level of creative control, whether natively or through third party adserving.
Don’t unwittingly retarget through other media buys. You probably have some third-party tags in your site, so be aware that unscrupulous ad networks could exploit these to retarget without your knowledge, perhaps through black box “lookalike” media. Make sure you know exactly where your data is going. Lock in contractual protection for your most precious asset.
6. Beware “Pay For Performance”
I am skeptical about performance-based retargeting. Paying a third party on a CPA basis is tantamount to giving them your customer data and seeing what they can squeeze out of it. The margin a retargeter makes using your data is margin you could have held onto.
There’s also the impossibility of creating a model that aligns incentives. Attribution models are too easy to game. We know that brand exposure can play a big part in the effectiveness of retargeting, so a click-based deal misses a chunk of the point. Yet include any measure of post-impression credit and it is in the retargeter’s interest to cookie-bomb the world. If they buy below the fold and set the frequency cap at one per user, they’ve just taxed every sale you ever make online.
If you must work on a CPA basis, define strict rules around all the areas mentioned above. Don’t assume that a CPA buy will look after itself. If anything, it needs more supervision. Test periodically for incrementality to make sure the extra sales are real.
7. Do It Yourself
It’s much easier to get control of all of the above if you take matters into your own hands, or those of a trusted agency partner, by directly leveraging a DSP or self-serve ad network. This will make it much easier to deliver on all these safeguards and really understand what’s under the hood. You might need to layer in a good dynamic adserver that supports product feeds, decision trees, etc. If your audience segmentation needs are more advanced, add a good DMP that delivers flexible rules-based segmentation.
Specialist retargeting companies can add value for clients with really complex needs; they still have some of the most advanced and flexible audience management and dynamic creative capabilities, but getting the most value out of these arrangements requires real effort.
I usually steer clear of retargeting through standard ad network offerings because the value-add just isn’t there. I’ve seen many instances of retargeting acting to cross-subsidize underperforming broad network buys. This just muddies the water.
Ironically retargeting is often under-optimized because it looks so damn good on reports. It’s easy to max out retargeting, and for most advertisers it represents a small enough chunk of advertising spend that it gets lumped into “no-brainer strategies.” Don’t assume retargeting will look after itself, and don’t neglect it just because it looks good.