Retargeting company TellApart released a new case study entitled, “Can Retargeting Yield Incremental Revenue” with its client, Hayneedle. Download it here (PDF).
TellApart CEO Josh McFarland discussed the case study’s results as well as his company’s strategic focus around incremental gains through retargeting.
AdExchanger.com: It would seem that “incrementality” is core to TellApart’s offering. What does it mean for a conversion to be “incremental?”
JM: The simplest question a marketer uses to define incrementality is: If I turn off this marketing channel, what will happen to my total number of conversions? Or conversely, if I turn on this channel, how many new conversions will it yield? This litmus test applies as equally to keyword-based SEM as it does audience-based advertising. But with retargeting, the question is especially acute as marketers are becoming wise to the fact that these visitors are disproportionately likely to convert anyway. And it’s exactly the right question now, because many vendors have been pulling the view-through wool over clients’ eyes for too long.
In the absence of an effective cross-channel attribution model, is it possible for marketers to measure the “incrementality” of a particular marketing channel? If so, how?
A simultaneous A:B test fulfills this requirement of “turning off” the channel while accounting for variance in traffic patterns and audience composition. This is done by splitting users into two groups: control and experiment. The control group must view only placeholder ads (ex. public service announcements – PSAs), and then the conversion rate between the two groups can be compared. It is especially important that both groups be sampled only from the set of would-be retargeted users; marketers should not fall victim to the old trick of sampling control users from all visitors and comparing them to the cherry-picked retargeting users.
Yes, this method undercounts the upside of display’s positive impact on search and other multi-channel lift, but it at least answers the core question: how many new conversions were driven solely by the existence of this channel?
Are there use cases for when retargeting is/is not incremental? If so, please identify.
Retargeting can absolutely drive incremental conversions. One of the most common examples involves buyers who heavily comparison shop many retailers’ offerings. In that instance, a well crafted/placed retargeted ad can help “cut through the noise,” thus driving ad clicks that convert quickly. And these are conversions what would have otherwise been lost to a competitor.
Unfortunately, there is a dark side of retargeting too. Every day, hundreds of online retailers pay for (or are scammed by, depending on your POV) retargeting campaigns that take credit for sales that would have happened anyway. The primary culprit is the over-attribution of credit to view-through conversions.
In the past, you have been a vocal non-believer in view-through conversions for retargeting campaigns. In your opinion, is there any hope that a client can apply your ideas around “incrementality” to view-through conversions? And how does “incrementality” compare to click-through conversions?
Measuring view-through conversion lift through a careful A:B test can prove its validity as a metric, as I’ve stated before. What marketers have to be wary of is the over-attribution of credit. And a vendor should never, ever be allowed to combine retargeting and “prospecting” into a single line item; demand complete transparency, marketers!
The problem with using view-through conversions as a metric for gauging retargeting’s success is that those users are much more likely to convert anyway! A vendor need only get one cheap, below-the-fold ad impression in front of a user before they checkout in order to collect credit. This is why you see many retargeting vendors cookie-stuff their way through client sites and low quality inventory sources.
Even when the percentage of view-throughs that are paid for is negotiated downward, we continue to see them be dramatically over-attributed. For example, in our recent study for one of the world’s largest retailers (see: “Can Retargeting drive incremental sales?”) we saw a 24% lift in conversion rate with TellApart Transactional Retargeting… of which view-throughs comprised only 2%.
This wouldn’t be such a an issue if retailers paid for just one view-based conversion for every 10 click-based conversions. But the ratio is often inverted! This is one reason why a strict click-based vendor like TellApart can provide a 10x ROI improvement while driving far more incremental conversions than a retargeting 1.0 vendor.
So what is the target market for TellApart today in terms of clients – is it ANY eCommerce retailer? Where are you seeing strength today?
We are focused on working with large (>$50M) data-driven online retailers, focusing first on the smartest direct-response marketers. As these retailers learn of the tremendous volume and ROI that can be generated from retargeting done well, we have seen strength in our new model: we’re compensated only via a click-to-conversion share of revenue.
By John Ebbert
