How to Improve Upon Generic Cooperative Database Response Rates
February 2, 2015
5 Tips from the New Best Practices for Circulation Management
October 5, 2014
Measuring the Incremental Value of Catalog Mailings
March 28, 2015
Behavioral Targeted Ads are the New Breakthrough in Direct Marketing
July 4, 2014
Retargeting ads allows marketers to continue to show ads to consumers who have shown an interest in a catalog’s products by showing them messages as they browse other sites on the web. On average, 98% of a web site’s visitors leave without purchasing. Sending ads to the people who have visited your web site and left is proving to be a profitable way to convert these web site visitors into buyers.
What is retargeting? Retargeting finds your website visitors as they search across the internet and displays your banner ads to bring them back to your website to make a transaction. Bringing ready-to-buy consumers back to your website can be a profitable customer acquisition strategy.
How does retargeting work? When customers browse your website, the behavioral ad provider targets your customers with cookies. When these potential customers leave the site and visit other sites on the internet, the cookies allow the ad provider to find your lost prospects and target them with banner ads. The ads bring the shoppers back to your website to complete a transaction.
Why are these ads profitable? Because retargeting ads to customers that have already been to your site focuses on your prospects that are most ready to buy, they know you and have visited your site recently.
How do you measure the profitability of on line ads? The ads generate sales in two ways. The first and easiest to measure are direct click throughs where a customer sees the ad and clicks all the way through to a completed purchase. That sale is easy to attribute because there is a direct linkage between the ad and the sale. The second way the ads drive sales is when an ad is displayed and a customer makes a purchase but without a directly clicking from the ad all the way through to a completed purchase. With this second type of sale, the issue is what percentage of the sales should be attributed to the display ads versus the other marketing communications (catalog, e-mails, organic web traffic) that a customer has received during the same time period.
The economics are pretty straightforward. Most marketers need to bring in new customers at or above breakeven. Determining a cataloger’s breakeven cost is pretty straightforward.
Average Order: $200
Margin: 60% or $120
Variable Cost: 15% or $30
Total Margin & Variable 75% or $150
Breakeven cost per order 25% or $50
So if you can bring in an order with a behavioral ad costing $50 or less you’ve broken even.
These economics work for a click through order. What about for view based conversions, the other kind of order? Catalogers typically test the incremental sales they get from display ads by using A/B test panels. If testing shows that 25% of the orders come as a result of the display ads, then you can pay 25% of the $50 or $12.50 to acquire a customer based on a view based conversion.
How are conversions attributed? Behavioral targeted ads produce two types of sales, click-through and view-based conversions. However Google Analytics and nearly every other system do not track view-based conversions. Because it is difficult to link a view-based conversion back to the ads that were displayed, the issue of attribution is critical to accurate metrics. Some catalogers are content with simply guessing that 10% or 15% or the sales that come in from customers who have seen ads should be credited to the ads.
But marketers should simply test the impact of the ads by creating holdout panels and not serving ads to a portion of the potential customers and then measuring the difference in sales between the two groups. (Hint: most of the companies serving up ads will manage this testing process)
There are a stable of proven successful companies serving up BT ads including Dotomi, Fetchback, Criteo, Acerno and Affiniti (a part of DataLogix.) How do these companies distinguish themselves?
All companies start by placing cookies on potential customers. Some place cookies just on recent web traffic to your site. Some place cookies on your entire house file as well so you can reach your own customers even if they haven’t recently viewed your site. Some stretch even further and place cookies on your entire mail file of both house and prospect names.
Companies may put banner ads just on your home page or deeper into your conversion funnel.
Companies differentiate by the width and breadth of the ad networks where they buy ads. Some companies buy ads from all the ad networks and some purchase from a more limited number of ad networks or use only their own ad network to supply ad inventory.
Companies may charge CPA (cost per acquisition or cost per order), CPC (or how many viewers respond by clicking on an ad) or CPM (how many ads are served regardless of sales or click-through response.)
Some companies provide dynamic ads tailored to the individual consumer versus more static ads which are targeted toward everyone. The level of personalization ranges from single static banners for all viewers to banner offers personalized for each viewer to banner personalization featuring up to 10 product level recommendations per viewer. The banner creative can range form a single static creative to dynamically generated creative unique for each viewer generated in real time.
Some companies spend more time testing different ads, different placements inside a target web site; provide more analytics or visibility to the analytics.
Most companies have a minimum threshold of unique visitors per month to your website and for some companies the minimum number of unique visitors is higher.
Some programs scale nicely and can grow to become a substantial percentage of your total sales. Some programs plateau and don’t grow once they reach maturity after several months. Everyone says they can scale sales. Ask for references form other catalogers who can discuss how programs continued to grow with your business.
The cooperative databases provide data about which consumers are actively buying and are able to focus on sending ads to consumers who are in the market for a particular category of product. Datalogix is the parent company of the Next Action database and Acerno who evolved out of the I Behavior database use underlying cooperative database information about consumer buying to drive their efficient purchase of BT ads. Using cooperative database information to find consumers is such a powerful set of data that companies who use this data clearly have an advantage in serving up cost effective ads.
An important issue is measuring the impact of ads and identifying the incrementality.
The best approach to attribution is to isolate the overall effect of personalized display ads by setting up a random control. Then the conversion rates of those receiving ads to those not receiving ads can be compared. Why is finding out the attribution % important? Because if the majority of the ads are view based, knowing what percentage of the revenue should be attributed to the ads is critical to knowing whether the ads or cost effective and to determine (if the ads are cost per order) how much should be paid.
Chad Little, CEO of Fetchback, summarizes the revolution that is happening.
“We propose a shift for on line marketers to put equal, if not more, focus on prospects who have previously visited your site, rather than on acquiring new prospects.” “Something widely overlooked is calculating what percentage of your site conversions come from prospects who visited your site at least once before. These conversions are called return conversions.” “Return conversion: a prospect visits your site without converting, but ultimately returns at some point to convert. Return conversions include new prospects who leave and return, as well as existing customers who return and purchase again.”
Getting these lost prospects back to your site to convert is the heart of the algorithm for most behavioral targeted ad programs.