We’ve all experienced them. Those annoying and often creepy ads that follow you around after you’ve searched for something online. There’s a reason they seem to be everywhere: they work pretty well.
While marketers are spending huge chunks of their digital ad budgets on retargeting, variables associated with timing, frequency and other parameters mean there’s no one-size-fits-all approach to employing them.
A case study reported recently by Aditi Malhotra in an Insights by Stanford Business article sheds some light on why retargeting is so popular – and so effective. Stanford Graduate School of Business marketing professors Navdeep Sahni and Sridhar Narayanan designed an experiment to measure the effectiveness of various retargeting campaigns on more than 230,000 visitors to BuildDirect.com, a Canada-based home-improvement products retailer. While BuildDirect uses multiple platforms for its retargeting campaigns, this study focused on its use of Google’s DoubleClick, which tracks users through a combination of cookies and Google user IDs.
The researchers created different categories of frequency caps, or the maximum number of retargeted ads each customer would see during the four-week experiment. Some customers saw zero ads over the entire period and some saw up to 15 per day, every day.
The first finding? Retargeting works. “Among users who exited the BuildDirect website after viewing a product page (as opposed to creating a shopping cart), the retargeted ad campaign increased their likelihood of returning to the site by nearly 15%,” Malhotra notes.
“Retargeted ads do affect consumer behavior,” the researchers write, along with co-author Kirthi Kalyanam, in their Journal of Marketing Research article (“An experimental investigation of the effects of retargeted advertising: the role of frequency and timing”) on the study. “A significant proportion of users, at both early and relatively advanced stages of purchase process, change their behavior because of the ads. This is consequential . . . because a returning consumer gives the marketplace another chance to sell its products and also gain revenues by showing relevant ads on its own website.”
The study is significant, according to Sahni and Narayanan, in that it’s the first to quantify the benefits of immediacy in retargeting ads. Ads shown to users in the first week after their visit to the website were more effective than those shown in later weeks, Malhotra writes. In fact, about one-third of the effect of the first week’s advertising occurred on the first day and half occurred in the first two days – which runs counter to the widespread assumption that retargeted ads serve mainly as “reminders” to potential shoppers and thus are less effective if they’re seen shortly after a site visit. “This is a relatively big deal since it goes against the canonical thinking,” Narayanan says in the Insights by Stanford Business article.
The study also showed that the ads can actually drive consumers back to the advertiser’s website even if they offer no new information beyond what a consumer gleaned from their initial visit. “This finding suggests that such ads can repeat known information and still be effective in increasing website engagement – especially for users who have created shopping carts, which is a sign that they have done significant research and thus already know a lot about the product,” Malhotra notes.
As an added bonus, retargeted ads also play a defensive role by making it harder for competitors’ ads to reach potential customers, especially in the days immediately after the site visit. “In a setting like ours, in which competitors also engage in aggressive retargeting, a consumer who leaves BuildDirect’s website is likely to be a target of a competitor’s ad campaign,” the researchers write. “Therefore, even if the ad does not provide the consumer with any new information, or remind her of information she may have forgotten, its exposure increases the chances of the consumer coming back to BuildDirect.”