Okay, so it’s a mouthful. But all of my previous posts which have distinguished customer re-targeting from behavioral targeting, redefined BT as event-based targeting and attempted to diffuse the FTC complaint have led to this. I am going to describe the workflow that puts first party ad serving, customer re-targeting and direct response online advertising into practice. Re-targeting generates recurring revenue, decreases the CPA of online advertising campaigns and demonstrates significant reasons for increasing the online advertising spend by allocating direct marketing budgets to re-targeting initiatives.
The first step happens outside the realm of the online advertising campaign. It takes place before the planning or strategy sessions or even before the budget is set. The first step is first-party cookie writing. As I described in my last post, How Does Re-Targeting Work? an advertiser has to segment its existing audience and set cookies to distinguish users for the re-targeting process.
This sounds complicated but most often it is already done. A retailer like an LL Bean will have already done this. It knows who its customers are and has modeled them out by various types. Amazon.com has you pegged by preferences. Yahoo has you cookied if you maintain your stock portfolio on their web site so that they can recognize you when you return. Forget about Microsoft! Your bank does it too. Pretty much anyone that you interact with online, with whom you have identified yourself, sets a cookie to further classify you. Classification helps a site recognize you when you return so you don’t have to login, they pre-populate the user field, they dynamically serve content to you that is more suitable to your preferences, they optimize your experience so that your time is not wasted. Are being tracked? Yes but it is not invasive.
But there are other reasons to set first party cookies as well. If you are going through a multi-step registration or application process, a first-party cookie can be set at each stage to indicate how far you have gone in the process. That way if you leave, and later return, you can be ear-marked and taken back to where you left off.
So the first-party cookie writing process has to be in effect and, depending on the universe to be targeted, the cookie must be propagated out on to the Internet so that it may be effectively recognized through the re-targeting campaign. This is usually about a 30-day lead time on the ad campaign.
The traditional media planning process has to be conducted. Sites have to be selected, negotiated and buys need to be made. That’s all good.
Then there is the strategic media planning portion. Unlike with traditional online advertising – and/or Direct Response online advertising – it is no longer just about prospecting, branding, messaging and generating leads and opportunities. Re-targeting introduces an order of magnitude of complexity to the planning process because you have to think about messaging to existing customers in addition to the traditional planning you do involving prospecting.
Think for a minute about a three-month campaign that involves 10 core sites. You renew on each site each month because those sites consistently perform well. Popular sites get repeat visits. Therefore if a site consistently generates strong leads for you, your previously acquired leads are also returning to those sites. But while you are continuing to advertise there you are paying to re-prospect your previously acquired leads at the same time. A portion of your message is falling on deaf ears. Existing customers, previously acquired leads that bailed on you and people that have seen all of your ads and have never responded continue to see your ads over time. You pay to continue to re-prospect them. What is the composition of that audience? The longer you advertise there, the higher it gets. Maybe its starts off at 5% but it grows and could become 25% or higher over a few short months.
So with re-targeting you now have the opportunity to say something to your previously acquired leads, your customers and any audience that you can identify.
For the sake of an example, and as we usually do with most of our DirectServe clients at TruEffect when they first start working with re-targeting, let’s just say that you create three segment types of a known audience for re-targeting.
- Frequent shopper (weekly)
- Moderate shopper (monthly)
- One-time shopper
So in addition to the campaign planning that will take place for acquiring new leads, which may have a number of messaging strategies and associated creative, we now must also do the same for each of these three audiences. Multiple messages and creative must be planned and tested for optimization throughout the campaign to maximize response.
When the campaign is finally setup there will be four simultaneous campaigns going on across the same set of inventory. The three segment types listed above, plus the prospecting type for unknown users who are not already carrying the advertiser’s first party cookie. If you decide to use behavioral targeting to pinpoint events to drive more specific prospects you may have additional campaigns as well.
What will you see when you execute on a campaign with re-targeting?
(1) Audience composition
First of all, and for the first time, you will be able to measure the percent of your advertising audience composition. You will now know who of the people that you are showing banners to are existing customers and who are prospects. Not only that, but you will know what kinds of customers they are. Ads will be displayed according to the cookies that exist. So cookie type #1 (Frequency Shopper) will see creative group #1 (Targeting Frequent Shoppers) and so on. And your impression reports will tell you not only how many times each banner was played but based on banner plays, what percent of your advertising audience is comprised of each type of person. Overall, what percent of your advertising audience is comprised of existing customers vs. non-customers across every web site and network that you advertise on will become clear.
This is very compelling information as the longer you advertise, audience composition may become a factor that impacts your media buying decisions.
(2) Re-target vs. Non-Re-Target Click-thru Rate
You will be able to distinguish the click-thru rate results of each customer segment type as well as prospect types. What you will find is that like with your traditional online advertising campaign, you will be able to optimize click-thrus over time. You will also be able to do the same with your re-targeting. At TruEffect, we have consistently found re-targeting tends to have an incrementally higher click-thru rate than prospecting response rates. If you think about this, it is pretty logical. You are messaging offers to existing customers to drive repeat business. It is a lot easier to get an existing customer to come back and do something than it is to get a new customer. So the click-thru rate comparison will be a strong indication of re-targeting success.
(3) Post-Click Results of Re-targeting vs. Non-Re-Target
Here is where things really matter. If the direct response campaign has a post-click success metric that is about generating a sale or action, then revenue is the success metric and the CPA is calculated based on that amount. Generating recurring revenue or generating new revenue hits the cash flow statement the same way. But when you can take your online advertising campaign and convert a portion of it into a customer penetration campaign you will please a lot of people in the marketing department at the advertiser.
Dollars spent re-prospecting a deaf audience will now go towards driving recurring opportunities, cross-promoting and up-selling products and bringing customers back to the transaction cycle. The CPA for the online advertising campaign will drop significantly because the revenue attainment of the campaign will go up incrementally.
Is it a lot of work? It takes brain power to figure out what you are going to say to three different customer segment types. It takes strategic thinking to come up with multiple messaging strategies to motivate customers to re-transact. But marketers do this everyday. Direct Marketing is a huge initiative. And the internet is already a massive DM medium. Re-targeting introduces DM to online advertising and offers the opportunity to expand campaign budgets exponentially. Think about that as an agency. If you can prove to an advertiser that you can drive recurring revenue, you can demonstrate that you should have a greater share of the direct marketing budget!
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