Should you use dynamic retargeting to boost your online conversion?

Should you use dynamic (or personalized) retargeting to boost conversion rates?

Scientific research suggests you should, but only when consumers have a clear product preference and are actively engaged with the product!

Dynamic retargeting refers to using browser data from a previous visit to a brand’s webpage, to construct personalized recommendations on other websites (i.e. behavioral retargeting). In other words, it combines two popular techniques: using internal browsing data to retarget consumers when they return to the website (6x more effective than standard banners, claim made by Criteo), and using external browsing data to target consumers who recently visited a website for a particular product (4x more effective compared to standard banners, claim made by Criteo). For example, suppose you visit an online travel agency who uses dynamic retargeting, and you search for a weekend trip to Barcelona. Using internal browsing data means that when you return to the online travel agency, it will mainly display trips to Barcelona. Using external browsing data means that when you visit an unrelated website which displays adds, the ads shown will be trips to Barcelona from that online travel agency.

At face-value this makes sense, greater specificity of marketing efforts increases relevance and subsequently influences consumers responses. For example, when I intend to book a weekend trip to Barcelona, ads showing me trips to Barcelona are very relevant to me. Chances are I might click on these displays and subsequently book a trip. However, lately it seems that more and more people find dynamic retargeting (DR) annoying (note: based on personal communications, not on scientific research), and actually started questioning the added value of DR.

Here are five commonly expressed arguments why people think dynamic retargeting might not work:

  1. Using DR may lead to overexposure. It simply becomes annoying, and feelings of annoyance may become associated with a brand employing DR. This in turn may lead to a less favorable attitude towards that brand, und thus less spending on that brand.
  2. Using DR may lead to targeting consumers too late. It is difficult to determine using previous browsing data whether the product has already been bought or not. Thus, intentions to buy may not always be aligned with the presentation of the online ad display.
  3. Using DR may lead to targeting the wrong consumer. It is difficult to accurately retarget the appropriate product to the appropriate consumer using browsing data. Consumers may use different computers, may use different browsers, or one computer may have more than one user. You cannot perfectly predict who is using the computer and thus on what browsing data to use DR.
  4. Using DR may lead to displaying the wrong brand. Potential consumers may not use the correct product name or a less than optimal product to find what they are looking for. Using a primary search query for DR makes it less likely that the appropriate product is aligned with the consumers preferences.
  5. Using DR may lead to displaying the wrong product. Similar to argument 4, product preferences develop and change over time, especially when consumers are orientating on brands/products. Right now, a consumer might be looking for trips to Barcelona, but perhaps in two weeks time they prefer to go to Paris. DR ignores this shift in consumer preference and will still keep displaying ads about trips to Barcelona.

Now, let’s see what science says about dynamic retargeting.

Anja Lambrecht and Catherine Tucker conducted a research in which they tested whether DR (using specific queries such as a “trip to Barcelona”) results in higher conversion rates then retargeting with generic brand information ( specific online travel agency). Thus, they compared whether the retargeted message should consist of specific product information (trip to Barcelona with pictures of a hotel they looked at) against a message that just promoted a brand (e.g. ebookers.com). The data came from an online travel firm in the UK who used DR. The firm tracked consumers who visited their website. When these consumer subsequently visited an external website, they were randomly shown either a DR based message (showing a picture of a hotel they previously looked at) or a generic message (a generic brand ad). They tracked consumers for 21 days to see if they made a purchase. Note that consumers could receive a DTR message one day and a generic message the next day, but this was corrected for in the analyses. The authors measured the effectiveness of each type of message by correlating a conversion to the received message at the day of conversion. Finally, they also tested whether visiting a review site increased effectiveness of DR (i.e. when consumers have a clear product preference) and whether browsing other travel related websites impact the effects of DR (i.e whether consumers are more engaged with the product).

What they found was surprising:

Using generic messages for retargeting lead to higher conversion rates than dynamic retargeting messages.

However…

the effectiveness of dynamic retargeting messages increased (but did not outperform generic messages) when consumers first visit a product review site (i.e. develop a clear product preference).

Moreover…

the effectiveness of DR further increased (and finally outperformed generic messages) when consumers both visited a review site (i.e. have a clear product preference), and were browsing other travel related websites (i.e. were more engaged with the product category).

Why? Well, after visiting a review site (like Tripadvisor) product preferences are more defined. Consumers know better what they want and thus DR messages are becoming more relevant to them than a generic message. Second, when consumers are browsing on other travel related websites they are more engaged with the product category (e.g. weekend trips) and are probably more ready to buy a product.

Thus, this research suggests that you should only use dynamic retargeting when your customers have well defined product preferences (for example by tracking whether they visited a review website) and are engaged with the product (by tracking whether they visited other product related websites). If either of these conditions is missing, using a generic brand message for retargeting leads to higher conversion rates.

If you want to know more about dynamic retargeting or online persuasion, contact me or have a look at what I can do for you.