Persuasion Profiling: conversie-optimalisatie door overtuigingsprincipes?

Persuasion profiling: conversie-optimalisatie door overtuigingsprincipes?

Deze blog over persuasion profling verscheen eerder op www.emerce.nl

Persuasion profiling Bron: enterprisenation

Persuasion profiling is de nieuwe hype in onlinemarketingland. Het uitgangspunt is dat je klanten gevoelig zijn voor specifieke persuasion principes. Ik ben misschien gevoelig voor autoriteit, terwijl jij meer gevoelig bent voor schaarste. Het grote voordeel van persuasion profiling is dat je niet meer op groepsniveau target (iedereen krijgt het autoriteitsprincipe) maar juist op individueel niveau, ofwel ik krijg wat anders te zien dan jij. Wanneer je kunt voorspellen voor welk persuasief principe een specifieke bezoeker gevoelig is, verhoog je de kans op conversie.

Persuasion profiling lijkt dus een veelbelovende manier om het effect van conversie-optimalisatie inspanningen te maximaliseren. Maar is deze verwachting wel terecht? En moet je als organisatie ook direct starten met persuasion profiling? Ik denk van niet. Of meer genuanceerd, ik denk dat het effect van persuasion profiling afhankelijk is van vier factoren.

1. Behavioral stability.
Een belangrijke aanname van persuasion profiling is dat de mate van gevoeligheid voor een persuasion principe stabiel is over tijd. Recent onderzoek bevestigt dit inderdaad. Maar sociaal wetenschappelijk onderzoek laat ook zien dat persuasion principes verschillen per type gedrag en waarschijnlijk ook per type product. Wanneer iemand vandaag gevoelig is voor autoriteit, dan zal dat volgende week ook wel zo zijn. Maar wanneer ik door een autoriteitsclaim word overtuigd om me in te schrijven voor een nieuwsbrief, betekent dat dan ook dat ik door een autoriteitsclaim word overtuigd om een product te kopen?

Daar komt bij dat het doelgedrag ‘converteren’ vaak uit meerdere kleine gedragsstappen bestaat (bijvoorbeeld productselectie, klikken op button en gegevens invullen; ofwel de customer journey). Elke gedragsstap heeft specifieke determinanten (redenen om de stap te zetten). Je zult dus waarschijnlijk voor elke gedragsstap een andere persuasion techniek moeten inzetten. Het is dan ook erg belangrijk om van te voren goed in kaart te brengen welke persuasion technieken je wanneer in de customer journey moet inzetten.

2. Persuasion technieken.
Welke technieken ga je wanneer inzetten bij persuasion profiling? Cialdini’s principes zijn erg populair en worden vaak toegepast bij persuasion profiling. Er zijn echter veel meer persuasion principes. Bovendien, en naar mijn idee nog belangrijker, de mate van persuasiviteit van een principe is sterk afhankelijk van de manier waarop een principe wordt toegepast.

Neem het socialproof principe (het inzetten van sociale normen). Dit wordt vaak toegepast (‘velen gingen u dus voor’). Er bestaan meerdere vormen van socialproof:

  • injunctieve normen; “Jij vindt gezond eten toch ook belangrijk?”
  • descriptieve normen; ‘Veel mensen vinden gezond eten ook belangrijk.’

Onderzoek laat zien dat het voor de effectiviteit uitmaakt wélke techniek je op welke manier inzet bij welk gedrag. Sociale normen kun je bijvoorbeeld inzetten om mensen te overtuigen om een keuze te maken maar ook om mensen gerust te stellen nádat ze een keuze gemaakt hebben (self-efficacy verhogen). De manier waarop en de inhoud van de ‘sociale norm’ boodschap is dus afhankelijk van doel en type gedrag. Kortom, het succes van persuasion profiling hangt dus ook af van het correct gebruik en toepassing van de persuasion techniek.

Wheel of Persuasion

Bron: wheelofpersuasion

3. Context.
We onderschatten vaak het effect van de context wanneer we gedrag proberen te voorspellen en te verklaren. En de context waarbinnen mensen beslissingen nemen (emoties, het weer, frequentie bezoek, cognitive fluency van de site) spelen vaak een grotere rol dan we denken. Persuasion profiling houdt, voor zover ik kan zien, weinig rekening met deze context. Stel, een spaarbank heeft als doel mensen te overtuigen hun spaargeld over te zetten van hun eigen bank naar de spaarbank. Ze bieden een iets aantrekkelijkere rente (zeg twee procent ten opzichte van 1,8 procent bij een standaard grootbank). Je kunt hier persuasion profiling toepassen om mensen te verleiden om naar jou over te stappen. We weten echter dat de context (het rentepercentage) ook een belangrijke rol speelt. Naast persuasion profiling kun je hier ook targetten op bestaande klanten (die je wilt behouden) versus nieuwe klanten. Bij bestaande klanten maak je bijvoorbeeld ‘het gedoe’ van overstappen plus de geringe opbrengst van overstappen saillant. Voor nieuwe klanten maak je juist het renteverschil saillant (liefst per bank).

4. Digital maturity.
Is je organisatie al klaar voor persuasion profiling? Wij merken vaak dat eerst de basisprocessen van optimalisatie op orde gebracht moeten worden voordat je optimaal kunt profiteren van persuasion profiling. Denk aan standaardzaken zoals techniek (bijvoorbeeld databronnen koppelen), usability, webdata-analyse, klantonderzoek en A/B testen. Deze basisprocessen geven voeding aan het doel en de inhoud van persuasion profiling. Je leert dan namelijk waar in de klantdialoog je met persuasion profiling moet beginnen, welke technieken je waar moet gaan inzetten en wat de inhoud van de technieken moet zijn (welke sociale bron is bijvoorbeeld relevant?). Je kunt dus pas goed en effectief gaan profiteren wanneer je eerst de basisprocessen op orde hebt.

Online Dialogue Maturity ModelBron: onlinedialogue

Business case
Wat is dan uiteindelijk het additieve effect van persuasion profiling? Of, in termen van het voorspellen van gedrag: het doel is om gedrag (conversie) zo goed mogelijk te voorspellen aan de hand van persuasion principes/profiles. Maar hoeveel procent van de variantie in gedrag (conversie) wordt verklaard door het correct toepassen van een persuasion profiel? Dit hangt dus af van meerdere factoren. Factoren die niet alleen met de techniek zelf te maken hebben, maar vooral ook met de inhoudelijke toepassing van persuasion technieken.

Conclusie
Persuasion profiling kan een goede en effectieve methode zijn om online gedrag te beïnvloeden. Moet je nu ook direct hiermee starten? Mijn advies is: maak eerst een goede afweging of persuasion profiling echt iets is wat je nu moet toepassen. Neem de volgende aspecten mee in de afweging:

  • Beschikt je organisatie over genoeg kennis over het gedrag van je klant om te weten waar je profiling in moet zetten?
  • Beschikt je organisatie over genoeg kennis over het correct toepassen van persuasion  technieken?
  • Heb je als organisatie al voldoende geleerd over het effect van de context en hoe die toe te passen binnen targeting?
  • Is je organisatie al ‘digitaal volwassen genoeg’ voor persuasion profiling?

De kans op succes van persuasion profiling hangt namelijk sterk af van deze elementen. Ben je als organisatie inderdaad klaar voor persuasion profiling, betrek dan vooral professionals in het proces die veel inhoudelijke kennis hebben van persuasion technieken. En ja, dat laatste is inderdaad preken voor eigen parochie:-)

“Choice paradox”: Is less really more? (+ 5 online persuasion tips!)

Online persuasion using choice paradox

The paradox of choice, choice paradox, or choice paralysis are all names for the same and often cited online persuasion technique. It is also one of the techniques in the Wheel of Persuasion (still in beta, but who knows…  someday it will be released! [update: it has been released]) category “ratio & thoughts”. Simply said, when you offer too much choices to your customers (please choose from 206 available flights!), they will not make a decision at all. Most online marketeers therefore, recommend to their clients to stop giving so many choices to customers. But, is that the best advice you can give your clients? In this post, I will argue that there are 5  online persuasion strategies that you may want to try first to overcome the choice paradox, before advising your clients to reduce the number of choices.

We are more likely to choose when presented with fewer options to choose from  

Most people will be familiar with Barry Schwartz’s book (or most likely his TED Talk) on the paradox of choice. It is intuitively plausible to think that more choice is better. To some extent this is true. Autonomy of choice is good predictor of human well-being and happiness. For example, giving elderly people freedom of choice over how to take care of the plants achieved greater health and lived longer. However, researchers have discovered that providing too much choice leads to choice paralysis. People stop making decisions!

Jars of Jam

The classic study is as follows. Imagine a food store, with a food stall displaying jam jars. Customers were invited to taste a variety of jams. The food stall either displayed 6 jars or 24 jars of jam. Afterwards, they were invited to buy a jar of jam. Two interesting results emerged. First, displaying 24 jams attracted more customers to the food stall, supporting the idea that more choices attracts more customers (though they didn’t sample more jams). Second, displaying 24 jams lead to a significant decrease in sales (3% purchased a jar, compared to 30% with 6 jars on display).

Less is more!

So, the obvious conclusion here is that when displaying your goods in your online shop, you should not give your customers too many choices. But how many is too many? A recent meta-analysis showed that the optimal range of choice falls between 2-5. Thus, you should not present your customers with more than 5 choices. However, in reality the optimal number depends on a number of factors (e.g. time available for decision, product involvement, readiness to buy, etc.). Nevertheless, the common advice is: do not give your customers too many choices.

Less is not always more!

Is less really more?

But is that really the best advice you can give your clients? Nope (says research). The actual number of choices leading to choice paralysis depends on a number of factors. For example, the context the decision maker is in (I need to buy now, or I have plenty time), or the nature of the product (simple versus complex products) all have influence on the maximum number of choices allowed before choice paralysis occurs. Also, it is not always practical to limit the number of product choices. For example, some products you might sell just requires you to make a number of choices (e.g., travel destinations). Need to display (too) many choices? Take these 5 online persuasion tips in mind!

5 online persuasion tips to overcome choice paralysis!

  1. Categories: present your choices in categories. This helps to simplify the decision and it prevents cognitive overload. Categories also prevents choices from appearing “almost identical”, thereby giving customers the feeling that they have something to choose from. So, in the “jars of jam” study, they could have overcome choice paralysis by presenting the jams in a variety of categories. Most travel sites categorize their selection into categories. The (paradoxal?) challenge is to decide (or better, test) how many categories to use.
  2. Complexity: try to simplify the choices. If you have many choices, try making them less complex. Less complexity reduces cognitive effort needed in choosing. This one is a little bit more difficult to achieve. It requires you make your products less difficult and thus more distinctive. So, avoid displaying 10 products which look more or less identical but differ on some small aspects. It will likely lead to choice paralysis.
  3. Adequate time: be sure to give your customers adequate time to consider the different options. Again, more time to choose reduces cognitive load which in turn aids decision making. So, when you display many items on a “limited time offer”, be sure to test the whether too little time decreases conversion. Limited time offers appeals to our sense of urgency. You must act now! But, when time is too limited, I can’t possibly make a decision so I most likely make no decision at all.
  4. Present an easier choice first: have your customers make a prior commitment to your product before selecting the various products. A prior commitment (a simple “yes or no” type question) simplifies the subsequent decisions on the various options. See for example how Dell does this the first time you enter their site. It asks a small question, but it serves as an important first commitment.
  5. High quality options: if the options in the set of choices are all high quality choices, than you decrease the chance that you make a bad choice. All products must have a certain level of quality (or be presented in such a way) that customers feel reassured that no matter what they choose, it will always be a good choice.

Less is more, more or less

In conclusion, less is more seems to be a valid presumption for online persuasion. However, this does not necessarily mean that you should always strive to avoid presenting more than 3-5 choices. But, when you do need to give more choices, be sure to implement the above 5 online persuasion techniques!

If you want to find out how this or other online persuasion techniques can be applied to your website, feel free to contact me.

ps. this paper was partly based on Grant & Schwartz 2011 paper.

Mapping for Online Persuasion Model

Mapping for Online Persuasion Model

Designing and implementing an online persuasion strategy can be difficult. One must decide on what strategy to use (what do you want to achieve as a company?), one must choose from a vast number of theoretical persuasion methods (e.g. Social Influence methods, Framing, etc.) and practical applications (building a brand community, using loss aversion to persuade consumers to buy now, using dynamic retargeting to make display adds more relevant, etc. ). It may not always be clear when to employ which method and what techniques. Furthermore, most methods and techniques may only work well under very specific conditions (see for example this post). To facilitate the development of effective online persuasion strategies, we developed the Mapping for Persuasion Framework.  This framework helps you to design and implement your online persuasive strategy to maximizing your online sales with fewer costs and better customer retention.

Mapping for Online Persuasion is a protocol that describes five steps in designing and implementing effective online persuasive communication strategies, based on scientific theories and evidence from behavioral and communication sciences. This approach differs from other approaches because it primary focusses on the behavioral aspect of online persuasion (i.e. it focusses on your customers behavior). Furthermore, it integrates methods and application from various disciplines (e..g psychology, behavioral economics, marketing, communication, design, etc.) and as such uses an holistic approach to designing online persuasion strategies. The Mapping for Online Persuasion Protocol is based on Intervention Mapping  protocol for Health Promotion programme development.

Step 1: Needs Assessment. The first step is to briefly review your current online persuasion goals (increase conversion for product x), and to analyze your marketing & communication strategy (branding, social media, etc.). The aim is to get a thorough understanding of your goals, of you and your company, and of your customers. Next, you must understand the reasons (called determinants) why your customers want to reach your goals (e.g. why do people want to buy your product x?). For example, customers must hold a positive attitude towards your product, have the necessary skills to buy and use it, perceive positive social norms, etc. The results of step 1 will be a set of online persuasion goals for your company and an overview of all the reasons your cutsomer may have to reach those goals. These goals and the associated reasons will form the basis on which your online persuasion strategy will be build.

Step 2: Identify Behavioral Steps. These are the steps your customers have to take in order to achieve your online persuasion goals (from step 1). Remember, your customers’ behavior is central in the Mapping for Online Persuasion Protocol, so your “Performance Objectives” primarily refer to “behavioral steps”. A behavioral step is defined as an action your customer has to do in order to reach a specific goal. For example, one goal of your online persuasion strategy may be to have your customers subscribe to your weekly newsletter. Ask yourself “what do my customers have to do in order to subscribe to my newsletter?”. The answer to this question are your Performance Objectives (e.g. decide to want to the newsletter, locate subscription page, enter an e-mailadres, click on subscribe-button, etc.). The result of the second step is a set of Performance Objectives which will serve as input for selecting the appropriate persuasive methods and applications. Furthermore, these performance objectives also act as your Key Performance Indicators used to assess the succes of your online persuasion strategy (see step 5).

Step 3: Selecting Persuasive Methods and Applications. Based on your Performance Objectives, the relevant persuasive methods and applications will be selected. It is very important to align the various performance objectives with the most relevant persuasive methods. For example, the performance objective “customer completes newsletter subscription form” requires different persuasion methods (e.g. using set completion) and applications (e.g. add green mark next to each input line) than the performance objective “decide to put item in shopping cart” (e.g. loss aversion or price priming). Key here is to make sure you use the appropriate method and application for each specific behavior you want to influence, and check the conditions under which each technique works (or perhaps backfires).

Step 4: Design and Implement Online Persuasion Strategy. Bases on step 1 to 3, the online persuasion strategy will be designed. This means, the website will be altered in such a way that it covers all performance objectives using all the selected persuasive methods and techniques. In practice you will most likely build several versions of your website. These versions differ in that they use different persuasive applications (i.e. photo’s, content, coloring, etc.), and these different versions will be tested in step 5.

Step 5: Test and Adjust. The last step is to test the various online persuasion designs you created in step 4. Only when you measure your results you can be certain your persuasive campaign is effective. Testing involves using analytics data (e.g. Google Analytics) to analyze website traffic or bounce rates,  and A/B or Multivariate test to test conversion rates. Based on test results, the online persuasion strategy will be adjusted when necessary.

In conclusion, the Mapping for Online Persuasion Protocol can be used to build an online persuasion strategy, to design an optimal online sales campaign, and to test and review the online sales campaigns. Using the Mapping for Online Persuasion Protocol makes sure your online marketing and sales efforts are based on the latest scientific insights thereby optimizing your conversions!

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Cognitive biases and online persuasion

Recently, I started working on the Wheel of Persuasion by Bart Schutz. The Wheel of Persuasion is a tool that aims to provide a comprehensive overview of practical and proven persuasion techniques. Being part of the Online Persuasion Knowledge circle from Online Dialogue, I contribute a little by helping Bart translating our knowledge of cognitive biases into practical online persuasion strategies. I thought it would be useful to explain here what cognitive biases are, and to provide an example of how you can use this knowledge for online persuasion and conversion optimization.

Cognitive biases

Cognitive biases are “deviations in judgment that occur in particular situations that lead to perceptual distortions, inaccurate judgments, illogical interpretations and thus irrationality” (from Wikipedia). They occur because in most cases when people have to make a decision, they don’t spend much time thinking about their decision and just go with the option that seems most attractive or appealing to them. Nowadays, it is generally assumed that we humans have two “thinking systems”:

  1. System 1 which operates automatically and quickly, with little or no cognitive effort (i.e. is more intuitive).
  2. System 2 which relates to more effortful processing of information, whereby you think a lot about a problem (e.g. complex questions), and you generally use a lot of concentration to arrive at a decision.

System 1 and system 2 are both active (when we are awake). System 1 runs automatically dealing with most situations and system 2 runs in the background while using only a fraction of its capacity. Now, our system 1 generates suggestions for our system 2, suggestions such as impressions, beliefs, intuition, and feelings. When all things go well (which is most of the time), system 2 adopts these suggestions from our system 1. So, you generally rely on the suggestions (beliefs, feelings, impressions) from your system 1 and in most cases that works just fine for you. However, sometimes our system 1 runs into trouble and it can’t generate a proper suggestion. For example, when asked to compute 17×24  system 1 will call upon system 2 for help (i.e. system 2 directs more attention towards the problem, and more cognitive effort).  So, basically our system 2 becomes active when we see something unusual (say jumping lamps, flying cars, etc.). Perhaps you know the stroop tasks, where you are required to state the colors words are written in (e.g. blue red) This is difficult for us because our system 1 wants to say “red” “blue” whereas our system 2 wants to say “blue” “red”.

So, one of the main functions of your system 2 is to monitor and control thoughts and actions suggested by your system 1. However, it only becomes active when our system 1 runs into problems (i.e. doesn’t know the answer, or when something unusual happens that disrupts our system 1 thinking). Therefore, in most cases we rely on our fast, intuitive system 1 when making our every day decisions. Although this generally works very well for us, we are also prone to make some mistakes every now and again. These mistakes are referred to as “cognitive biases“.

A well-known example that nicely illustrates the workings of our system 1 and 2 (and that shows our vulnerability to cognitive biases) is the bat and the ball problem.

A bat and a ball together cost €1.10. The bat is €1 more expensive than the ball. How much does the ball costs?

Most people, when asked to quickly state an answer, will say €0.10 because they subtract the price of the bat (€1) from the total price (€1.10), leaving €0.10. However, the correct answer is €0.05 (do the math yourself). In other words, the fast, intuitive (and false) system 1 answer is €0.10, the more effortful (and correct) system 2 answer is €0.05. Another “famous” example is Müller-Lyer illusion. Two sets of arrows are presented and you are asked to state which one is longer, A or B. In fact, both arrows have the same length. However, the positioning of the “fins” creates an illusion of one being longer than the other (i.e. arrows with fins pointing inwards are seen as shorter than with fins pointing outwards; see for example here).

These examples illustrates that when we don’t spend a lot of effort in thinking about a problem, we rely on our system 1 to make a decision. €0.10  feels intuitively correct so we go for that answer, or the fins serve as a clue to which arrow is longer so we go for that arrow. However, when we spend more time thinking about the problem (when someone says €0.10 is incorrect or when someone states both arrows are of similar length) and we actually start calculating or measuring it, than we use our system 2 thinking and we (most likely) arrive at the correct answer.

Practical applications for conversion optimization

So, how can we use this knowledge to persuade your customers to buy your products? First of all, there are many different cognitive biases and each of them offers tools to persuade your customers to buy from you. The afore mentioned wheel of persuasion will contain many of the cognitive biases and will provide examples of how to utilize them for your online business. Second, I think the system 1 versus system 2 way of thinking provides a very useful framework to arrive at decisions on how to optimize your online persuasion goals. In other words, I think we as marketeers should focus more on system 1 decision making than on system 2. Remember, when your customers make decisions, they probably spend some time thinking about what they want to buy from you (effortful system 2 thinking). However, when they are in your online shop they have to make various other decisions related to the decision whether to buy or not (e.g. add extra items to shopping cart, cheaper or more expensive version of your product, what kind of delivery method to choose, where to focus attention on in the webshop, etc.). Thus, cognitive biases shows us that you have to make sure the shopping experience itself is as easy as possible for your customers (i.e. reduce the cognitive effort as much as possible). Finally, an easy shopping experience also means that you can facilitate decision making in such a way that your customers are more likely to buy the products you want them to buy. For example, some cognitive biases can influence how your customers perceive the prices of your product (e.g. we have a tendency to prefer middle options; we use the first price we see as a reference point for judgments of other prices). Knowing how to use these biases to influence price perception may result in your customers opting for a product with a bigger profit margin (e.g. offering your most expensive item first influences your customers decision what product to buy).

Below is a more general example (that refers to the more basic cognitive biases) that illustrates the potential for using cognitive biases to persuade your customers.

Credibility. Credibility of your online shop is an important aspect of online shopping experience so you have to make sure your persuasive message is perceived as credible as possible. Next to “just being credible” and trying to obtain various credibility certificates, you can also use some “cognitive tricks” that will make your customers believe that your persuasive message is more credible. For example, maximize contrast (our system 1 says that when something stands out, it is more credibility), use bright blue or red colors (our system 1 says these colors imply credibility), use simple language (our system 1 says that formulating familiar ideas in difficult language means low credibility), and put your message in a verse or rhyme (our system 1 says that when words rhyme they must be true). One remark about rhyming, marketeers have been using rhyme for a long time because they assume that rhymes are better remembered. Now you know that it not only leads to better memory for a brand, but also adds to its credibility because of the cognitive bias “rhyming signals trustworthiness”.

What do you think? Are you vulnerable to cognitive biases? And what kind of biases (or maybe “tricks”) do you use for your business?

For more information on cognitive biases, you may want to read Daniel Kahneman’s new book: Thinking, fast and slow. Also, sign up for the “wheel of persuasion”. If you want to know more about cognitive biases and how you can benefit from using them for your business, contact me at dirk [at] betterchange [dot] nl. Also, check out my other blog posts here or learn more about www.betterchange.nl

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.

The quest for social money! A conversion optimisation technique

More and more brands are creating an online social community and use this form of social proof as an optimisation technique. They do this either on social networks such as Facebook and Google+, or they crease their own social community. There has been a lot of interest in the Return on Investment from this optimisation technique by the (online)marketing community.

“Does spending money building an active online brand community lead to more customer expenditure?”

Scientific research by the University of Michigan (professor Puneet Manchanda et. al.) revealed multiple interesting findings. The bottom line: Yes, 19% more.

The logic of spending ‘social dollars’

Looking at the increase of online marketing budgets, or the many job offerings for online or social marketeers suggests companies realize there is a positive ROI on communities. Moreover, brands such as Ikea (IkeaFans) or Disney (MyDisney) used this optimisation technique and created their own online community and motivate its users to actively engage with each other, preferably about the brand. Conversations range from sharing experiences, reviewing new products, and recommendations and advice for usage.

The rationale behind the money spent on building a social brand community is simple. Customers, who actively engage with a brand in an online brand community, will be more loyal to that brand. Brand loyalty in turn, will lead to spending more money on that particular brand. This makes sense and seems very logical.

This consumer spending after engaging with a brand in a social community has been defined as social money: money spent by members of an active brand community on that particular brand. In other words, this social money can be directly attributed to the social behaviors that these costumers engage in with that particular brand. The 2 million-dollar questions are:

“Does having an active brand community lead to more brand loyalty?”

“And does this increased brand loyalty in turn lead to more social money?”

Time for science!

Quite some research has been conducted to study the link between engaging with your customers online and brand loyalty. There is also some evidence that brand loyalty leads to more spending on a brand that has an active social community. However, this research usually uses “intention to buy” as their dependent measure and we know that intention does ‘not always’ translates into actual behavior. Moreover, the direct link between engagement, brand loyalty and online spending has not yet been properly tested.

A good test of this hypothesis should make use of:

  • Two groups: an experimental group consisting of people who actively engage with a brand on a social network, and a control group consisting of similar people whom do not engage with that brand
  • A measure of actual shopping behavior instead of measuring buying intentions
  • Longer term data collection, to compare pre- and post engagement online shopping behavior

Puneet Manchanda, a marketing professor of the University of Michigan, and his colleagues did just that. They saw a perfect research opportunity when an online retailer decided to build an online social community. Using a quasi-experimental design, they were able to measure how much of the online shopping expenditure on that retailer could be attributed to its members actively engaging with the retailer’s in its online community.

And now for the results…

What they found was that social money account for about 19% of revenue once customers join an online community. That is a 19% increase in spending on that retailer after the launch of the social community. In case of this retailer, that meant an average added value of about €100 per customer per year (unfortunately, the authors were not allowed to disclose the total revenue per client to put this added value into more perspective). This rise in spending could be attributed to an increase in frequency of visits and not so much to an increase in shopping cart value or conversion rate. Thus, these customers came back more often and therefore bought more products.

So: Do setup a brand community (that is, when setting up and maintaining an online community costs you less than the profit you make over a 19% sales increase…)

This research suggests that – if you haven’t already – you should set up your own brand community and actively engage with your customers. Use your online community to create more brand loyalty. Science now proved that – purely financially – it pays off. In fact, the researchers commented that for a brand with a single product (such as Heineken or Douwe Egberts) the pay-offs might even be bigger. The retailer used an umbrella structure to sell many different products of various brands (books, office supplies, etc.) from different brands. Brand loyalty is likely to be even stronger and more persistent for firms marketing a single brand. And of course there are other benefits such as customer insights, product improvement suggestions et cetera.

Discussion

There are however some questions left to be answered. For example, does setting up an online brand community attract new customers? What should be the focus of a brand in its online community to strengthen brand loyalty? For example, a brand could focus on strengthening existing brand beliefs and attitudes, on active engagement with its community to find out more about their customers, on letting members co-create or review new products, or, most likely, a mixture off the above.

If you want to know more about brand communities or optimizing your conversion rate, contact me or have a look at what I can do for you!