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Heavy Promotions During COVID-19 Pandemic Hurt Retargeting Ads

Heavy Promotions During COVID-19 Pandemic Hurt Retargeting Ads

This was originally published on Retail TouchPoints

These last few months have been challenging for retailers, but while brick-and-mortar stores have struggled, many e-Commerce merchants have benefitted from consumers staying home and shopping online. After an initial one- to two-week lull in mid- to late March, e-Commerce sales have shown strong year-over-year growth across a broad set of categories.

For some categories, like health and wellness, educational software and consumer packaged goods (CPG), COVID-19 has brought increased category demand. Other categories, such as fashion, have found consumers to be extremely responsive to promotions. Sitewide discounts of 50% or more have become common and very effective in driving revenue.

The net effect is that both site traffic and conversion rates have seen sustained increases compared with February and early March across all these categories. As overall site conversion rates have increased they have had an unintended side effect: retargeting ads, a staple of many marketing strategies, have become significantly less effective.

This extended period has given data scientists a unique and unprecedented opportunity to study the impact of increased site conversion rates and promotions on retargeting effectiveness. Typically, promotions are short-term events tied to specific days such as Black Friday, Cyber Monday or the Fourth of July. They might last a few days or even a couple weeks, but rarely have we seen sustained periods of promotions and increased demand across entire categories for eight to 10 weeks as we have since the onset of the COVID-19. The result is that we have a unique opportunity to explore their impact on retargeting programs to a higher degree of accuracy than would be possible during shorter promotional windows.

At Measured, a cross-channel attribution and incrementality measurement company, we studied the effectiveness of retargeting programs for 11 brands across fashion, health and wellness, educational software and CPG brands before, during and after the onset of COVID-19. Across brands, overall site conversion rates increased on average by 91 basis points for fashion and 37 points for all other categories, compared to pre-coronavirus periods in February and early March. All 11 brands maintained continuously active testing that withheld a randomly selected percentage of site visitors from receiving retargeting ads. We then compared the conversion rates of that control group with overall conversion rates for site visitors receiving retargeting ads.

In February and early March, conversion rates averaged 2.57%, compared to 2.02% in the control group. That results in an average lift of 27% directly attributable to retargeting programs. For mid-March through mid-June, the same group saw overall site conversion rates averaging 3.17% vs. 2.78% for the control group. The takeaway: since mid-March, the lift attributed to retargeting programs decreased to 14%.

While overall site conversion rates have increased, conversion rates in the control group have increased even more dramatically. The implication is that retargeting programs have been 43% less effective since the onset of the pandemic. Retargeting ads prevent conversion leakage, hence while site conversion rates are being driven sky-high due to promotions and increased demand, there is less leakage for retargeting to prevent. Marketers don’t need retargeting to bolster conversions when promotions and discounts are doing it for you.

We have previously found evidence to this effect, but the volume of data provided in the last eight to 10 weeks across numerous brands and industries has made an overwhelming case. Retargeting effectiveness is anti-correlated with your overall site conversion rate. When promotions, discounting or high demand increase site conversion rates, spend less on retargeting. Instead, take advantage of your compelling offer by reallocating budget to prospecting tactics that drive site traffic and maximize return on your marketing investment.

The last few months have produced upheaval for many brands and marketers, but those that rely on in-market experimentation to measure marketing effectiveness are finding opportunities within the chaos.

Nick Stoltz is the COO of Measured, an industry leader in cross-channel media incrementality measurement for portfolio investment decisions. He has spent the last 10 years working with brands across industries to build analytics programs that use data, measurement and insights to make decisions that drive incremental revenue and profit. He has worked with brands and budgets of all sizes across paid, earned and owned media channels, deploying media mix models, multi-touch attribution and experimental design. Stoltz earned an MBA from UCLA, a Ph.D. in materials engineering from University of California at Santa Barbara and bachelor’s in physics from Washington and Jefferson University.