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Retailers are finally wising up to their retargeting problem
 
This was originally published on DigitalCommerce360

Retargeting is an effective online marketing tactic, but attributing all sales to the last touch overstates the value of the tactic. When retailers test how much incremental value they get from retargeting they often cut back and direct marketing dollars to other channels.

Over the last few years, I’ve had daily conversations about media incrementality with retail marketers, and retargeting is consistently the No. 1 topic they want to discuss.

Retargeting has been a cornerstone for most online marketing strategies, and when a last-touch methodology is applied per platform it often looks dreamy. It can appear so efficient it leads to suspicions, and when logic is applied, most marketers arrive at the same conclusion: a last-touch retargeting metric is not a reliable metric for informing high-value investment decisions.

The critical question from an incrementality standpoint is how many of them were going to convert anyway?

Following the marketer’s logic, the prospect has been to my website, demonstrated awareness, interest and intent, and now I follow them to other devices across publishers until they convert—or not. The critical question from an incrementality standpoint is how many of them were going to convert anyway? If you assign 100% of the conversion credit to the last touch, the answer to how many would have converted anyway according to the platform would be zero, which we know isn’t right.

So what is the true contribution of this tactic? What is the true incremental marginal lift driven by the retargeting exposure? What is my true cost per acquisition as measured on an incremental basis? These are precisely the questions we seek to answer with our retargeting experiment.

We have deployed this experiment across many fast-growing e-commerce, direct-to-consumer and retail businesses over the last two years. What we continue to see is that lift ranges from negligible to 25-30% max and on average falls within 10-15% incremental. When correlated with your guiding business metrics, such as return on ad spend, that result can dramatically change where you decide to spend your marketing dollars.

Brands evaluate the efficacy of retargeting

Two years ago, more often than not we were helping brands dramatically right-size retargeting. More recently brands seem to have gotten wise to the role of retargeting and gotten smarter about where it fits the portfolio.

For example, subscription box company FabFitFun has relied heavily on retargeting for new customer acquisition. In early 2018, it started deploying incrementality testing to measure how retargeting was driving new subscriptions on an incremental basis. They discovered retargeting was 15-20% incremental and the large majority of new subs happened within the first three days.

These insights provided the intelligence to right-size retargeting spend and cut it by 81%, which resulted in a cost-per-acquisition efficiency gain of 57%. The company put that budget toward other prospecting tactics that brought in an incremental 8,400 new customers in the next 45 days.

Last year, women’s fashion retailer Soft Surroundings deployed incrementality testing for insight into the true incremental contribution of retargeting during the holiday time period. While they found retargeting was modestly incremental at 16%, it wasn’t attracting enough new customers to justify what they were spending on it. They cut their retargeting budget by 85% and observed zero effect on sales, saving the company $40,000 from its marketing budget in the first month.

In other cases, we help brand brands refine the composition of their partner mix. Do they need seven retargeting partners? No. We’ve helped brands cut their retargeting vendor list from six-plus vendors to two or three partners driving meaningful operational and media efficiency.

Getting retargeting right means getting clarity on:

  • Incrementality of the tactic and by platform.
  • The maturity curve: At what point have you captured 90% of the value? This informs a proper retargeting window. How long should you be retargeting consumers?
  • Frequency: What is the optimal frequency of retargeting exposures?

Looking across the portfolio of paid media, some tactics are more measurable with precision than others, and marketers have gotten a lot smarter about putting resources to what they can measure while eliminating outdated attribution models like last-touch. Applying incrementality measurement to retargeting is not easy, but every marketer should examine their retargeting programs because the payoffs are crystal clear.