When Does Retargeting Work? Information Specificity in Online Advertising
It is estimated that the average US citizen spends 5 hours and 46 minutes of his time online (eMarketer, 2014). Hence, it is no surprise that the business of online advertising is booming. With an increased intensity of individual browsing behaviour (for example, by tracking cookies), firms are now able to offer better personalized product recommendations than ever. The article of Lambrecht and Tucker (2013) is particularly interested in the effects of Retargeting. Although retargeting knows several different forms, the general overarching concept can be described as follows: a customer visits website A, but decides not to buy a product and then proceeds to leave the website. When he logs on to a different website – website B – he is now shown an advertisement of website A. These so-called external advertisements that run through ad networks provide firms the chance to target consumers even when they are not on their website.
Lambrecht and Tucker (2013) are specifically interested in the concepts dynamic and generic retargeting. Whereas dynamic retargeting shows the actual product you have been looking at (often together with three recommendations in the same price range) on an external website, generic retargeting only shows the image of the general brand or firm. Whereas personalized product recommendations on own websites have proven to be successful, little is known about dynamic and generic retargeting. Lambrecht and Tucker (2013 help to explain if dynamic retargeting is more successful and also when it is effective in converting customers to purchase.
By conducting a field test that ran for 21 days in which 77,937 individuals viewed both the firm website (in this case a travel website) as well as an external ad, the authors yielded a surprising result. In general generic retargeting proved to be MORE successful than dynamic retargeting(!). To explain this phenomenon the authors suggest that the effectiveness of an advertisement is dependent on how narrow the consumer has defined his or her preferences. They state that initially, consumers have only a broad idea what they want, whereas only after they define a detail viewpoint of what they actually want.
Scrutinizing browsing history, the authors manage to confirm this hypotheses. They find that dynamic targeting is indeed MORE effective when costumers have visited a review site (for example, Tripadvisor). In this case, the review site is an indicator that a consumer has narrowed down his or her preference. As a result, when a customer has gone to a review site, it will be more effective to target him or her with a dynamic retargeted ad.
Similarly, the authors also prove that browsing different websites in the same category is an indicator that a customer has narrowed down his or her preference. Again, it is proven that when a customer has shown particular interest in one category (across different websites), dynamic retargeting proves more successful.
Lambrecht and Tucker (2013) clearly show that using external websites is an important indicator on how to differentiate your retargeting. Initially, customers are more likely to react to generic retargeting; however, once customers define their product preferences over time, dynamic retargeting proves to be more successful. The multistage journey of a customer’s decision proves once more that advertising is not a one-size-fits-all concept.
Emarketer, 2014, Mobile Continues to Steal Share of US Adults’ Daily Time Spent with Media, 22 April, retrieved from: http://www.emarketer.com/Article/Mobile-Continues-Steal-Share-of-US-Adults-Daily-Time-Spent-with-Media/1010782#sthash.ubc17EDr.dpuf
Lambrecht, A. & Tucker, C. 2013, When Does Retargeting Work? Information Specificity in Online Advertising, Journal of Marketing Research, vol. L, 561-576.