Is Personalization Worth the Cost?

As more marketers embrace behavioral targeting, critics have questioned whether it really pays off. Behavioral targeting can be highly effective when implemented as part of a larger plan and when directed in pursuit of achieving specific marketing goals, answers, Rachel Curasi, Director of Media , R2integrated.

Personalized marketing is everywhere. Today, 89% of digital businesses are investing in personalization, according to ForresterOpens a new window , including leading brands like Netflix, Sephora and Wells Fargo. This is often done through behavioral targeting, in which marketers use data about customers’ online behavior to serve them personalized ads. Personalization aims to deliver the right, relevant message to the right customer at the right time. It’s no longer a “nice to have” — it’s a must, and consumers expect it. College students don’t want to see ads geared towards families with young kids or retirees, and vice versa.  

The benefits of behavioral targeting have been treated by the marketing community as a given, but a recent Wall Street Journal articleOpens a new window challenged that narrative. The article covered a study conducted by academics at the University of Minnesota, University of California, Irvine and Carnegie Mellon University who found publishers only get about 4% more revenue for an ad impression that has a cookie enabled than for one that doesn’t. Given that a previous study from 2009 found advertisers were willing to pay 2.68 times more for a behaviorally targeted ad, the article suggests that this strategy was not paying off for publishers. Marketers were throwing money into a technique that was supposed to drive revenue, but instead took money away from other campaign initiatives.  

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While skepticism about behavioral targeting (or any marketing technique) is healthy, the article presents the issue in overly simplified terms. Personalized advertisements can be helpful in reaching prospective customers, but marketers should only implement them as part of a larger plan. Behavioral targeting is one of many ways to optimize a campaign. Relying on behavioral targeting alone, or only measuring the outcomes in terms of revenue, may yield underwhelming results, but that doesn’t mean it isn’t a valuable part of a marketer’s arsenal. 

Behavioral targeting is valuable because it allows marketers to go after people who are exuding behaviors that are relevant to the brand. There are a number of different ways to go about this. Marketers can bring in third-party data segments, build out lookalikes and look at search history. Ideally, the goal is to find people showing behaviors even before they need a particular product. For example, someone in the process of buying a house may soon be in need of an HVAC unit and a pregnant woman will soon need baby gear. She may not purchase that gear until the baby is born, but that doesn’t mean the ads she was served during her pregnancy have no impact.   

However, marketers shouldn’t rely on behavioral targeting alone. It’s not a silver bullet. Contextual targeting, targeting customers based on their job title, or intent data can also be effective. The smart approach is to try out many different tactics and see what works and what doesn’t. What mix of tactics to use will vary significantly depending on the needs of the client. Every brand’s approach to user targeting is different and their audience may respond differently to different techniques. Marketers can’t go in with the exact same plan and just swap out the behaviors. If what worked well for one client doesn’t work well for another, move on to the next strategy. 

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Personalization should be used depending on the goals of the client. If brand awareness is the goal, then behavioral targeting is effective to grow this recognition. Generally, the more specific targeting, the more lead driven the goal. If marketers become too granular with their behavioral targeting and rely on it too heavily, it’s no surprise that ROI is so low. Getting too granular can cut a brand off from certain audiences it was not thinking about. At the end of the day, awareness drives conversion. An ad that is too hyper-targeted never gets to the point of going after a larger relevant group of behavior. 

Marketers should explore how to layer in all of the targeting options, set them up and report on them carefully to understand how they are performing. This enables optimization towards the better performing tactics. Sometimes that tactic will be behavior, and other times it won’t be, but that doesn’t mean behavioral targeting is intrinsically ineffective. This is why reporting is so key. Marketers have to understand how a campaign is performing and adapt accordingly.  

The study cited in the Wall Street Journal specifically looked at revenue, but that’s not always the direct goal or outcome with behavioral targeting. There is a full funnel of KPIs to focus on — upper funnel, awareness metrics, impressions, views and click-through rates. It boils down to engagement. How are customers engaging with site or with an ad? And next, it focuses on conversion, leads and, ultimately, revenue. Analytics and tracking are essential to understanding what’s successful.  

There’s so much that goes into an effective campaign, beyond targeting techniques. Research beforehand, to understand the journeys and the personas, sets the direction for a campaign. Creative copy and messaging is huge. And the landing pages an ad is driving to need to be relevant to each individual behavior. If you send personalized ads, but the landing page doesn’t reflect that ad, there’s a disconnect.  

Behavioral targeting isn’t going away anytime soon, but it will change as the industry changes. Marketers must stay on top of reporting, to make sure they’re serving their clients in the best way possible. Personalization still might be worth the cost for specific brands. The healthy dose of skepticism is understandable, but brands should write off the strategy with one report. 

 

About Rachel Curasi