Measuring the Impact of Behavioral Retargeting
An issue for many cross-channel retailers these days is measuring the impact of retargeted online ads. Retargeting your website traffic, particularly those who leave without making a purchase, with online ads is a profitable way to increase revenue. But you must understand the metrics first.
There are two kinds of responses that need to be measured when running retargeted ads: click-based conversions and view-based conversions.
Click-based conversions are pretty simple. A display ad is served to a consumer who's abandoned your website. A conversion occurs when a shopper clicks through the ad and makes a purchase. The online vendor then claims credit for the sale and is paid the bounty.
View-based conversions are when a consumer abandons your site, is served an online ad and later makes a purchase from you, but doesn’t directly click on the ad to make the transaction. That customer may have received many other marketing messages from you — ranging from catalogs to emails to other online ads — during the time that cookie is active. In this instance you pay an agreed upon attribution percentage for a view-based order, which ranges from 8 percent to 25 percent of all the view-based orders.
It's necessary to validate the attribution percentage over time using hold-out panels where the ads aren't served to 25 percent of the cookie pool, for example. Then measure your sales with and without the online ads. Identifying the appropriate attribution percentage is a big issue in getting the metrics correct and in managing your relationship with the online ad vendor.
You also need to measure the overlap percentage where two vendors are claiming the same sale. To claim a sale, a vendor has an actual order number. Measuring the overlap therefore is simply listing the orders that are claimed by two different ad vendors. Then calculate the percentage of overlap orders as a percentage of total online orders claimed by each online provider. Typically overlap orders range from 5 percent to 15 percent and aren't significant.
Online ads based on behavioral retargeting have proven profitable just on click-based conversions, so view-based conversions are an added bonus. If a vendor serves up few click-based conversions but many view-based conversions, that's a red flag — it may be claiming orders from customers that received a number of marketing messages. Watch very carefully your mix of click-based vs. view-based orders.
Measure the number of orders coming from existing customers and abandoned website visitors. Measure visitors who aren't customers and the number of orders that come from people who haven't visited your website but are flagged as prospects by your online ad provider.
The basic metrics for online ads are the number of click-based shoppers who place an order without leaving your site, the number of view-based customers and the attribution percentage. With those three metrics, you can determine if your behavioral retargeting program is profitable.
Behavioral retargeting ads are a new tool that cross-channel merchants need to know how to analyze and control. Converting those consumers who wander away from your website can be a profitable initiative that every merchant should be using to maximize sales.
Jim Coogan is president of Catalog Marketing Economics, a consulting firm focused on catalog circulation planning. Jim can be reached at (505) 986-9902 or jcoogan@earthlink.net.
