Dynamic retargeting is a way in which companies can design advertisements for individual consumers based on the products these consumers’ have before viewed on the company’s website. But does it work? This research paper investigates and produces some surprising findings about consumer behaviour.
This article is provided by the Deloitte Institute of Innovation and Entrepreneurship.
Common marketing wisdom says that the more specific an advertisement is to an individual consumer, the better its chances of success. This research paper examines this claim with relation to the online technique of dynamic retargeting and produces some very surprising results.
"On average, messages with more specific information were less effective than generic messages in converting consumers"
Tailoring a company’s advertisements and offerings to the specific interests of individual consumers is widely considered to increase relevance and therefore improve consumer response. As a result, a great deal of attention has been focused on dynamic retargeting, an innovative new practice in online advertising that allows a company to target individual consumers’ apparent preferences.
Dynamic retargeting is a method by which a company can track individual consumers who have visited its website but not made a purchase and then retarget its ads on other websites to appeal to those specific consumers’ preferences as demonstrated by their earlier visits. The ads can be designed to highlight the specific products that the consumers have browsed on the company’s website but not purchased.
There has hitherto been little empirical evidence to support the notion that using such consumer-specific information in advertising is really more effective than using more generic content. This research paper by Anja Lambrecht, Assistant Professor of Marketing at London Business School, and Catherine Tucker, Associate Professor of Marketing at MIT Sloan School of Management, sets out to discover whether these methods really work.
At the core of the paper is data from an online field experiment conducted by a travel firm. In this experiment, the firm tracked consumers who visited its website and the specific hotel they looked at. Each time these consumers then visited websites created by other firms where the travel firm advertised, the travel firm randomly showed either an ad containing individually tailored product information or one containing generic information. This random variation allowed the researchers to identify whether high information specificity in ad content was more effective than generic messages in persuading customers to buy a travel product.
The results were surprising. The study found that, on average, messages with more specific information were less effective than generic messages in converting consumers, suggesting that on average, firms do not benefit from designing advertising messages that reflect a consumer’s specific interests. This finding goes against conventional wisdom and indicates that many companies are using innovative technology in an ineffective way.
Exploring the subject further, the authors examine why specific messages are often less effective than generic ones. Their investigation suggests that there are two main stages to a consumer's search for products. During the first stage, consumers often begin with only a general notion of what they want. During this part of their search, they learn about the available product options and their different attributes and about their own preferences.
The paper suggests that, in the initial stage, generic advertising is more effective than specific advertising as it appeals broadly to the consumer’s needs. At this point, consumers are not yet evaluating product alternatives in any detail and have little interest in detailed product messages.
Once consumers begin to fine-tune their searches, however, the effectiveness of generic advertising falls away sharply and specific ads become far more effective in converting consumers. At this point, dynamic retargeting can have a significant impact on consumer behaviour. The paper contains empirical results that illustrate that matching information specificity to a consumer’s product search is most effective when consumers are more heavily engaged in searching for detailed information.
These findings have significant implications for online marketing. The paper’s conclusion that dynamic retargeting is only effective in particular situations is a valuable insight for marketing professionals and opens the way for new innovative approaches to engaging with consumers online. This paper, using a significant body of empirical data and offering clear and practical conclusions, is a valuable resource for anybody interested in understanding online marketing and how it can be made to work most effectively.
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