By: Bharat Mahajan
Thanks to the digital revolution, and companies like, Amazon, Kayak and Trip Adviser, a vast majority of customers are using the Internet to research and purchase their goods. On the one hand, this has made customers’ shopping easy; on the other hand, the advancement in technology has given companies all kind of tools to gather data about their targeted consumers. Today, data is gathered through a company’s website, as well as other websites. As the data overflows, it is very important for marketers to understand and use it to have maximum impact.
Anja Lambrecht & Catheine Tucker, in their paper ‘When does Retargeting Work? Information Specificity in Online Advertising,’ discuss the marketing strategy of gathering consumers’ browsing data from a company’s website and using that data to show consumers personalized advertisements on external websites. This is also known as Dynamic Targeting. The general working principle of dynamic targeting is that when a consumer views a product on company’s website, the company sets a cookie on the consumer’s computer to collect data about consumer’s subsequent browsing behavior. If the consumer visits an external website where the company is advertising, the cookie would trigger an advertisement specific to that customer for the product he/she was browsing earlier.
Earlier work – by researchers like Hoffman, Novak, Criteo etc. – which is referenced in this paper, reports that the personalized retargeted ads are more effective than generic ads. However, Lambrecht & Tucker argue that the research so far could not determine if consumers are always receptive to these very specific advertisements, or if their response is based on their product related knowledge.
The field study conducted by Lambrecht and Tucker concentrated on a travel website, focused on beach vacations, and studied the effects of generic and dynamic retargeting. While the generic image showed a standard beach-type holiday, the dynamic retargeted ads displayed the hotel that was previously browsed by that custom on the firm’s website. Alongside, three similar hotels were recommended. The objective was to understand whether and when the data gathered from browsing history should be used for generating consumer specific advertisements.
The results showed that dynamic retargeting only worked when the consumers had a well-defined product preference and were actively researching the product. The generic advertisement got a better response when the consumer lacked well-defined product preference or if they were still evaluating the product alternatives, as it appealed broadly to their needs. To better understand whether or not the consumer had a well-defined product preference, Lambrecht and Tucker argued that if the consumer is reading the reviews the probability is high that he/she is actively researching the product (and, thus, dynamic retargeting might be a better option).
The research performed by Lambrecht and Tucker not only highlights the technological advances in consumer data collection that are available today but also emphasizes how that data can be stored, analyzed, and processed to get the best results. The results also show that the consumer data, if not used without better understanding the consumer, could cause ill effects on the targeted consumer, just like using dynamic retargeting without knowing if the consumer has a well-defined product preference, or not, could be detrimental to overall marketing efforts.
References: Anja Lambrecht and Catherine Tucker (2013) When Does Retargeting Work? Information Specificity in Online Advertising. Journal of Marketing Research: October 2013, Vol. 50, No. 5, pp. 561-576