How Retargeting Can HURT Sales
Advertising money can be wasted, but can it ever actually hurt your sales?
Yes! Particularly if you have the wrong attribution management system in place.
Let’s take the case of re-targeting. At SMX this past week I heard one agency rep say Google re-targeting generated a 7 to 1 ROAS for his clients. He was asked what sort of controls he was using to determine the incremental lift and he said: “er, uh, none.”
I’m willing to wager that re-targeting actually reduces sales for this company.
How could that be?!?
Simple: Some fraction of buyers will place an order on the first visit to an advertiser’s site. Some fraction will leave and come back later. If all the people who leave before buying are shown re-targeting ads, re-targeting will get credit for a big slug of orders that would have happened anyway in addition to orders legitimately inspired by re-targeting.
Herein lies the rub: if all of the credit for those orders is given to re-targeting efforts then credit must also be taken away from the channel that drove the initial visit. If those driver channels are being run to efficiency metrics, then the ads that drove the orders will effectively be bid down as they are perceived to be less valuable. That, in turn, leads to less of the high quality traffic that re-targeting served to cannibalize.
By stealing credit from what actually drives incremental business, re-targeting poorly measured can actually lead to fewer total sales.
We see similar impacts with other touches that tend towards cannibalism: affiliates, email, brand search (paid and organic) and sometimes Comparison Shopping Engines. Clients that credit paid search only when it’s the last touch end up shrinking their online sales as a result.
In one dramatic case, moving from same session only credit to smart credit attribution led to doubling the size of an already huge paid search program, and that had a corresponding positive impact on the more cannibalistic channels. The rising tide lifts all the boats.
Re-targeting can and should be tested. Showing 10% of the traffic a public service announcement ad will give a clear sense of the true lift created by re-targeting ads. Correctly handling fractional order allocation will give the right credit to each program preventing the advertiser from overspending on re-targeting and underspending on the marketing channels that drive the visitors that re-targeting feeds upon.
As online marketing becomes more convoluted, having smart systems in place to address attribution becomes more important.