In 1859, marketing introduced the rule of six, which defined the number of times a consumer needed to see an ad before purchasing the product. The movie industry eventually increased the rule to seven in the 1930s after finding it took people that many ad views before buying a ticket for a film.
With the modern advent of online media, and the subsequent inundation of advertising on computer and phone screens, consumers are increasingly becoming numb to ads.
Whether it takes one, or six, or seven ad views before a purchase today, the retargeting of prospective consumers remains a very effective growth marketing strategy. It has changed significantly over the last few years, which has compelled other marketing strategies to also shift.
I’ll be covering how retargeting has shifted over the last few years, budget allocations for retargeting, and how to think about messaging and segmentation for these campaigns.
One of the largest changes in performance marketing over the last two years has been with the introduction of Apple’s iOS14. This operating system has obfuscated the flow of conversion data that paid channels once received and thrived on to inform ad targeting. In turn, this has made retargeting more challenging for those iOS14 device owners who haven’t consented to sharing their device’s data – roughly 74% of users as of April 2022 (Flurry).
Fundamentally, this means growth marketers will now have to do more with less. A few tactics to consider include:
With this iOS14 data loss, one shining light remains that about ¼ of users can still be targeted, as well as all Android and web users. To further mitigate some of the lost data, startups can look at leveraging web to app flows. Instead of sending users directly to the App Store, they can first be sent to a website that prompts them to enter their signup prior to receiving an app download link. If such a prompt adds too much friction, the same signup email data that’s entered in-app can be sent to paid channels, such as Facebook, who can then match their users for targeting by the email. Another useful tactic is to retarget upper funnel actions such as ad interactions, specifically clicks.
There are a series of tactics a startup can take to implement to help mitigate iOS14 changes, and the point of this section has been to simply say that retargeting isn’t dead.
How should one go about allocating a budget for retargeting? This will depend on the audience pool that you intend to retarget. I have personally seen several small startups not needing to set stringent budget caps as their target audience wasn’t large enough to exhaust a budget.
Here’s a simple exercise to understand if retargeting is working for you:
To put this in practice, below are two examples of when it makes sense to continue increasing retargeting budget (example A) and one where it doesn’t make sense to continue running retargeting (example B).
In example A, the CAC to get a purchase is $100 with a new paid acquisition campaign. When introducing a retargeting campaign for people who sign up, but don’t purchase, the CAC is only an incremental $15 to push users from sign up to purchase. Ultimately this means that the total purchase CAC when leveraging retargeting is $65 for that audience pool. Example B is an example of when to stop retargeting as the incremental cost to get someone from sign up to purchase is $75, making the total CAC for retargeting campaigns $125.
Think about the last time you expressed interest in a product online, and all the additional communication you received after you didn’t complete the purchase. The messaging was probably strikingly different.
What’s most important with retargeting is that the pitch is not the same as the person’s first encounter (or touchpoint) with your startup. In contrast, it should vary with new content such as promotions, testimonials, or providing additional context. These styles solve for two of the most common objections when it comes to purchasing: price and social validity.
For example, take a look at how major brands have retargeted you via emails, push, and advertisements after you expressed interest in a particular product. The brand has already done the research on what type of content resonates best when retargeting, so be sure to leverage new inspiration from their efforts.
During my tenure at Uber, while I was responsible for the growth of rider acquisition, it became clear that the level of precision with our retargeting campaigns needed improvement. The largest differences in performance came with how we segmented our retargeting buckets. We spent several fiscal quarters running various tests solely to perfect our user bucketing. Do we couple paid acquisition retargeting with email-only on cold segments? Do we retarget users who recently ordered food but hadn’t taken a ride in X amount of time? These were just a few questions that we set out to uncover, but I bring up this experience as an example of the way that thinking about breaking out audiences can yield better performance.
One of the foundational strategies we employed was segmenting buckets by how recent users had lapsed into three tiers (cold, warm, hot). To break this down further, each tier was segmented by three specific time series (i.e., 180 days, 90 days, etc.).
While recency was one facet to our segmenting at Uber, there were various other segments that made up our retargeting strategy.
When thinking about retargeting, put yourself in the shoes of your potential customers. What questions will they have? What will push them over the edge to complete your north-star metric? Utilizing this mindset, you can organically develop the strategies that will best fit your startup’s marketing needs.
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