What Is Retargeting?
Retargeting, also known as behavioral retargeting, is a digital marketing strategy that involves displaying advertisements to users who have previously interacted with a website or mobile application. This approach falls under the broader umbrella of marketing analytics and is a core component of digital advertising efforts. The primary goal of retargeting is to re-engage prospective customers who have shown interest in a product or service but did not complete a desired action, such as making a purchase or filling out a form. By presenting relevant ads across various online platforms, retargeting aims to guide users back to the advertiser's site, ultimately improving conversion rate and maximizing the return on investment (ROI) for marketing spending.
History and Origin
The concept of showing personalized advertisements based on past interactions became feasible with the advent of internet "cookies." These small text files were originally created in 1994 by Lou Montulli at Netscape Communications to enable features like virtual shopping carts on e-commerce websites.6 However, the advertising industry quickly recognized their potential for tracking user behavior. By 1995, companies like DoubleClick began utilizing cookies to manage and rotate banner advertisements, laying early groundwork for what would become targeted advertising.5 The evolution of web analytics tools and the increasing granularity of data collected from online interactions further refined this process, allowing advertisers to "follow" users across different websites and serve them highly relevant advertisements, eventually giving rise to the specialized tactic of retargeting.
Key Takeaways
- Retargeting delivers targeted advertisements to users who have previously visited a website or interacted with an online property.
- It is a strategic approach in digital advertising aimed at re-engaging interested prospects and moving them down the sales funnel.
- Retargeting campaigns often utilize tracking technologies like browser cookies or pixels to identify and segment audiences.
- Key benefits include increased conversion rates, improved brand recall, and potentially lower customer acquisition cost.
- Concerns regarding data privacy and user experience are common criticisms associated with retargeting practices.
Interpreting Retargeting
Retargeting is interpreted primarily through its effectiveness in driving desired consumer behavior and achieving specific marketing objectives. Success is often measured by key performance indicator metrics such as the increase in website revisits, completed purchases, or lead generation attributed to retargeted ads. Advertisers evaluate factors like the click-through rate (CTR) of retargeted ads, the post-click conversion rate, and the overall revenue generated from retargeted audiences. A high engagement rate with retargeted ads, especially after an initial site visit, suggests that the campaign is effectively reminding and persuading users. Conversely, low engagement or negative feedback might indicate excessive ad frequency or irrelevant messaging.
Hypothetical Example
Imagine "DiversiGadgets," an online retailer selling specialized electronics. A customer, Sarah, visits DiversiGadgets.com and browses a new smart thermostat but leaves the site without purchasing. Her visit is recorded by a tracking pixel. Later that day, as Sarah browses a news website, she sees an advertisement for the exact smart thermostat she viewed on DiversiGadgets.com. This ad, displaying the product image and a special offer, is a retargeting ad.
Sarah then visits a social media platform, where she sees another ad from DiversiGadgets, this time highlighting features of the smart thermostat and customer reviews. Intrigued by the persistent reminders and the offer, Sarah clicks on one of these retargeted ads, returns to DiversiGadgets.com, and completes the purchase. In this scenario, retargeting successfully re-engaged Sarah, converting her from a browser into a customer, directly impacting the e-commerce company's sales figures.
Practical Applications
Retargeting is widely applied across various sectors of investing, markets, and business strategy to influence consumer actions.
- E-commerce: Online retailers extensively use retargeting to remind shoppers of abandoned shopping carts or recently viewed products. This is a powerful tactic for recovering potentially lost sales and increasing order completion rates.
- Lead Generation: Businesses seeking to generate leads can retarget individuals who have visited their landing pages or content assets but haven't filled out a form. These ads might offer a whitepaper, webinar, or free trial to encourage conversion.
- Brand Awareness and Engagement: Beyond direct sales, retargeting helps maintain brand awareness by keeping a company's offerings top-of-mind. This is particularly useful in longer sales cycles or for building a strong brand presence. Academic research from Stanford Graduate School of Business has shown that retargeted advertisements can effectively influence consumer behavior, driving users back to a website even without new information, especially if the ads are displayed promptly after the initial visit.4
- Cross-selling and Upselling: Existing customers can be retargeted with ads for complementary products or premium versions of services they already use, boosting customer lifetime value.
- Event Promotion: Organizers can retarget individuals who visited event pages or expressed interest, reminding them to register or purchase tickets.
These applications demonstrate how retargeting serves as a versatile tool within a comprehensive marketing campaign.
Limitations and Criticisms
Despite its effectiveness, retargeting faces several limitations and criticisms, primarily concerning data privacy and user experience.
- Privacy Concerns: The core mechanism of retargeting relies on tracking user online behavior, often through third-party cookies. This practice raises significant privacy concerns, as users may feel their online activities are being monitored without their explicit consent. Regulations such as the General Data Protection Regulation (GDPR) in Europe3 and the California Consumer Privacy Act (CCPA) in the United States2 have been implemented to address these concerns, giving consumers more control over their personal data.
- Ad Fatigue and Annoyance: Over-exposure to the same retargeted ads can lead to "ad fatigue," where users become annoyed or actively ignore the advertisements. This can negatively impact brand perception rather than enhance it.
- Ad Blocker Adoption: The rise of ad-blocking software directly impacts retargeting campaigns, as these tools often prevent tracking pixels and cookies from functioning, thereby blocking retargeted ads from being displayed.
- Questionable Effectiveness for Publishers: While advertisers may pay a premium for behaviorally targeted ads, a study referenced by the Benton Institute for Broadband & Society suggests that publishers may only see a modest increase in revenue (around 4%) from ad impressions that are cookie-enabled, despite advertisers paying significantly more for such targeting.1 This raises questions about the equitable distribution of value in the ecosystem.
- Lack of Freshness: Retargeting can sometimes present outdated information if a user has already made a purchase or their interest has shifted, leading to irrelevant ad exposure.
Retargeting vs. Remarketing
While often used interchangeably, "retargeting" and "remarketing" traditionally refer to slightly different approaches within digital marketing, though the lines have blurred over time.
Retargeting primarily focuses on displaying paid advertisements to users based on their online behavior (e.g., website visits). It is cookie-based, using small pieces of code placed on a user's browser to track their movements and then serving display ads to them across other websites or social media platforms. The emphasis is on visual ads to bring users back to a site.
Remarketing, in its original sense, referred more broadly to re-engaging customers through email marketing. This often involved collecting email addresses (e.g., during checkout or sign-up) and then sending targeted email sequences, such as abandoned cart reminders or personalized product recommendations.
Today, many digital platforms and advertisers use "remarketing" as an umbrella term that encompasses both cookie-based ad display (retargeting) and email-based re-engagement. However, understanding the distinction can help in precise segmentation and personalization strategies.
FAQs
What data does retargeting use?
Retargeting primarily uses non-personally identifiable data collected via browser cookies or pixels. This data typically includes information about pages visited, products viewed, time spent on site, and items added to a shopping cart. It generally avoids direct identifiers like names or email addresses for the ad display itself, though these might be used for email-based remarketing.
How effective is retargeting?
Retargeting can be highly effective because it targets users who have already shown interest in a product or service, making them more likely to convert than cold audiences. It helps improve conversion rate and strengthens brand awareness by keeping a company's offerings top-of-mind.
Can I opt out of retargeting ads?
Yes, users can often opt out of retargeting. Many advertising networks offer opt-out mechanisms. Additionally, most web browsers allow users to manage or block third-party cookies, which are fundamental to many retargeting efforts. Privacy regulations like GDPR and CCPA also provide users with rights to control their personal data and opt out of its sale or sharing.