At conferences and speaking engagements, I am frequently approached by CMOs who express frustration over the failure of their digital ad campaigns to convert new customers. More often than not, I discover that the reason lies within an insufficient behavioral targeting strategy.

These CMOs say their prospect database is reliable, and the creative is spot on; nevertheless, conversion rates are low, and they have no idea why.

After asking a few questions, I almost invariably find that their ads are running on the right sites but at the wrong moment for the customer, resulting in a disconnect with their prospects.

In today’s age of data and advanced tracking technologies, random marketing is a thing of the distant past. Prior methodologies based solely on contextual data such as demographics and lifestyle interests led to haphazard campaign strategies focused on the who, where and why, but not the when.

The Missing Link

Eventually, technology providers caught on to this missing link and developed a solution called behavioral targeting. By tracking consumer web behavior, marketers now can know when to strike with their ads while the iron is hot and when a customer is raising their hand.

Hallelujah! No more wasted ad spend! Improved customer conversion rates!

So, if the solution has been around for several years, why aren’t more CMOs taking advantage of it?

For most, it has to do with time and expense. Until now, only enterprise brands could afford a self-managed programmatic solution to their advertising. Smaller brands (read: 95% of marketers) were forced to work with multiple technology providers to cobble together behavioral targeting programs. The process was time-consuming and difficult, if not impossible, to get technologies and providers to work well together. 

This post explains how behavioral targeting works, what it tracks, the outcomes it produces, and how it can help marketers with smaller budgets get a leg up on their competition.

What is Behavioral Targeting?

Behavioral targeting is the practice of targeting people in a digital environment based on their online, and sometimes offline, behaviors. Previous digital targeting tracked site visits, which gave marketers a good idea of which websites they should invest advertising dollars.

However, behavioral targeting is far more sophisticated, capable of tracking customers’ complete digital experience throughout the purchase cycle to identify common behaviors among each customer segment.

To give you an example, a car dealership that uses behavioral targeting will know from search history that someone began showing interest when they started searching for different car brands and began visiting local dealer websites.

They knew they either had a car to trade or wanted a used car when they went to Kelly Blue Book to investigate a resale value. Recent purchases of baby clothes and accessories also explained why they were looking at mini-vans. A review of their Pinterest searches showed a drastic increase in baby-related information, such as baby room décor, outfits, and parenting advice. Things really heated up when email exchanges began occurring between the soon-to-be customer and several dealers. 

Tracking the behaviors of actual customers allows the car dealership to build a common framework around key customer segments, which not only helps the dealer know when and where to deliver ads, but also what messages will best resonate and at what time.

For instance, if all of the aforementioned online behaviors occur, the dealer could purchase inventory via an exchange targeting customers exhibiting those behaviors with the headline “Our new addition is perfect for families.” Once the email exchanges begin, the message becomes more price driven, such as “$0 down!”

The Benefits of Behavioral Targeting

Mainly, behavioral targeting drastically improves the efficiency and effectiveness of the ad spend. Most specifically, marketers can expect:

Increased Customer Conversion Rates. Relevance, not only contextually but in a customer’s correct frame of mind, has been shown to increase ROI by substantial margins.

Elimination of Ad Spend Waste. Rather than assuming a user’s motivation for being on a website, behavioral targeting allows an advertiser to eliminate prospects from their pool that are not indicating a readiness to buy.

Likewise, consumers benefit by receiving relevant product offerings at the right time and place, which improves their overall online experience and increases their willingness and desire to use a similar purchase methodology in the future.

How Behavioral Targeting Works

The key to effective behavioral targeting is to start with a highly detailed audience model. Using first-, second-, and third-party data will ensure you build the most granular lookalike audience possible. Collecting from a wide range of demographic, behavioral, and contextual audience information makes campaigns more layered and compelling overall.

If starting with a first-party data set of known, anonymized individuals, it also all but eliminates ad fraud and invalid traffic, which is a big problem in the digital advertising industry.

Advertisers that don’t collect first-party customer data are at a severe disadvantage because they don’t know who their customers are, much less their online behaviors. Those that do, but who cannot afford second and third-party data, are also at a disadvantage because they can only dig so deep on reach and depth of consumer insight. 

Upon establishing the audience model, five essential steps occur with behavioral targeting:

1.    Collect Cookies

Cookies are placed on computers whenever someone visits a website or creates an account online, for example. It is stored either temporarily or on a local memory drive and then deleted upon closing the browser.  

User information that is tracked includes:

Mobile Device Data.Consumers provide data about their online communications, search, purchasing, social media usage, and so much more through their mobile devices. Understanding how people use their devices can help produce higher response rates and spark new ideas for engaging with them.

Geographic Location.Whereas in an earlier post we discussed how IP address tracking is an inferior methodology for identity resolution, it is an excellent way of revealing where someone lives, works and spends much of their time, as well as their travel habits depending on different log-in locations and the time spent between visits.

Subscription or Registration Entries.When someone creates an account, purchases a subscription plan or fills out registration forms online, our DMP can pull the information that’s provided, such as contact information, ZIP codes, and fields relating to interests or activities. These pieces of data help enable DMPs to estimate purchase needs, times, and locations so that they can present appealing and necessary messages to the consumer in ideal future circumstances.

2.    Establish a User Profile

As cookies are collected and stored, behavioral patterns related to shopping and search habits begin to emerge, such as frequently visited pages, webpage viewing times, clicked ads and links, webpage element interactions, transaction progress, purchase histories, and time gaps between visits. Collectively, these behaviors form a profile of a user that helps formulate a behavioral model for other users exhibiting wholly similar behaviors. This kind of analysis is especially beneficial in guiding advertisers to develop stronger retargeting and creative testing strategies, as well as segmenting their audiences more effectively for lookalike modeling.

3.    Designate Audience Segments

The patterns and profiles that emerge begin materializing into distinct target consumer groups. We typically recommend starting with three or four audience segments. Any more than that and campaigns become too small to produce effective results and track. As you monitor the results, you can determine which are most successful and drop those that aren’t.

4.    Campaign Development

We recommend running no more than two or three versions of an ad per audience segment to find the one that works best. For example, if you’re a real estate developer with a target audience segment of expectant couples, you may want to run test campaigns to determine if interior or exterior ads perform better. You can test even deeper with interior ads to show one featuring a kitchen versus another featuring a bathroom photo. The response to each will help you hone in on what most matters and produce more rapid conversion rates.

There are seasonal triggers, too. For instance, in the urgent care sector, retailers may want to run campaigns during the August and September back-to-school period urging kids to come in for shots and checkups. They may also have a fall flu shot campaign for seniors and one that starts several weeks later for all other adult audiences. 

5.    Execute the Ad Campaign

Determining where to place your ads happens programmatically through the DSP, which is connected to the Exchange, which is where inventory for advertising lies. Remnant advertising inventory is put up for auction by the online publishers. The DSP identifies the available inventory that best matches our audience profiles and places bids based on how valuable each publication is to our overall goals.

Ads appear only when an individual in the database exhibits one of the identified behaviors.

6.    Measurement

The human element comes in the metrics phase. To measure the success of a campaign, our team of analysts looks deep into each of the established KPIs. For instance, there may be a top goal of achieving 100 minimum offline conversions. A second goal may be to achieve 70%+ viewability, and the third goal might be to generate 600 leads submitted via online lead forms.

The DXM Difference

DXM uses first-party data married with second and third-party data from multiple sources to build its audience model. Our ability to do this comes from exclusive partnerships granting us the unique ability to warehouse and manage the entire database of US consumer households; access to the world’s most extensive digital Exchange, BlueKai; and access to the world’s first autonomous DMP.

Sharing these resources with an unlimited number of clients spreads the cost evenly across multiple users, making it affordable for medium-sized ad budgets. It also removes the burden of setting up the DSP and managing the media, allowing marketers to focus on marketing instead of the technology behind it.

Choose DXM to Increase Conversions with Behavioral Targeting

Increasing conversion rates has never been easier or more cost efficient with DXM’s behavioral targeting methodologies. If you have a regional or national brand with much larger competitors, contact us to see how our behavioral targeting solution can help you outsmart the competition versus outspend it.