Targeting Is Complicated, But Getting It Right Is Crucial

Of all complications posed by the demise of the cookie, the threat to targeting may be one of the most significant. Paul Sinkinson (lead image), managing director of Analytic Partners, investigates what role targeting has to play in a post-cookie world…

We’ve all heard that old adage – that the power of modern marketing is getting the right message to the right person at the right time. This was the great promise of digital marketing, and something that’s defined the industry for decades.

But with the demise of the cookie, increasing privacy regulations and the advent of walled gardens, is it still something we can strive for?

The problem is, targeting in marketing isn’t straightforward. It involves nailing a number of different tactics that each impact sales and consumer behaviour in different ways.

We’ve evolved from an era of when broad reach (TV, radio, and out-of-home) dominated in the latter half of the 20th century. We then saw the birth of internet advertising in the late 90s and the creation of narrow and hyper-targeting. Ever since, both broad and hyper-targeting have been locked in a battle for dominance.

The question is: should either take precedence?

Mythbusting the allure of narrow targeting

Narrow targeting promised the ability for marketers to reach those core customer segments that would be genuinely interested in their brand. It sounds ideal on paper, but it has its limitations.

Like most things these days, it comes down to data, and especially third-party data – which many businesses are still overly reliant on. Device sharing, walled gardens and the crumbling of the cookie are all reasons why narrow targeting based on third-party data is so difficult to execute optimally.

In fact, a recent joint research study from the MIT Sloan School of Management and Melbourne Business School found that the accuracy of gender-based targeting with third-party data was worse than 50%1. In other words – and ironically – you would have more success not targeting at all.

Compare that to contextual targeting, which is a method of buying ad space based on the relevance of the site’s content to the product. Analytic Partners’ ROI Genome has determined that, on average, contextual targeting is 1.2x to 2.5x more effective2 than other forms of targeting when costs are comparable.

It’s also worth noting how the complexity surrounding third-party data affects first and second-party data. Second-party data is also subject to some of the limitations on third-party data, particularly a lack of transparency from data vendors. There is also a danger that first-party data, often touted as a rolled gold cookie alternative, can limit an ad’s impact by focusing on a narrow, high conversion segment by being too specific.

Analytic Partners, by way of example, recently partnered with a business to analyse multiple targeting tactics. The business was particularly interested in leveraging its first-party data, and was surprised when it transpired the return-on-investment from this tactic was less efficient than others. There were two key reasons for this: the brand didn’t understand how its customers responded to media; and the size of its first-party database was too limiting.

This is just a snapshot of how murky the waters surrounding narrow targeting have become. But don’t give up on this tactic just yet.

Re-imagining the marketing funnel

When you’re trying to understand when to use broad reach or narrow targeting, it can help to think of the marketing funnel – but perhaps not in the way you’re used to.

Take broad reach. It may seem like a relic from an older age of marketing, but it’s still essential when it comes to customer acquisition. It traditionally sits at the top of the funnel, driving awareness, but we’ve found it also drives lower-funnel areas of consideration and purchase. That’s because broad reach often provides a customer’s first interaction with a brand, and can have long-term ramifications for brand equity.

That means that narrow and hyper-targeting, seen as middle and lower funnel tactics respectively, aren’t exclusively occupying this space anymore. The customer journey is not linear, so why should we treat our marketing funnel the same way? Customers will ultimately move back and forth through the funnel.

The lesson? Businesses can reap the benefits of supporting narrow targeting with broad reach, and vice versa. These tactics work well in synergy, not in opposition.

In particular, there are a few key rules of thumb you can use to navigate this terrain.

First, focus on the customer segments that will deliver the highest short and long-term value rather than those segments that are most likely to convert. Take into account the size of your market, how your marketing targets align with your purchasing segments, and whether these segments are growing or declining.

When it comes to third-party data, try to avoid relying on it to inform gender and age-based targeting. Instead, look into contextual targeting, particularly when it comes to digital tactics that utilise third-party user profiles (like display ads).

And, when embracing the synergies of broad reach and narrow targeting, make an effort to interrogate your data. A mix of first party data and accurate second-party data is a particularly potent mix for powering a narrow targeting strategy.

In the end, when it comes to a choice between broad reach and narrow targeting, it’s a false choice- the reality is you need both. Perhaps we shouldn’t view it as a struggle for dominance at all. The truth is, if either of these targeting approaches definitively wins out over the other, your marketing strategy will suffer.