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Ad Retargeting Basics: How to Get Conversion Rate of a Champion

Dec 09, 2020  ·  5 min read
Kate Novatska
Kate Novatska, Marketing expert at Epom

With catchy hooks (“Too shy shy, hush-hush, eye to eye”), 80's pop songs were everywhere, consistently reminding listeners to head to Sam Goody to pick up more ca-singles — proving that staying top-of-mind leads to successful outcomes. Ad retargeting can help your brand in much this same fashion.

Compared to traditional ads, the ability of retargeting campaigns to keep targets focused can help your brand reach superior conversion rates, significant boosts in brand awareness, and more considerable gains in brand recall.

This article helps you understand how retargeting works and decide if it is right for your marketing needs. Let's dive deeper into how retargeting works and why it's a must-have tactic in your marketing playbook. Like diving into the catalogs of Simple Minds or Pet Shop Boys to get into 80's rom-com pop, let's start with required materials to understand the essence of ad retargeting campaigns.

Contents:

What is Ad Retargeting? Retargeting Ads Definition

Ad retargeting is the practice of serving advertisements to users who have previously visited a specific site. Retargeting allows an advertiser to showcase their wares through the many sites that a customer visits throughout a particular period of time. This allows the customer to continue learning more about the advertiser's products, be offered an incentive to purchase, or simply evoke already existing interest in some goods or services.

In 80's terms, this would be like hearing “The Power of Love” by Huey Lewis on the radio on your way to school, catching the video later on MTV, and then watching the song power Marty McFly to skitch on a garbage truck. (Sorry if we lost a few Zoomers there)

But would “The Power of Love” be as catchy as it was if you heard it on the radio only once? A resounding “no.” The product of any company is not an exception; see what usually happens in the commercial world:

Why you need retargeting infographics

How Do Retargeting Ads Work? And What is a Retargeting Pixel?

Retargeting is a simple process but can be daunting to tackle, as it's hidden behind some mighty-odd-sounding terms.

The process of ad retargeting begins when a user visits a specific website that has added a retargeting pixel. This pixel is just a small piece of code that is built to capture the viewing activity of everyone who visits a specific site.

Retargeting pixels are also filled with rich data on the user's session visit to the site and is designed to give programmatic advertising tools the info needed to serve relevant ads to that user.

The next step in learning about how retargeting works is to learn all about retargeting cookies.

I Want Candy...and Cookies! (Retargeting Ones)

Once a pixel is assigned to the specific user, it follows the user throughout their web journey for a preset amount of time. This crazy tech feat is accomplished by the pixel placing a piece of data onto the user's browser, known as a cookie. The reason for this fun moniker is the ability of the cookie to follow the user through their web journey, leaving “crumbs” to display ads to the user from the original site that placed the pixel.

How retargeting works

So how does retargeting work? Let's check out an example:

After reading this article, you check out a few more of our solution pages and then begin to research how to make sourdough bread. As you start to view some sites on hip, techy ways to make a food item that's been around for hundreds of years, you see an Epom ad. It could be a rectangular banner ad for our solutions, a link in a video to our site, or even a text ad about our white label DSP. You'll notice too that you start seeing our ads more often as you visit other sites. This is the magic of retargeting!

What Are The Benefits of Retargeting?

From a really broad level, the main value proposition for retargeting is quite solid. As an advertiser, retargeting empowers you to consistently remind users (who are interested in your brand) to take action and re-engage — a subtle reminder like, “Hey, I'm still here.” However, the power of retargeting is impressive when we dive deeper into exactly how retargeting adds value through each step of the typical online sales cycle:

Cycle Step: First Visit

With an abundance of options for every product imaginable, it's a virtual “needle in a haystack” conversion rate of 2% for first-time site visitors. Retargeting allows advertisers to begin the necessary task of working to bring visitors back to their sites, with the added power of “top-of-mind” ad campaigns to increase conversions.

Cycle Step: Search

As visitors continue to see ads via retargeting placements, their interest in returning to the advertiser's site begins to rise. This increase in purchase intent can be seen via increased site traffic and brand search from campaign placements. Retargeting has a massive effect on brand search, as studies have shown the retargeting can boost search for brands by over 1,000%.

Cycle Step: Return to Site

As stated above, first-visit purchases, lead submissions, installs, or other online conversion targets are challenging for most advertisers. The good news is that retargeting's immersive effects keep visitors engaged with a brand longer and more often. Compared to traditional ads, retargeting campaigns bring a substantially-higher amount of users back to the original site to complete a purchase. As we mentioned above, it increases the probability of completing an abandoned cart from 8% to 26%.

Cycle Step: Purchase

The cumulative effects of being served retargeting ads throughout a visitor's online journey have shown to have a powerful impact on conversion. The repetition of seeing ads often, on trusted sites, and with incentives, knocks down many of the conversion barriers. Studies show that the average CTR of retargeting ads is 10x of traditional ads, demonstrating how effective retargeting can be for brands.

RIP Cookies, Der Kommissar's in Town

Unfortunately, retargeting cookies are on their way out. Users are turning them off, browsers aren't allowing them, and ad blockers are blocking them. Therefore, retargeting efforts need to be utilized through solutions that offer more precise (and easy-to-use) targeting options. We're totally biased, but our white label DSP is packed with retargeting features to help advertisers continue to generate revenue from the smaller amounts of opted-in cookie users.

How Much Does Retargeting Cost?

68% of agencies and 49% of brands have a dedicated budget for retargeting. Most of those (51%) spend no more than 10% of their general monthly marketing budget on retargeting.

monthly spend on retargeting

In programmatic advertising, retargeting ads, just like any other, are traded via CPM and sometimes via CPC (here, the cost is predicted, while the bidding is still based on approximate CPM). The average CPM for retargeting ads in a self-serve DSP goes in-between $3 and $6 for regular display ads, reaching up to $6-10 for native and $14-17 for video advertisements. Note: stats are relevant only for North American and Western European geos.

Thus, this largely depends on the niche, geo, and the SSP you partner with. Targeting audiences in lower-income countries allows you to decrease CPMs by half or even more. Using a white-label DSP, you also cut your spend up to 30%, thanks to the absence of intermediaries that add bid markups to each CPM you set.

As for CPC in programmatic, the bidder is still tied to the CPM model. So the approximate CPM will be calculated using the formula: CPM = CTR x CPC x 1000. Google's average CPCs are $0.66 to $1.23 per click, but we won't recommend sticking to them, as Google's prices are usually higher than across other DSPs and ad networks.

When to use CPM and when CPC?

  • CPM is an excellent choice for creatives that deliver CTRs higher than average. If you see one of your campaigns perform well in terms of clicks, always choose CPM.
  • CPC is better for under-performing campaigns, as you will pay less because your CTR is below average.

How to Set Up a Retargeting Campaign in Epom White-Label DSP

Pretty recently, we made a brief 3-min video that explains both targeting and retargeting functionality in Epom white-label DSP. The retargeting part starts at 2:47.

If you don't feel like watching the video, here is a brief checklist on how to set up retargeting in our DSP:

  1. Go to the retargeting tab and see “Segments.”
  2. Here, you can generate a custom code for each segment and use it on your website or give it to your advertiser client to place on their website.
  3. Select the segment in the targeting section while setting a new campaign and include or exclude a specific group of users.
  4. Compare the first ad and retargeting campaign stats in the analytics tab.

All in all, we hope we didn't overload you with 80's references. All puns and jokes aside, retargeting helps your brand remain in the heads of your customers long after they have left your site. Like the 80's pop song that you are now humming, retargeting will keep your customers thinking about your brand. Simply put, that should be the primary goal of any ad campaign.

Ready to get a conversion rate of a champion with sophisticated retargeting? Try if it works for you with a 14-day trial on Epom white-label DSP.

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