Retargeting Campaigns – Buyer Behavior

Many B2B marketing tactics are built on a deep stack of unverified assumptions, and one of the worst examples is Retargeting Campaigns!

As discussed in last week's Marketing Measurement Newsletter, proponents of retargeting campaigns justify the tactic in one of two ways:

1. It has a lower CPL and higher CVR than other lead-gen campaigns
2. Prospects have to see your ad seven times (or 20 times or 50 times) before they will make a purchase.

Both are seriously flawed ideas that are driving millions in wasted ad expenditures!

Last week, we examined why the first justification for retargeting (lower CPL/higher CVR) is flawed. This week, we'll examine why the second justification (you have to reach a prospect many times to have any impact) is even more seriously flawed.

This second justification represents a failure to understand the core principles of marketing and of buyer behavior based on more than 60 years of research and evidence-based data

We will break this down into three parts:

1. The Advertising Response Curve
2. Your Core Point of Differentiation
3. Retargeting Arrives Too Late

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Part I – The Advertising Response Curve

A core assumption behind retargeting is that you need to slam someone with your marketing message 50 times to have any impact.

We have 60+ years of research on exactly this topic, which shows that this is a fundamentally flawed belief. Once is enough!

Advertising has a single purpose – to increase the buying propensity of future buyers.

It's not about "educating buyers." Though that might be one tactic, it's not the end purpose of investing in advertising. "Educateding" prospects who buy from someone else isn't effective marketing.

It's not about "informing" the buyer of your product's 127 different features. Most of those "features" are identical to the core feature set of every product in the category and will not increase the buyer's propensity for your brand (more on that in the next section).

The ad response curve looks at what impact an ad's initial impression has on increasing future buying behavior and then how that propensity to buy increases with each additional ad exposure.

The first initial ad exposure will have the greatest impact 100% of the time. That initial impression takes a buyer from a state of "not knowing" (or not remembering) to a state of knowing.

Generally, 90%+ of any increased propensity to buy occurs after the initial ad exposure!

So the question to ask is this –

"Is your next dollar of ad budget better spent on hitting the same person 50 more times or finding 50 potential buyers who don't know (or remember) that you exist and letting them know you're a buying option?"

Do you REALLY think showing someone an ad 50 more times will make them 50 times more likely to buy? Is that really a good use of limited marketing budget?

You have PROOF they've already seen your ad!

Because of the use of behavioral targeting criteria to move people from the cold layer into the retargeting layer, in most cases, you have positive confirmation that they've already seen and interacted with your ad.

That Cold Layer ad will have ALREADY achieved 90%+ of any increase in buying propensity. All the budget wasted on the retargeting ads can, at best, only increase the buying propensity by a few percentage points, if at all.

That budget is FAR better spent on expanding reach and getting your ad in front of 50 people who don't know (or remember) that you exist!

Evidence from Research Results

Research papers dating back to the 1960s show this ad-response effect. A recent, particularly well-designed piece of research from the Ehrenberg-Bass Institute is summarized below.

There are many other papers, a few of which will be referenced in links at the end of this article.

"Is Once Really Enough? Making Generalizations about Advertising's Convex Sales Response Function" Jennifer T. Rachel Kennedy Byron Sharp

This particular paper looks at FMCG (Fast Moving Consumer Goods) goods, but similar results are seen across all B2B and B2C categories.

The ad-response function is NOT about the nature of the product; it's about how human brains process new information and how memory and recall work. As long as you're involved in selling things to humans, these will be universal features.

The only difference between how this works for B2B vs B2C is on the timescale of the buying cycle and duration of aided and unaided recall.

Is "Once" Really Enough?

For overall ad campaigns, the answer is NO! But this depends on a few factors:

1. Are you talking about a single individual or the entire ad target group?
2. Did that single individual actually see and consume the ad?
3. How long has it been since they saw an ad from you?

Ad distribution channels contain a lot of "friction." Most of your ad impressions are never seen by humans (ad fraud bots), seen by the wrong humans (not future buyers), or there's insufficient attentional awareness to take in the ad message.

You have to "pay" for friction in the ad distribution channels with "frequency," so ad frequency >1 is always necessary. This is illustrated below.

But once a particular individual has seen and fully consumed your message, then once is enough...at least until they forget (we all forget).

For low-consideration FMCG goods, this can be from a few hours to a few days, depending on whether you're measuring unaided or aided recall.

For high-value, high-consideration goods, this can be from a week or so to a few months. Research shows that some B2B ads last out to 12 weeks or ~90 days.

So there has to be a (slow) cadence of ongoing ads "refreshing memories" in the minds of future buyers who may have seen your ad a few weeks ago but have forgotten.

But you really do NOT need to slam a person with 50 ads in a week to keep "reminding them" unless you're selling to Alzheimer's patients!

Part II – Your Core Point of Differentiation

A similar but equally flawed argument is this –

"We don't want to show the SAME ad 50 times, but we need to educate buyers all about our 126 amazing product features!"

Again, the ONLY purpose for a business to spend financial resources on advertising is to increase future buyer's propensity to buy your brand.

It's extremely misguided to imagine that telling a prospective buyer about all your amazing 126 features and benefits (across 50 pieces of advertising content) will accomplish that task.

Again, if we go back to research on buying behavior, we see a number of reasons why this sort of thinking is completely disconnected from reality –

• Almost ALL buyers are "undifferentiated category buyers," meaning that they buy (and use) only the core feature set that defines all products within the category.
• Buyers primarily buy based on the market penetration of the available brands, NOT on features or value. This year, ~35% of all CRM purchases will be from Salesforce (which happens to have a 35% market share – weird).
• Typically, not more than ONE differentiating feature is all that matters! Everything else is just table stakes to be considered in the category and nothing but noise to most buyers.

Salesforce created a $30B ARR company on a SINGLE differentiating feature (being in the cloud) that isn't even a unique feature anymore, as all CRM products have shared that "differentiating" feature for 15 years or more.

So no, you do not need to retarget someone with 50 ads to "educate" buyers all your amazing features...sorry!

To buyers, it's all just noise. They are either entirely "undifferentiated category buyers" or will seek you out for that ONE unique differentiating feature.

And even then, they will be more likely to buy from the market share leader simply because of brand trust. Your "differentiation" might be interesting, but making a buying choice that won't get me fired is far more interesting.

Which is why Salesforce, and Microsoft, and Oracle, and IBM keep winning.

Part III – Retargeting Arrives Too Late!

Even if you believe the fantasy that hitting someone with 50 ads will make them 50 times more likely to buy...or that slamming them with stories about all your amazing features (99% of which are identical to every competitor), retargeting is still an extremely bad use of marketing budget allocation!

Research from Gartner and Bain (and published in the Harvard Business Review) shows that for large to enterprise B2B buyers –

• 85%+ start with a "day-one consideration set" before ANY buyer research occurs.
• 90%+ of the time, the final buying choice will be from that day-one consideration set.

If you're waiting for your buyer to search Google, click on a piece of content, watch your explainer video, or visit your Pricing Page, you've already lost the game.

If you wait until the buyer is already in the market and searching for information (the typical use case for Retargeting Ads), you've got less than a 5% chance of eventually being seen and then purchased.

With retargeting, you wait until the game is almost over (the buyer is already in the market and has started buyer research) and apply your ad dollars to the smallest possible fraction of your target audience.

Retargeting is the absurdist extreme of choosing "Frequency" over "Reach" and "Performance" over "Brand"! This combination is guaranteed to produce ineffective marketing efforts.

Buyers who are not in-market have no interest in "being educated" about your stuff!

The related argument that "We're targeting buyers not yet in-market to educate them about our product" is equally absurd.

If someone just installed Salesforce two months ago, do you REALLY think they want to watch a 20-minute video or read a 1200-word piece on the feature details of your amazing CRM product? (hint: the answer is NO!)

And it's an entirely self-indulgent fantasy on the part of marketers to imagine their ads and content are so gripping that complete non-buyers just won't be able to stop themselves from obsessively reading it all.

A question I always ask – "How much time do you personally spend consuming content about all the detailed features and benefits of B2B products you have absolutely no intention of buying?" (I'm guessing about zero).

We are interested in "category problems" but not "category solutions" unless we're in-market and actively buying.

A Sales Manager who just installed Salesforce a year ago does NOT have a "solution problem" that they're willing to invest time and attention into. They just solved that by buying a solution; they're NOT in-market.

However, they will continue to be interested in the "Category Problems" that the product category solves, such as how to better manage a remote sales team.

This is why effective content marketing can definitely reach the 95% of those not currently in-market, but only if it's content around "category problems" and not stuff about how amazing all your features are.

No one is going to waste their time "being educated" on your product features if they're not actively in-market and in a buying process.

Conclusions

Key takeaways –

• Advertising exists for the sole purpose of increasing the buying propensity of future buyers.
• You don't need to hammer someone with 50 ads to achieve 90%+ of the possible increased buying propensity.
• A single point of meaningful differentiation is sufficient to set your product apart from the competitors and is ALL you need to talk about.
• Most buyers are "undifferentiated category buyers" who are only interested (and use) the core feature-set common to ALL products in the category.
• 95% to 100% of your product features are shared by every other product in your category and in most of the products in all the adjacent categories.
• Capturing prospects AFTER they're already in-market is a playing a loser's game. Allocate some budget to brand awareness marketing instead!

Retargeting Campaigns fail on every point and are likely to be among the poorest marketing investments you can possibly make!

Instead, you should focus on:

• Broad Reach over High Frequency – It's vastly more effective to find 50 people who don't know (or remember) that you exist rather than find one person who already knows who you are and slam them with 50 more ads.
• Do Brand + Performance – Have closer to a 50:50 budget allocation between Brand Marketing and late-stage lead-gen Performance Marketing! It's far more effective that they know you exist before they're in-market than to capture them once they're already in the buying process.
• Think For Yourself & Ask Questions – If a marketing guru or agency is pitching you on some expensive scheme, demand they show you proof that the tactic actually works and is effective (and not merely talk about lower CPL, higher CVR, or "better" ROI - these are not "effectiveness" metrics).

References Related to the Advertising Response Curve –

• https://www.researchgate.net/publication/250168821_Is_Once_Really_Enough_Making_Generalizations_about_Advertising's_Convex_Sales_Response_Function
• https://www.jstor.org/stable/3008585
• https://www.jstor.org/stable/30036660
• https://www.jstor.org/stable/2487067
• https://dl.acm.org/doi/10.5555/2882794.2882803
• https://www.academia.edu/17738889/Advertising_Response_Function
• https://www.anderson.ucla.edu/sites/default/files/documents/areas/fac/marketing/ASMBIPractice%280%29.pdf