Based on an article in the Harvard Business Review, studies show that targeted ads are effective not only because they are targeted, but because they also influence the target’s perception of themselves. What this means is that if the ad has been corrected targeted, the viewer is subconsciously influenced to perceive themselves as belonging to that target market segment, even if they are not fully inclusive of that segment. Studies show that they accept the fact that they have been targeted for this particular type of product as validation that they belong to the subgroup; and that this validation subsequently increased interest in the product.

Rather than target demographically, advertisers have learned that targeting behaviorally can often be more effective. However, what most advertisers don’t know is why it is more effective. They may just see that it is better at generating clicks and conversions or has higher ROI than non-behaviorally targeted ads.

We exposed students to an ad that they believed to be either behaviorally targeted or non-targeted for a high-end watch brand. Then we asked them to rate how sophisticated they perceived themselves to be. The data show that participants evaluated themselves as more sophisticated after receiving an ad that they thought was individually targeted to them, compared to when they thought the same ad was not targeted. In other words, participants saw the targeted ad as reflective of their own characteristics. The ad told them that, based on their browsing history, they had sophisticated tastes. They accepted this information, saw themselves as more sophisticated consumers, and this shift in how they saw themselves increased their interest in the sophisticated product.

Behaviorally targeted ads can also impact behaviors beyond just purchasing products. Another study was conducted in which students rated themselves as “more green” after receiving a behaviorally targeted ad for an environmentally friendly product. This resulted not only in purchases of the product, but a measured increase in the student’s willingness to donate to a pro-environmental charity, which they were prompted about at the end of the same lab session.

However, the most important part of this is that the behaviorally targeted ad must be at least somewhat plausible or accurate – meaning that the targeted individual must at least share some of the characteristics of the target segment. If the targeted individual shares none of the characteristics of the target segment, then the likelihood of a conversion is low.

*It’s important to note that the effects on self-perceptions we observed are contingent on consumers being aware that a given ad was or was not tied to their past behavior. Across all of our studies we provided participants with an explanation of behavioral targeting, so that those in the behaviorally targeted ad condition believed that they received the ad as a result of their own online behavior.

Given that the ads in our studies were not actually matched to participants’ behavior — we merely created the perception that they were — we expect that effects may be even stronger in the real world when behaviorally targeted ads are more accurate. If consumers are not aware that an ad has been behaviorally targeted, though, even if it is actually matched to their online actions, they likely won’t perceive the ad as a reflection of the self.

Finally, and perhaps most importantly, our results suggest that transparency benefits consumers and firms. These effects of behaviorally targeted ads only occur when consumers know that an ad has been behaviorally targeted, so it behooves advertisers to include the AdChoices icon to clearly label behaviorally targeted ads as such. Additionally, identifying ads as behaviorally targeted gives consumers greater control over the use of their data and may help alleviate many of the privacy concerns cited by the FTC in relation to disclosure of the use of consumer data in delivering online ads.

This brings me to the point of this blog post. There is an additional method of online advertising that often incorporates behaviorally targeted ads – and that is “retargeting” (retargeting ads follow potential customers around the internet and show them targeted ads based on their previous browsing history). With retargeting ads becoming more popular with advertisers, any somewhat perceptive viewer will have noticed the same ads following them around the internet as they browse from website to website. The way retargeting works is when a visitor lands on a webpage, a javascript tag hidden in the webpage code places anonymous retargeting cookies in the visitor’s browser. This code allows advertisers who typically contract with a third-party retargeting company (such as Adroll, ReTargeter, and Criteo) to display retargeted ads to visitors as they browse other websites. The large social media platforms and browsers, such as Facebook, Google, Twitter, and Instagram even have their own retargeting services. This repeated exposure has proven to be effective not only in increasing conversions but promoting brands as well. And, when used in combination with behaviorally targeted ads, retargeting makes those ads even more effective. This combination can be a powerful 1-2 punch in the advertiser’s arsenal. For most websites, only 2% of web traffic converts on the first visit. Retargeting can multiply that conversion rate significantly, which allows advertisers to optimize their ad spend, and simultaneously increase their marketing ROI.

What is your opinion? Feel free to contribute in the comments below.

source: Harvard Business Review article

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