Research shows customised online ads are often ineffective

When consumers research a product online, a big question for marketers is whether or not to tailor advertisements to individuals’ interests. If you’re looking at a pair of running shoes on a website, how effective would it be for an ad for those shoes to pop up again later on in an ad on an unrelated website?

Maybe that ad would persuade you to buy the shoes, but it is unlikely to have any effect at all, according to a recent study by Anja Lambrecht, Assistant Professor of Marketing at London Business School and Catherine Tucker, Assistant Professor of Marketing at MIT Sloan School of Management.

Lambrecht and Tucker used data provided by Havas Digital from Artemis, the advertising company’s digital and campaign management and optimisation system, which enables marketers to collect data and evaluate their campaign’s performance.

The objective was to address the questions of whether it is always optimal for advertisers to provide more specific ad content based on consumers’ earlier product interests, as well as when increased specificity of information in an ad is effective. In their study, consumers who had looked at a company’s specific products were randomly shown either a generic or a personalised ad. The company then tracked whether consumers ultimately purchased one of its products.

People who saw the personalised product information were on average less likely to buy a product on the day they were shown the ad than the people who were shown the more generic ad. Highly-specific ads were generally not more effective than generic messages. This goes against the conventional wisdom that more specificity is always good.

However, Lambrecht and Tucker did find that under certain circumstances, this type of specific ad did work. The key, they said, was whether the consumer had developed well-defined product preferences at the time they saw the ad. When online shoppers were simply looking at a product category, ads that matched their prior web browsing interests were ineffective. However, after consumers had visited a review site to seek out information about product details – and had better defined what product they were looking for and were closer to a purchase – then personalised ads became more effective than generic ads intended for a mass audience.

As a result, notes Lambrecht, marketers should carefully evaluate when to use new online advertising techniques, paying attention to how they can identify whether a consumer thinks broadly about a product category or seeks out detailed information. “In our study, we took visiting a category review site as an indicator for being likely to have well-defined product preferences. Consumers who had visited these sites to compare products reacted more positively to an ad that specifically reflected the product they had looked at earlier. But if they had not yet visited a category review site, they were more responsive to generic messages.”

This was a “big surprise,” says Tucker, as there has been a lot of excitement about using this new technique in online advertising where marketers can reach consumers with messages that are a better fit based on their known interests. “But it turns out that just because you have the data to personalise, it doesn’t mean you always should,” she says.

The results of the study are published in, “When does Retargeting Work? Timing Information Specificity”.

The full paper can be found at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1795105