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Navigating the 3 Ecommerce Audience Types

Written by: Shane O'Neill, Director of Content

Brands that focus their ad retargeting spend on consumers who are predisposed to purchase or continue retargeting to customers who are no longer interested in their products ignore the nuances of ecommerce audiences.

That fact is: A strong majority of your website’s audience doesn’t want or need to see retargeting ads. They’re either already a consistent buyer of your brand’s products or they’re no longer interested in you, at least for the time being.

Related post: From Attribution to Incrementality — 5 Steps to Start Growing Revenue

There is, however, an extremely important audience group that really needs to see your ads. They’re called “The Persuadables” and they’re critical to minimizing ad spend and maximizing incremental revenue.

Along with “The Persuadables” there are two other ecommerce audience groups: “The Sure Things” and “The Lost Causes.” What’s important to note is that these audiences constantly morph into one another. Today’s “Persuadable” could be tomorrow’s “Lost Cause”, so it’s vital to understand them and do ongoing incrementality (lift) testing to always be selecting the most valuable consumers.
Ecommerce audience types

The Persuadable

Characteristics: These are consumers whose purchase decision has been proven through lift testing and machine learning to be positively influenced by an ad. They are not regularly buying your products, but they’re on the market, and they’re visiting your site. They’re open to being persuaded to click the “buy” button.

What the data shows: Persuadables are like undecided voters in an election. They have high lift, meaning they are influenced by ads to make a purchase, but they have lower purchase rates than “Sure Things” so they’re cheaper to bid on. In terms of ad retargeting, they are the sweet spot.

While it’s impossible to always target the exact users who are on the verge of purchasing, analysis of Nanigans customers shows that 10% of an ecommerce company’s monthly site visitors contain high enough rates of “persuadables” to be worth targeting with ads.

Ecommerce audiences for incrementality

To show ads or not: Yes, show ads frequently. Persuadables have huge bang-for-buck potential given that their CPMs will be lower than consumers with higher purchase rates. Persuadables are the great drivers of incremental revenue, which is revenue that’s a direct result of the ad.
Ecommerce audience types

The Sure Thing

Characteristics: Speaking of high purchase rates, “sure things” have the highest. They’re already part of your ecosystem — they likely have high brand loyalty and they’re purchasing regularly enough that ads aren’t necessary to get them to purchase more than they already do.

What the data shows: Sure Things are the opposite of Persuadables in that they have high purchase rates and low lift. Low lift means that ads are unlikely to influence their decision to purchase. They’re doing the work for you by making purchases without any guidance.

Analysis of Nanigans customers shows that 30% of a typical ecommerce company’s site visitors will contain a high number of “Sure Things”. It’s worth mentioning that “sure things” don’t really equate to people who are certain to purchase, but simply that they’re a group of individuals not worth advertising to due to the slightly higher purchase rate within that group.

Ecommerce audiences incrementality

To show ads or not: Not recommended. Advertising to Sure Things is, simply put, a waste of money. Why spend your ad budget preaching to the choir?
Ecommerce audience types

The Lost Cause

Characteristics: These are consumers who once purchased products or visited your site, but have stopped engaging with you. This could be a consumer who bought a birthday gift for a sibling but has no personal interest your products; it could also be a consumer who bought a pair of sneakers, but has no need for new socks or any item related to the sneakers.

What the data shows: Low purchase rates + low lift + website abandonment = they’re not interested in your products and advertising is unlikely to change that.

Analysis of Nanigans customers shows that 60% of a typical ecommerce company’s site visitors will contain a significant portion of “Lost Causes”. This high percentage reflects the high volume of users on any ecommerce site — even a large, popular one — who bounce immediately and show no interest in actually buying a product.

Ecommerce audiences incrementality

To show ads or not: With an unlimited media budget, a brand could try to use advertising to lure Lost Causes back to the website. But most brands need to be smart about how they spend their budgets, so Lost Causes are better left alone until they show interest organically (i.e. they become “persuadable” again).

Finding and Monetizing the Persuadables

To boost incremental revenue (net-new revenue that can be tied directly to advertising) brands need to continually discover and isolate persuadable consumers for retargeting, and the way to do that is through incrementality.

Incrementality is the difference in revenue between two groups: those assigned to a treatment group (who see ads) and those in a holdout group (who do not see ads). A/B testing these groups allows advertisers to measure the lift, i.e. the additional revenue generated by advertising that otherwise would not have existed without the ad spend.

To boost net-new revenue, brands need to continually discover and isolate Persuadable consumers for retargeting, and the way to do that is through incrementality.

Incrementality enables retail marketers to identify the Persuadables. They’re able to do this through the use of machine learning algorithms that monitor how many add to carts, site visits and purchases these consumers have had over time. Once the Persuadables are identified, media spend can be optimized toward them.

At the same time, teams can dedicate less or no ad spend to users who’ve been predicted to have a strong likelihood of purchasing regardless of seeing an ad (Sure Things!). In addition, teams can shut off spending on Lost Causes who may drain your budget and cut into revenue.

We estimate that optimizing for incrementality can generate tens of millions of dollars in net-new revenue for a large ecommerce company. That’s an amount that can be the difference between a profitable quarter and an unprofitable one.

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