E-commerce and Retargeting

E-commerce has come a long way since it became a popular and socially acceptable way of purchasing one’s household items and clothing. Although it was pioneered in the 1980s as a Business-to-Business prototype by Michael Aldrich, e-commerce did not take off as a popular B2C activity for a few decades. Years later, it is almost more of a nuisance to online “window shop” due to retargeting than it is to be followed around in a department store by commission-based sales people, asking if you would like to have a fitting room started for every item you spend more than a few seconds eyeballing. Digital business has perfected the craft of e-commerce so that it now knows what you are clicking on and checking out on your computer, even if you do not add it to your online shopping cart.

What is retargeting?

The best way to explain retargeting is first by giving an example. Last week I was perusing a popular home furnishings store’s site when I noticed that in one of the site’s weekly boutiques had a designer selling cosmetic bags. I wanted to get a closer look at these bags, so I made the mistake of clicking through to the bag to zoom in and read the product’s description. Every day since that day, I have seen the same make-up case advertised by the company on my Facebook page, as well as on Instagram. I am also on the company’s e-mail list and have received e-mails that I may have “forgotten something” with a link back to the page containing the cosmetic bag. The reappearance of the product on my Facebook page, Instagram and e-mail are examples of retargeting; positioning the item elsewhere from the website itself. It is actually quite brilliant and rather expensive on behalf of the company. If I had just seen the cosmetic bag in a store in person and then walked out of the store, I would not have given it a second thought. The same goes for websites that do not retarget products that are clicked on. These are missed opportunities. Stores do not have the option to retarget, however websites do and from a digital business standpoint should take the opportunity to capture a customer’s attention where and when they can, regardless of how annoying it may be to the customer.

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Example of retargeting on Facebook

How does retargeting work?

As described by Hubspot, there are two kinds of retargeting campaigns: pixel-based and list-based. Pixel-based is the type of retargeting described in the example above where a pixel is placed on one’s server, essentially flagging or having “cookied” it as having viewed the content on the original website viewing the cosmetic case. Then, when visiting sites that that company has paid a third party retargeting fee to reach, such as Facebook or their smaller company Instagram, the same content shows up as an advertisement again. Hubspot mentions the benefit of this type of retargeting as being fast and it clearly was in my example as I was seeing the same product advertised within a few hours on other social media sites.

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Hubspot’s illustration of how pixel-based retargeting works.

The second type of retargeting is list-based. This type of targeting works when a company already has the customer’s contact information. The e-mail I received suggesting that I look at the cosmetic case would be list-based retargeting because I was logged in with my e-mail when viewing the product on the company’s website so it was easy for them to identify me as the user who clicked through to the product in the online boutique. This type of retargeting can be less successful if users are quick to delete any e-mails that come through from retailers or flag them as spam in their inboxes. Clearly there are more complex algorithms behind the science of e-commerce retargeting, but for our purposes, this is the basic overview for understanding why it is that you “coincidentally” see the same content over and over again either on social media platforms or in your inbox after viewing it one time on a website. You are being followed after all!

Does retargeting actually work?

According to CMO.com by Adobe, the average website conversion rate for is 2%, or one out of every fifty people who visit a website actually purchases something from it. With display retargeting ads, such as pixel-based retargeting, however, conversion rates are closer to 70%. Regular display ads fall at only 7% without retargeting. Thus, there is clearly a huge benefit for companies to use retargeting.

How much does retargeting cost?

It is hard to put an exact price on retargeting because it depends on seasonality, numbers of views a website has, third party vendor used, and many other factors. However, AdRoll, one of the biggest retargeting campaign providers there is, has a tool that suggests how much a company should set aside per week for a retargeting budget based on monthly visitors to a company’s site. For a less popular site that has 10,000-25,000 visitors per month, AdRoll suggests a budget of $1,000 per week on retargeting, which comes out to $52,000 per year, not accounting for seasonality. For a company whose site sees between 100,000-200,000 views per month, AdRoll advises setting aside $7,500 per week for retargeting, or $390,000 per year. While retargeting is certainly not inexpensive, the ROI and conversion rate is certainly worth the investment.

While it can seem a bit creepy as a consumer to know that your every click on a product is most likely being tracked on by websites, from a business standpoint it is quite remarkable how far businesses have come in their digital capabilities that they can now have virtual sales people reminding customers of what they were initially interested in in the form of retargeting via social media and e-mail. E-commerce certainly has come a long way since it first started 35 years ago.

5 comments

  1. Great post. Of course, the obvious reply is that I’d love for them to figure out when I’ve actually bought the item so they’ll stop targeting me with a product I already own. eBay did a similar thing a decade or two ago, it would take data about losing bidders on an item and then offer them another version of the product for slightly less than they had been willing to pay. Really great way to get buyers preferences. 70% conversion rate seems unrealistically high to me, though, although I have no doubt that its high.

  2. Austin Ellis · ·

    Great post, you hit on one of the most annoying things about online shopping. You would think that being online would protect you from being hassled, but that is very far from the case. I noticed when I was abroad in England last year that most websites over there made you accept their cookies policy in order to use the site, and I am starting to see that pop up over here now as well. I wonder if having to click “agree” is going to stop anyone from using a website; my guess is no. It is, however, a great way for companies to know what consumers are actually interested in, because by clicking on an item and checking its options, you are expressing more interest than is shown by mere stopping to look in a store. I could be wrong, but aren’t search engines like google using similar cookies to guess what you might be looking for?

  3. Nice post! It is easy to understand how something like retargeting can make it easier to convert site views to final purchases. One item that may definitely affect this in the future is ad blocking. More and more people, especially younger consumers, are using software that blocks ads on both desktop and their phone. This growing trend could have long term impacts on the online advertising industry.

  4. mikeknoll98 · ·

    I think I am the prime target of retargeting… but i love it haha!! I love seeing new products that are similar to the type of things that I buy. Also, my thought process is I would rather see the same product that I have some interest, rather than other ones I have no interest in. Like Professor Kane said though, I wish they would recognize when I have already bought an item though. Great Post.

  5. I think it is very interesting that e-commerce started as a B2B transaction rather than B2C. It makes sense in a way, but I still find that interesting. This article was a great read, and very informational. I had no idea there were two main types of retargeting, but I have experienced both.

    I agree with the above posters that it is an ingenious way to increase sales within the company, but I must admit that it can become a bit annoying. Sometimes I accidentally view the wrong product, and that is the one that follows me. Or sometimes I am solely online window shopping with absolutely no intention to make any purchases, yet here is that pair of boots showing up on my Facebook page! I think retargeting has a ways to go – they definitely should work on not trying to sell products that a consumer has already purchased – but I do think that once it is all figured out, it will be a win-win situation for all.

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