How to Get Smart About Retargeting Ads

Paid advertising is often one of the most expensive aspects of your marketing budget. It’s infamously difficult to strike a balance between high cost and high reward. While retargeting campaigns generally have a better ROI, your strategy still suffers if you leave it up to the algorithms — which don’t always serve your ads to the right people. On the flip side, micromanaging your campaign can limit its reach.

How can you maximize your ROI while reducing your cost-per-acquisition? Thankfully, new A.I.-powered ad platforms make it easier to serve up the ideal ads for the audience that will bite. Here’s what to know about the smart approach to retargeting.

The True Costs of Paid Advertising

Most PPC campaigns focus on the top-of-the-funnel (awareness building) and run on Google AdWords, Bing Ads, etc. They target keywords you believe your audience will use. Obviously, you need to cast a broad net to capture enough “fish.” The wider you go, the more you spend. And because your scope isn’t highly specific, it’s more challenging to resonate with your target audience. This is especially a problem for niche or high-ticket items, where you must align your ads with specific interests and buyer journeys.

The results? A relatively low conversion rate and high cost-per-click (CPC), ultimately resulting in an extremely high cost-per-acquisition (CPA). Cross-industry averages are $1.03 CPC, 1.8% CTR, $18.71 cost-per-mille (CPM), 5.2% conversion, and $19.64 CPA. This means to acquire 100 customers, you’d have to reach more than 106,000 people and spend nearly $2,000.

This may not sound terrible, but once you consider the actual revenue generated by those conversions, the costs may be quite steep compared to the payoff — especially for high-ticket or niche items, where you already face conversion challenges.

For example, Power Tank sells portable AC units for off-road vehicles — a product that appeals to a very niche audience. For this unique, innovative product, the ticket price is already high. If they were to spend $2,000 on a PPC campaign, which goes on autopilot and achieves 2,060 clicks, most of which are not from qualified leads (they don’t have an off-road vehicle, don’t spend a lot of time adventuring, don’t live in a hot climate, etc.). Assuming a conversion rate of 2.2% (the average rate for equipment purchases) you end up getting 45 customers buying $100 items, which means your CPA is $44 and you effectively spent half of your revenue on more than 2,000 lost leads.

High PPC costs could easily cut into your profits.

One chief problem is that many PPC platforms will simply serve the ads according to your audience, with no way of distinguishing qualified leads from unqualified ones. You can fix this by crafting each campaign to target specific searches, but that requires a lot of time that ultimately doesn’t boost your profitability.

Thankfully, there are ad platforms that can serve dynamic ads for each audience segment’s interests. Before we discuss those, though, let’s look at another way to refine your targeting.

Retargeting — Better Bang for Your Buck

Any high-ticket items such as portable AC units are likely not going to be an impulse buy. Leads need the opportunity to recognize and re-engage with the product. And if they see something that doesn’t suit their particular need, they’ll ignore it and the associated brand. That’s why generic ads can be a waste of money; you’re paying for messages that don’t tap into your leads’ buying journeys.

The solution is to retarget website visitors based on their previous browsing behavior.

Retargeting campaigns are primarily done on platforms such as Facebook, where users who visited your website see targeted ads for your offering. This means they’re focusing on middle-of-the-funnel leads who have already engaged with your brand. The people who see your ad are already aware of your brand and are usually in the evaluation phase. Therefore, they’re more likely to convert.

Indeed, retargeting ad campaigns generally boast 10x the clickthrough rate of standard display ads and half the cost-per-click. Your ads are only served to people who have already visited your website, and because they’re also more likely to click, you ultimately pay less for conversions. The cross-industry average CPC for retargeting is just $0.66. So, you can continue running your campaigns for cheap, allowing you to continually target your leads until they convert.

The Best Option: Smart Retargeting

Unfortunately, retargeting campaigns aren’t guaranteed revenue-generators. If the leads aren’t shown ads that follow from their previous engagement, you’ll be throwing money down the drain. However, you also don’t want to swap your adverting budget for the labor costs you’d incur with constantly tweaking your campaigns.

For example, let’s say you have a decent retargeting campaign running for your most popular portable AC unit. People visit your website but don’t make a purchase, then they see your retargeting ad on Facebook. Ideally, this reminder pushes them to click the ad and buy the product. But what if they were looking at a different product? Or they spent significant time on your site but not on any particular product page? Or they were simply researching for a future purchase but aren’t ready to buy? How do you retarget these people?

Rather than spending your valuable time tracking those leads’ search activity or figuring out which retargeted offers appeal to them most, let the bots do it for you. Artificial intelligence pulls users’ behavioral history, social media interests, and other key data, then dynamically serves retargeting ads that best suit their unique buying journeys, which vary in urgency and motivators. For a great example of this, consider Amazon, which has perfected the art of recommending products you didn’t even know you needed.

Wrapping Up: Re-thinking Retargeting

Whether you’ve been sticking with basic paid search campaigns and are eager to boost your ROI, or you’ve started retargeting but are still paying a high CPA, smart retargeting with an A.I.-powered ads platform can help you serve the right ads at the right time to each segment of your audience. At SharpSpring’s A.I. Lab, we recently helped a portable AC unit improve their retargeting for a 14% cost savings. Download the case study here and learn how smart retargeting can trim your budget while unlocking new revenue opportunities.