When does personalization pay off in ads?

When does personalization pay off in ads? - Marketing - Lorelei Web

We have known that personalization in advertising is more appreciated because it is more relevant for consumers. And relevance is essential to earn the viewer’s attention as an advertiser. The technology to serve campaigns with dynamic creative content has been around for some time. So you put extra effort and costs into personalizing and differentiating advertisements. But does that really pay in terms of purchase intention and brand effects?

In a recent study by IPG Mediabrands, this was further investigated for the American market. Below are the main results.

What has been researched?

For this study, multiple advertisements were personalized based on socio-demographics, purchasing behavior, search behavior, locations, and life stage. Data that you can usually find in the digital ad server environments. These ads were shown to 6,000 Americans for a YouTube video.

When does personalization pay off in ads? - Marketing - Lorelei Web

Naturally, the dynamics and content are very different per industry. That is why advertisements were tested in several product categories ( automotive, retail, and finance ) and on different devices (mobile and laptop / PC).

A personalized ad can lead to 5% more intention to buy than a regular, standard ad.

An example of this is the use of a location in the ad text. From a creative point of view, this is a relatively simple form of personalization. Different types of personalization also score differently. This depends on the objectives you have with a campaign.

If you want to improve brand perception, it is best to personalize purchase behavior, location, and life event data. For brand preference, ads that use search data work best. And so this varies per funnel objective. Life events work best as a source for personalization. This was also evident from previous studies by Mediabrands. This way, you can determine, depending on the objective, whether you should invest in personalization or not. Personalized ads work better than standard ads in the following cases:

Personalization on location

Location data, therefore, yields 5% more purchase intention. But consumers also get an “I am being followed and tracked” feeling. This is compensated for: the perception that the brand is relevant increases by 14%. The general brand preference also increases with this form of personalization by 16% compared to the effect of a standard advertisement.

Personalization on purchasing behavior

Consumers find personalized advertisements that use purchase behavior data 12% more innovative on average. There is also a higher chance (12%) that consumers will discuss and share them. 61% of the people who have seen the personal ad experience the brand as one with a unique story. For people who have seen a standard ad, that is only 49%.

Personalization on search behavior

Using search behavior to make advertisements more relevant leads to an 8% higher brand preference. 12% also find advertisements more informative than standard advertisements.

In short, impressive scores and reasons enough to start experimenting with personalized advertisements. There is one ‘but’ in this story …

Note: acceptance of data usage

To what extent do consumers accept that advertisers use their data? That differs per industry. People accept the use of data, least from banks, car brands, and pharmaceuticals and most from restaurants, retail brands, and travel agents. The more personal it becomes, the fewer consumers appreciate the use of data.

So it makes sense to take this into account when creating personalized ads. The ad says: “I have this data about you, and I am using it now.” The most sensitive type of data is to search behavior and major life events. So you have to be careful with this.

It is striking that people on their mobile phones are more accepting of the use of data for personal ads. Compared to a desktop, 14% more accept the use of ‘mood predictions’, 12% more ‘life events’, 10% more ‘where you often go,’ and 11% more ‘social media use’. The graph below shows all scores. Still, the current location does not score better than on a laptop/desktop, although it is obvious to do something with it on mobile.

Therefore, personalization works even better on mobile, where people accept the use of data more and are also more comfortable with it. On average, one-third of all digital advertisements are now delivered on mobile, and that continues to grow.

Specific targeting in combination with personalized messages

How does personalization work with a broad targeting strategy? Do you also see positive effects if you target specific target groups (for example, people who love yoga, own a dog, or are vegan)?

You can see that personalized advertisements’ impact is higher with these High-Value Audiences (HVAC) than with socio-demographic groups. But if you now adjust the personalization to the drivers of this HVAC, you will see a higher uplift than if you only use the standard data sources. Specific targeting methods thus increase the effect of the personalization efforts.

Brand preference rises 8% with standard personalization methods and as much as 20% with personalization-based personalization methods. You usually have to use the third or first party data (such as CRM data) in the latter form.

Research into the Dutch market will follow

  • Personalization of creative ads leads to higher brand recognition, brand preference, and buying intent.
  • Do take into account sensitivities in the use of this data and differences per product category.
  • Ads that were personalized based on search behavior data and life event data were the most successful in creating buying intent and brand preference.
  • Personalization works extra well on mobile and when specific HVAC are targeted.

This was a study in the US market, so it is probably not 100% representative of European and Dutch consumers. That is why there will be a follow-up study in the Dutch market. To be continued, so!

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