Increase ROI With Performance-Based Solutions

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The effectiveness of an online advertising campaign depends on a number of factors, not the least of which are a killer product and compelling creative. But once online marketers have defined their product, price point and audience, what can they do to get the most bang for their online advertising buck?


Today the most effective campaigns use comprehensive online databases that analyze criteria in real time. This enables marketers to use intuitive measurement and profiling tools that can be used to pinpoint what's working and provide smart, cost-effective methods to build brand and customer relationships, thus increasing a strong return on investment.


According to Jupiter Communications, more than one in four advertisers are failing to tailor online creative by behavioral segments. The study suggested that marketers must move beyond the limited offline model of demographic and content tailoring if they are to optimize their online creative execution and capitalize on the opportunity the Internet provides to connect with today's online consumer.


In another recent report, Forrester Research emphasized that the shift toward performance-based advertising - that is the use of emerging online tracking and ROI tools - will be the basis for 53 percent of U.S. online ad spending, which is expected to reach 22 billion by 2004.


Let's examine some of the innovations in online advertising technology, which are available today on various levels from the leading ad serving companies:


Adaptive Targeting


What if online marketers could immediately change their ads based on the behavior and content requests of online users? This little-known, but readily available tool has been referred to as adaptive targeting because it allows advertisers to deliver messages based on dynamic criteria in real time. This has been shown to enable advertisers to learn what creatives are working and how to adjust the marketing message in real time for maximum effectiveness.


Unlike targeting engines that depend on external user profile databases, adaptive targeting is typically based on user criteria that is stored directly the same ad server from which ads are delivered. This allows the advertiser to have their data updated in real-time and immediately available for review.


Here's an example: a nationally-branded bank has an ad server delivering a campaign in the financial sections of selected portal sites to promote its new online banking product. A user sees the ad, clicks through, and proceeds to fill out the online application at the bank's Web site. Upon the bank's acceptance of the completed form, the user's status is instantly changed from "prospect" to "customer." From that moment on, whenever the user visits a site that is part of the bank's advertising campaign, that user will be served a "customer-only" ad. In this case, it could be an offer of cash for getting a friend to sign up for online banking.


The Advantages of Psychographic Tracking


There are two types of user profiles: The first is the traditional, opt-in database method, where users provide information such as age, income, marital status, etc. This is similar to the demographic profiling used in direct mail or e-mail marketing.


The lesser-known method of tracking is psychographic profiling, a method of data warehousing that tracks user behavior according to factors such as Web sites visited, areas within sites and keywords used. Specific user behavior patterns are charted via cumulative scoring based on frequency of visits and profile categories including automotive, business, entertainment, shopping, sports and finance.


The benefits of this solution are dramatic. User profiling can control delivery of ads based on ads a user has seen, ads a user has clicked on, sites visited, sections visited, and purchases or transactions on sites. And real-time modifications are implemented as user interest shifts from one subject to the next. A person buying a house, for example, could focus on finance for several months and then turn his interest to home improvements and purchases.


Despite its name, psychographic profiling does not track any personally identifiable information about its visitors. And because it is anonymous, there is no opt-out feature because at no time is any identifying information recorded. This is a boon to users who have concerns over privacy, and a big win for online marketers, as recent testing shows that some sites have experienced a 300 percent increase in click-through rates as a result of using psychographic profiling.


The Perpetual Buy: A One-Stop Solution


Another little-known yet effective concept in online ad serving is the 'perpetual buy,' which is an ongoing program that, with a single purchase of impressions, offers Web publishers and advertisers an affordable and highly targeted solution. In addition to its targeting properties, the perpetual buy is a one-step process that can keep a campaign running over a network indefinitely, with the publisher/advertiser paying per impression according to their predetermined budget.


For Web publishers, the perpetual buy works like this: The publisher purchases a set amount of impressions per month and breaks users down to several specific categories. For example, the criteria could be set to include users who have never visited the site, users who have visited the site but never made a purchase, and users who have visited the site and bought something afterwards.


Based on the above criteria, which is updated immediately, targeted advertising can be delivered on an ongoing basis according to a set of established rules. For example, people who have never visited the site will be served an invitational ad three times. If they don't respond after the third try, the server will discontinue delivery attempts, under the assumption that the person is not likely to ever visit the site and the ads are being wasted.


Users who have visited the site but never bought anything will be served an ad offering them a 10 percent discount as an incentive to buy. If those users visit the site and make a purchase, they will automatically be reclassified as 'customers.' Once considered customers, they will not receive ads at all, but instead will be provided with other marketing incentives, like customer retention programs.


The perpetual buy also holds specific benefits for advertisers, but instead of behavioral patterns, it controls the delivery of pre-designed creatives based on certain criteria.An airline can purchase ads across the Web, for example, offering fares and services based on a customer's status. Different creatives can be developed based on the customer profiles, such as those who have never flown with the airline before, those who are frequent-flier members, and those who are 100,000+ mile members.


In this case, an infrequent traveler may receive an offer to travel at a discount fare, while the frequent mile member might receive a promotion to double their miles, and the 100,000+ member gets an offer for a free ticket. As with publishers, this technology has the ability to discern changes in customer status in real-time and deliver ads accordingly.


The key benefit of perpetual buy is that both advertisers and publishers can control their reach according to behavioral patterns or delivery of specific creatives. For publishers, it results in an improved CPM rate. It's also a win for advertisers, because it allows them to purchase fewer ads, and not waste impressions on those who are already customers or simply not interested. Bottom line: if the ad is more relevant to the user's experience, they're more likely to respond to it.


A performance-based marketing approach can give online marketers significantly more power for their advertising dollar, but even so, traditional media buying habits should not be ignored. A successful marketing campaign should be well-rounded, and careful thought should be given about where an advertisement should be placed. We always recommend to our clients that they consult an expert media buyer for help with their purchases, relationships, and pricing. It's also advisable to inquire whether the site under consideration provides a reputable ad serving solution, which can be determined by simply asking the advertising representative what ad serving system they use, and whether ROI-based solutions, such as the ones presented here, are available.
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