Consumers appreciate personalized offers. According to research carried out by Adlucent, 71% of consumers prefer ads that are tailored to their interests and shopping habits while 75% prefer ads that are aligned with their needs.
You can achieve effective ad personalization by leveraging artificial intelligence (AI) and machine learning (ML) to recognize patterns in your target audience data and use the insights generated to increase the relevancy of ads served to each user.
What is Ad Personalization?
Ad personalization is a strategy that involves tailoring and delivering relevant advertisements to your target audience based on hyper-specific information such as their demographic, geo-location, preferences, niche interests, or buying intent.
In an article for AdWeek, Christopher S. Dean, a VP at Salesforce refers to personalized ads as a “digital concierge” that anticipates customers' needs and directs them to what they want. Essentially, ad personalization is when ads are customized to appeal to the specific interests or buying behavior of an individual consumer.
How Does Ad Personalization Work?
Ad personalization leverages data, analytics, artificial intelligence (AI), and machine learning (ML) tools to understand and engage customers based on the context of their behaviors.
In short, companies specializing in advertising such as pay-per-click (PPC) collect user information from various sources, then use algorithms to analyze all that data and serve ads relevant to each user. The process of ad personalization involves:
- Data Collection: A large amount of user data is collected by the two largest ad providers, Google and Meta. Google typically collects contextual data from search queries, location data from Google Maps, and app data from the Google Play Store. Meta collects social media data like personal profile information, liked pages, and posts. Advertisers then draw from this data using pixels, cookies, and other tracking tags.
- Data Analysis: This involves using machine learning algorithms and analysis tools to process the data collected, identify patterns and derive insights. This analysis helps in predicting users’ behavior, preferences, and interests as well as identifying the best ad format for a particular user.
- Ad Targeting: Advertisers use insights from analysis to show relevant ads to specific users. This sometimes includes retargeting ads to users who have previously interacted with their brand.
- Ad Delivery: Using various platforms, programmatic advertising, and the right messaging framework, advertisers automatically deliver targeted display ads, social media ads, search ads, or video ads to individual users.
- Ad Performance Monitoring: Advertisers track the performance of their ads and use the data to improve their targeting and optimization strategies. They also use other optimization techniques like A/B testing to experiment with different ad formats and targeting options that improve the ad's effectiveness.
Is Ad Personalization Effective?
Personalized advertising is a “powerful tool” states Google AdSense, adding that it improves the relevance of ads for users and “increases Return on Investment (ROI) for advertisers.” A 2021 article by IBM Watson Advertising also mentions that 66% of customers expect companies to understand their unique needs. According to the article, personalized ads boost engagement, help with product discovery, and “make online searching faster for those looking to buy”.
Based on these insights, as well as data showing that up to 81% of Gen Z and 57% of millennials like personalized ads, it’s safe to say that ad personalization is highly effective. However, with growing concern about privacy, it has become important to explore transparent and ethical methods to collect data and deliver effective personalized ads.
Benefits of Ad Personalization
Some benefits of ad personalization for you as an advertiser include increased click-through rates, improved conversions, and higher ROI. Ad personalization can also lead to better user experiences, which can in turn lead to increased brand loyalty and customer lifetime value
People understand that personalized ads reduce their search time and help them find options and value for their wants or needs. This means that users who see ads that are tailored to their interests are more likely to click on them and learn more about your product or service.
Conversion means that after viewing an ad, or part of it, a consumer takes a particular action that benefits a brand. This can include clicking on the ad to finish reading or watching, opening the website, and ultimately buying the product advertised. Generally, more people are likely to take action if the ad they see is personalized.
Ultimately, personalized ads can increase ROI. Since more people are likely to engage with the ad and complete a beneficial action, you will get higher returns for the effort and spending involved in advertising.
Challenges of Ad Personalization
Risk of Spooking the Customer
Many people already believe that their phones and other smart devices are listening in on them. While this may be unverifiable, personalized ads can fuel that fear, especially when over-emphasized.
Probability of Failure
Ad blockers on phones, browsers, and sites are becoming increasingly common. If a user has an ad blocker enabled, ads will not reach them, personalized or otherwise. In fact, some people may be more specific by turning off personalized ads, ensuring that advertisers cannot collect their data and include it in the ads shown to them.
Privacy is a rather sensitive concept. As such, while advertisers may decide to collect data to improve ad experience, they may go about this unethically, buying unauthorized information from analytics companies. People also fear that their information may be sold for much more than creating personalized ads. This leads users to distrust personalized advertising.
Different Types of Ad Personalization
There are different ways to personalize ads. Let's take a look at a few of the techniques you can use to create the best experience for your prospects possible.
With direct personalization, you can target a specific user by using their name or sending them reminders about that their shopping journey. An ad copy that reads “Dear John, don’t forget that the promo for the wristwatch in your shopping cart ends in two days.” is directed at John, a single user. This gives the feel of a one-on-one interaction. Direct personalization can be achieved by personalizing emails or enabling a bot to have a relevant conversation with users.
Here, you can decide to personalize ads by showing customers the ad that has had the highest engagement, conversion, and ROI rates. This way, you don’t have to create multiple ads to suit every single user’s taste.
Ads for a product can be tailored differently for different demographics. Let's talk through the example of a banks' personalized advertising. Opening a bank account is essential for anyone, meaning that there is a wide range of demography involved in advertising for easy ways to open a bank account. With age, for instance, you can decide to create separate ads for each age range. This will appeal to different demographics, while still maintaining the core advertising message.
Here, special attention is given to the search history and stage in the consumer’s journey. So, ads are personalized based on what the user has searched for (possibly recommending similar products), as well as what they seem most likely to do (if they have abandoned their cart, the ad would attempt to steer them back to the site and convince them to purchase the product).
In addition to the types of ad personalization mentioned above, you also need to know the six levels of ad personalization which signify the degree to which ads can be personalized and are broadly classified as follows:
- Level 0: Users are targeted based on their needs or wants, as well as their country or state.
- Level 1: Ads in this level are personalized based on needs or wants, and city location.
- Level 2: Ads in this level are personalized based on need or want, city location, zip code, and demographic info (age, gender, income).
- Level 3: Ads in this level are personalized based on need or want, city location, zip code, demographic info, and general interests (sports, beauty, fashion, technology).
- Level 4: Ads in this level are personalized based on need or want, city location, zip code, advanced demographic info (brand loyalty, political preference), niche interests (favorite music, hobbies), and buying intent (search keywords).
- Level 5: Ads in this level are personalized based on need or want, city location, zip code, advanced demographic info (brand loyalty, political preference), niche interests (favorite music, hobbies), buying intent (search keywords), and historical behavioral patterns.
How to Achieve Effective Ad Personalization
Many people ignore, close, or skip ads that are irrelevant to them. Forbes states that 49% of people are likely to ignore an ad if it appears irrelevant. In order to create personalized ads that deliver results, your ads need to add value to the user experience and also meet the requirements listed here.
Collect Relevant Data About Users
Data about users and consumers drive ad personalization. You have to collect data about target users based on the levels mentioned before. This information can range from simple things like what the user needs and where they live, to their behavioral patterns and political interests.
Know Where Users Are in the Marketing Funnel
Understanding where a user is in the marketing funnel helps you personalize your ad content and improve ad selection for users. For example, if a consumer is in the conversion stage, showing them an ad for similar products can convince them to return to your site and buy.
Use Retargeted Ads
This is a strategy directed at users who have visited a website but have not made a purchase. People may visit a website, and even fill their cart, and never really get to check out.
Retargeting helps to bring the site, and the browsed products, back to the attention of the user, and may convince them to make that purchase. Dynamic ads (personalized based on search history and items in the cart) and Google Display Network (which allows you to determine the time and location your ads are shown, based on features determined by the advertisers) are ways to achieve retargeting.
Choose KPIs to Measure Success
For every advertising or creative campaign, it’s important to measure performance, analyze, and refine your strategy.
After creating and implementing personalized ads, you must evaluate results, which helps you identify what is working and what needs to be re-evaluated. You can include surveys and forms for users to share feedback on the ads shown to them.
Be Ethical With Your Approach
Privacy is a major concern for users who are served personalized ads. They are aware that it requires a large amount of their personal information to deliver these tailored ads and as an advertiser, you should be mindful not to spook them further.
Offer voluntary ad transparency in order to build trust, be open about why personal data is collected, and lean more towards other forms of first-party data collection as opposed to third-party cookies and tracking codes.
To Sum it Up
Ad personalization is a good way for you as an advertiser to improve the effectiveness of your advertisements and increase ROI. By personalizing ads, you can make sure that your message is relevant to the individual and more likely to be of interest to them. This can result in higher click-through rates and conversions, and ultimately, more customers and sales.
To get started developing your omnichannel personalization ad strategy, reach out to the experts at MarinOne. We will help you set up the automation needed to make personalization a stress-free experience for your marketing team.
Bernard Aguila is a guest contributor to Marin Software.