By Harvey Goldhersz, IRI Media Center of Excellence
Today, data is the fuel that drives marketing successes, but not all data are created equal. As CMOs are being asked to consistently deliver growth, it is the marketing organizations that can identify and then successfully apply high-quality granular data that will win.
In reality, only a small number of CPG brands consistently deliver and execute a new “big idea” year over year. However, with the right due diligence and the right data, every brand marketer can find opportunities to improve performance by making small changes to how they approach certain business processes.
One area where quality purchase data at scale can improve marketing performance is audience targeting, as previous purchase behavior is the truest indicator of future purchase behavior.
Let’s look at a quick example of how media buying plays out today, where the opportunity exists and why purchase based targeting delivers a 4-5x higher return on advertising spend than legacy targeting tactics.
Choosing Targets Based on Your Performance Metric: Sales
Many campaign briefs include descriptors of the household that is expected to buy the advertised product. This can inform everything from the creative to the channels and properties where the campaign media is running. This data is useful and valid, as many CPG brands build these briefs based off consumer surveys or consumer household panel solutions that are used by the brands for everything from competitive intelligence to product development to brand portfolio planning. But does using this information for campaign targeting deliver the ideal response?
To better understand the reason why purchase-based targeting delivers a better response than a proxy targeting tactic like demographics, let’s take a look at an example scenario that describes how this plays out.
The Legacy Approach
Let’s say that ACME soup company wants to execute a digital campaign advertising its expanded line of all-natural farmer’s market flavor soups. The campaign brief may state that one of the target segments is young mothers aged 18-49 with a household income above $100,000.
A media buyer can log in to their DMP or DSP to apply the stated criteria and as long as they meet frequency and reach objectives, get a pat on the back.
But let’s say that target audience includes a household that meets that criteria, but a mother that was included in the target is a yoga teacher who only buys organic soup for her children. No matter how often she is exposed to the campaign, those impressions are wasted as her household is never going to buy.
Alternatively, let’s say there is a mother who is 50 years old, has a full-time job and two kids, and buys soup for her family every two weeks during her pantry-stocking trip. This household is most certainly a great target for this campaign but, because the mother sits outside the target age range, she’ll never see the ads. What should be more important to the advertiser - the fact that this mom is a heavy soup buyer for her household or that she missed the demographic age cutoff by a year?
A Purchase-Based Approach
Using a purchase-based targeting approach, a media buyer would log in to their DMP and DSP selecting audiences identified as:
- Households that have bought the farmer’s market flavor soups during the last 26 weeks
- Households that have bought any brand of all-natural soups in the last 26 weeks
- Households that have a propensity to buy the farmer’s market flavor soups based on their similarities to other households
With this approach, you are first identifying the strongest signal you have in the data. Then, you continue layering on the next strongest signal until you have an audience sized to meet your sales objectives.
Since you are relying on purchase behavior to build your target, the chances of wasting an impression on the organic-only mother is significantly reduced. And, you will always identify the 50-year-old mother who would buy the farmer’s market flavor soups.
Shifting your approach to purchase-based targeting does require a change in thinking and business process. However, if return on ad spend is the lens by which we determine if a conversion-focused campaign is ultimately assessed, spending a little more time upfront to achieve a 4-5x better ROAS than legacy tactics is a tradeoff that CMOs would embrace and celebrate.