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Boosting Returns on E-Commerce Retargeting Campaigns

Boosting Returns on E-Commerce Retargeting Campaigns

Jing Li, Xueming Luo, Xianghua Lu and Takeshi Moriguchi

Because consumers often abandon e-commerce carts, companies are shifting their online advertising budgets to immediate e-commerce cart retargeting (ECR). They presume that early reminder ads, relative to late ones, generate more click-throughs and web revisits.

In a new Journal of Marketing study, our research team develop a conceptual framework of the double-edged effects of ECR ads and empirically support it with a multi-study multi-setting design. In Study 1, we find that customers who received an early ECR ad within 30 minutes to one hour are less likely to make a purchase compared to those who did not receive it. These findings reveal a causal negative incremental impact of immediate retargeting. In other words, delivering ECR ads too early can engender worse purchase rates than without delivering them, thus wasting online advertising budgets. By contrast, a late ECR ad after one to three days has a positive incremental impact on customer purchases. Study 2 replicates this double-edged impact of ECR ads delivered by mobile SMS and explores cart characteristics. Both the negative impact of early ECR and positive impact of late ECR can be amplified when the products in the retargeted carts are larger in quantity and at higher average prices. 

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Given the prevalence of retargeting ads in practice, our findings provide managers with specific guidance on implementing ECR ads to boost ROI on retargeting campaigns. First, companies should not heedlessly follow the recency bump and shift all their online ad budgets to immediate retargeting. Delivering ECR ads too early can engender worse purchase rates than without delivering them. That is, too-soon reminder ads may annoy consumers and backfire, thus not only squandering ad budgets, but also likely hurting customers’ long-term satisfaction. Prudent marketers should resist the temptation of immediate retargeting even though advanced digital e-commerce technologies can deliver retargeting ads within minutes after consumers abandon carts online. However, early ECR with price discounts or scarcity framing may allow managers to engender more purchase responses. But price discounts are not a panacea: When repeatedly used, they may train strategic customers who purposefully cart products and then wait for price discounts before purchasing. 

Second, it is pivotal to scientifically gauge the causal impact of ECR ads. Firms should not rely on the absolute purchases as a measure of success, but rather adopt the relative purchase (i.e., incremental to the control without retargeting). Naively, without comparing the retargeting with the control, managers may mistakenly conclude that the early ECR is most effective. Our data show that simply observing the absolute effect indicates that early ECR within one hour induces the highest absolute purchases. Yet, compared with the early control, early ECR actually backfires with negative incremental purchase responses. Thus, we underscore the importance of using scientific experimental methodology to avoid an erroneous conclusion about the true effects of ECR ads. 

Further, we find that a late ECR ad can be effective and win back potential customers with an increase in ROI on advertising. Thus, firms can better deploy ECR ad campaigns with a delay after consumers abandon carts to minimize negative ad annoyance as well as maximize the positive ad reminder effects on customer purchases. Retargeting carts in e-commerce has enormous business potential because more than 69% of consumers abandon carts online, which amounts to more than $4.6 trillion each year. An interesting point is that the right timing of ECR does not incur additional financial costs in retargeting, but can significantly lift customer purchases. 

Finally, managerial actions call for an appropriate match between the timing of ECR ads and retargeted products. It is necessary to use ECR to cater to different types of cart abandonment. Different cases include carts with a high quantity of products versus carts with only one item or carts with an expensive product versus a cheap one. Thus, we reveal a tactic e-commerce retailers can use to more accurately retarget customers with different digital carts. Strategically, firms can decide the time to turn on ECR, depending on its suitability for different types of carts, to maximize conversions. For example, managers can win back more customers by implementing late ECR ads for carts with a larger quantity of products abandoned. 

Read the full article

From: Jing Li, Xueming Luo, Xianghua Lu, and Takeshi Moriguchi, “The Double-Edged Effects of E-Commerce Cart Retargeting: Does Too Early Retargeting Backfire?Journal of Marketing.

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Jing Li is Assistant Professor, School of Business, Nanjing University, China.

Xueming Luo is Charles Gilliland Chair Distinguished Professor of Marketing, Strategy, and MIS, and Founder/Director of the Global Center for Big Data in Mobile Analytics, Fox School of Business, Temple University, USA.

Xianghua Lu is Professor of Information Systems, School of Management, Fudan University, China.

Takeshi Moriguchi is Professor of Marketing and Director of the Research Center of Consumer Behavior, Faculty of Commerce, Waseda University, Japan.