If 2007 was the year of search marketing, then 2008 is the year of behavioural targeting. With increased data and technology capabilities at our fingertips, the marketer's dream of serving up the right ad, to the right person, at the right time has become a reality.
And the news that half of Britain's population chose to do their Christmas shopping online in 2007, according to Coremetrics, will not have escaped marketing technology companies. The number of firms touting 'behavioural targeting' technology has proliferated in the past two years, with each offering software to optimise web content and ads based on 'previous behaviour' of users.
Now that half of the UK has broadband in their homes, and most traditional high-street retail operations have already invested considerable sums in their websites, it's time to up the ante when it comes to optimisation. On-site behavioural targeting companies offer just that: a way to quantify user behaviour and offer up relevant content accordingly, which increases conversion rates.
"Behavioural targeting is for the top end of the market. As websites mature, it's important to make the most of your traffic by using analytics and conversion metrics," says Peter Ellen, director of services at Maxymiser.
"Once you've got your traffic, how do you make sure you're selling the right thing to the right people? Good user experience combined with knowledge of their requirements equals more income."
"Optimisation is the key buzzword for 2008," adds Neil Morgan, head of marketing, EMEA, at Omniture. "There is a shift in emphasis away from acquisition to conversion - Google and email marketing have become more expensive; plus privacy constraints make it more complicated. On-site behavioural targeting is a quick win to convert people on-site - it's the easiest way to spend money and see results."
On-site behavioural targeting is unique in the way that is able to serve up a range of content based on data gleaned from each site visit. Ellen stresses that, while the software is intelligent and automated, it doesn't pick up on personal information. He says that the software is able to gain a picture of the user from data such as IP address, time of day, length of session, whatthey've bought before and where they have come from. All of this data isfed into software that is able to segment profiles mathematically with a self-learning algorithm.
As impersonal and abstract as some of the data may seem, Omniture's Morgan claims that the company's formula is able to routinely lift conversion rates up from 20 per cent to 200 per cent.
"The UK leads in behavioural targeting, ahead of the US, because the UK consumer is more savvy and sophisticated. The first takers were in the banking sector because it is so competitive, and it's also good at cross-selling - they are very happy to invest, and willing to take a risk," he says. "We have Lloyds TSB, HSBC, First Direct and Halifax. We'll do a pilot for 90 days, with a five per cent control group and then rotate the 'containers' accordingly."
'Containers' are boxes of content on the home page that are flexibly changed according to the user's preference as dictated by automotive predictive-modeling techniques. Barclays Bank operates this strategy with its Omniture TouchClarity software, and has seen excellent results in the past two years, particularly across mortgages, personal loans and credit cards.
Retention
Commenting on the deployment, Julian Brewer, head of online marketing and content at Barclays, explains: "Omniture TouchClarity creates the automated selection of content based on 'observed customer activity' to maximise our return and has resulted in a 100 per cent increase in inquiries in some areas of the site.
"It's not about pulling more people into the site; it's about retention. And it's not just about the behavioural targeting software; it's about improving the way the site looks, the creative, the layout, the journey and the offer, too. Touch Clarity acts as an enabler of all of this," says Brewer.
"In future, we'll apply the tool to content. The content will change on the site as you go through it, it will be more relevant - at the moment, it's technically possible, but we need to get the strategic changes in place first. We'll take whatever you've put in that is relevant and use it to build up data for a better customer experience."
However, while better data can lead to a more productive customer experience, the compiling of legions of information inevitably comes with its own privacy issues.
Many online users and advocacy groups are concerned about privacy issues around doing this type of targeting. It's an area that the behavioral targeting industry is trying to minimise through education, advocacy and product constraints to keep all information non-personally identifiable or to use opt-in and permission from end-users.
Morgan thinks the solution lies in giving consumers the choice to participate. As websites build up more data and segmentation becomes more refined, he would like to introduce a 'Would you like to tell us more about yourself, so we can deliver you a better user experience?' option.
"But advancements in personalisation will have to follow an acceptable privacy policy. It is earmarked as an area of development. We will have to take care to explain our policies in plain English. As a customer, you'll have a different set of privacy levels - it is up to the customer to decide what level they would like to opt in at," he says.
These developments could herald a new area in behavioural targeting, where more sets of data are converged - building up what could be deemed as a true one-to-one marketing profile. For example, the software could marry behavioural stats, such as logging on time and number of visits, with postcode, age and sex. It's this sort of data integration that could deliver unprecedented returns for retailers.
Ellen explains: "We'll import other demographic data, if we can from CRM - this is optional content that they have given us to improve their experience. The difference between default and tailored content is noticeable."
Brewer adds that he plans to develop his on-site behavioural targeting exponentially in the coming years, and not just in terms of advertising. Eventually, the whole Barclays site will intuitively mould itself to user preferences - the entire journey will consist of targeted content.
Front door
At the moment, the bank only optimises its 'front door' content on the top pages, but the digital manager eventually plans to offer relevant content beyond the main area, into the secure banking section where the user has entered his or her log-in details to gain entry.
"In future, online banks will pull up information pertinent to the customer's preferences - such as news feeds, or pie charts illustrating their financial status - credits, debits and savings plans, for example," explains Brewer.
Brewer has a few ideas about handling privacy issues: "In theory, Omniture TouchClarity could be developed within the bank customer's secure area, but the server would need to be walled in at the bank to avoid third-party privacy issues. In the secure area, we could use personal data to provide relevant content, but this would require due diligence. We need to be careful about secure areas, as customers would expect that their information is only touching Barclays," he explains.
Banks were one of the first sectors to take up on-site behavioural targeting because they are selling high-value, low-margin products in a cluttered marketplace. "The cost of acquisition is pretty high, so it's better to maximise the customers that you already have," comments Ellen.
Indeed, Morgan says that he was pleasantly surprised by the uptake his software experienced in the financial services sector. He explains that, while banks are traditionally cautious with their marketing spend, they are making an exception for bottom-line-based web optimisation - particularly as it is the commercial teams that make the purchase and not, generally speaking, the technology teams.
However, the next sector to take up on-site optimisation on a large scale will be broad-based retail, according to both Morgan and Ellen. And not only that, increased online segmentation could change the entire model for shopping - both on and offline.
"There will be better merchandising, focused on specific user-behaviour and then delivered dynamically. The accruing of relevant data will ensure the content is specifically appropriate for them," says Ellen. "The returns are substantial. Demographic information could prove to be important - even simple information can boost revenues.
As online shopping becomes more sophisticated, we will see a divide between the objectives of the high-street environment and the online retail environment. The website will provide a base for merchandising stock and facilitating the transaction, while physical shops will provide the brand experience.
"The internet is great for selling stock that you want to shift, pushing it out to the appropriate audience. It delivers what 'one-to-one marketing' has been promising for the past ten years - true personalisation. Previously, the concept was too complicated in reality, the only way to do it is to automate it and let the system learn as it goes along," explains Morgan.
Brand experience
But this does not mean the high-street shop is dead. Far from it. Most people still want physical products. "Apple and Vodafone do this well - the store is about experiential marketing and the brand experience, not the transaction, which is done online," adds Morgan.
Revolution's entire expert panel agrees that behavioural targeting doesn't take away the value of human intuition in the marketing process. It will always require smart marketers; marketers that know how to leverage the software available them to gain best advantage in an increasingly tight market.
It comes back to a sentiment that we're learning time and time again in the online world; the basic tenets are the same as the offline world.
"As online matures, products and merchandise will become more competitive. It comes back to the core of retail - once you've got customers, if you don't have the right products, you won't sell anything. This era has now caught up with us online," says Ellen.
"It's a way for retailers to gain an edge - the smart ones will use this tool to change and modify their merchandising models; so that the internet does the transaction and the shop provides the experience," adds Morgan.
MASTERCLASS PANEL
- Neil Morgan is head of marketing, EMEA, at Omniture, a provider of online business-optimisation software. He has spent 17 years across all marketing disciplines including product management, product marketing, channel marketing, PR and analyst relations.
- Peter Ellen is managing director of services at Maxymiser, a website optimisation company. Ellen rose from the shop floor to become managing director of retail chain Fopp in 1999. Before leaving in 2005, he had led the chain from sales of 拢4 million to 拢35m.
- Julian Brewer is head of online marketing and content at Barclays. Having cut his teeth with the launch of interactive services at The Woolwich, he made the move to Barclays five years ago when the bank took over The Woolwich.
MAXYMISER HELPS EASYDATE INCREASE PAID MEMBERSHIPS
EasyDate operates eight properties in the online dating industry ranging from mainstream singles sites to niche adult and mobile offerings. In a mature and competitive market with a high cost per acquisition associated with many of the more lucrative keywords, the group has a history of harnessing new technologies early on.
Acquisition efforts focus on driving visitors to register for a free membership, allowing them to create a profile and have a limited level of interaction with other visitors. Maxymiser's behavioural-targeting technology was employed early in 2007 across four of the group's properties with the aim of increasing the number of these free registrants converting to some level of paid membership.
The EasyDate marketing team identified a number of factors to contribute to the behavioural records of visitors. These included interaction logs, on-site search history and profile attributes set by the user.
These behavioural records, together with new promotional content, allowed each customer to be served the optimal personalised content as measured by its ability to improve conversion to paid member. By creating opportunities to satisfy customer's specific requirements more accurately than ever before, banners, calls to action and other promotional content were presented to individuals on-site at the most relevant times.
As an example, it was found that response to content varied significantly based upon the age of the visitor as given in their profile.
Over the first six months of the engagement on DateTheUK.com, the activity realised a 15 per cent uplift in the number of free registrants upgrading to a paid level of membership. The contribution to EasyDate's bottom line was significant and the company remains a key client.
Maxymiser's behavioural targeting increased repeat visitor numbers to the point that the group's main adult property grabbed position one in HitWise UK dating rankings (traffic figures, November 2007). EasyDate operates three properties that consistently rank in the top 20, including DateTheUK.com and BeNaughty.com.
TOP TIPS ON ON-SITE TARGETING
1. Targeting is a strategic activity designed to increase sales and conversion on your web site. Ensure it gets the right level of executive sponsorship from the start.
2. Next, make sure that your site usability is worked out. There's no point targeting content if visitors can't find what they want.
3. Collect the right data. Your web analytics house should be in order before you take the next step with on-site targeting.
4. Think about the specific online segments that you want to target. These will need to be made available in the data collection process.
5. Be clear about the key performance indicators (KPIs) that you want to improve from a targeting strategy - is it to boost click-through rates, completed purchases or profit margins?
6. Focus on the highest value areas of your web site where you can influence the most visitors/sales opportunities. Each instance of targeting should be reviewed for its commercial benefit. Target high volume areas.
7. Each individual visitor's behaviour is unique and should be factored into the targeting decisions as much as possible.
8. Don't be drawn into setting rules. Having the marketing team try to figure out what content to show to which visitors and when will never scale. Let the system watch what is happening on your site and optimise the content for you.
9. Ensure that the business and IT resources are in place internally to deliver a success project.
10. Think about the politics and implications of on-site targeting on the various stakeholders. Who do you need to win over as you introduce this into your organisation? Are the marketing directors ready to let go of which creative appears on your home page? Thanks to Neil Morgan of Omniture.
CHECKLIST
- Do you have enough traffic to warrant effective autonomous targeting?
- Have you set your specific conversion objectives?
- Is your website already optimised for usability?
- Do you have management buy-in for your targeting project?
- Have you worked out which areas of your site could yield the most
value?
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