Digital Advertising

What is Retargeting and How Does it Work?


Last Updated on: 23rd May 2024, 11:45 am

Do you know what retargeting is? It is often mentioned as a method of promoting products on the Internet among users who have already expressed interest in your offer by visiting your website. But is retargeting the right advertising strategy for your business? We will provide you with a definition of retargeting and more useful information about the technologies leveraged in this technique.

In this article you will learn about:

  • Retargeting (what retargeting is and why you should consider using it)
  • Types of customers that are out there on the Internet (and how to reach them)
  • How real-time bidding dominates the world of online advertising
  • Deep Learning and how it improves the efficiency of retargeting campaigns
  • Companies that should invest in retargeting
  • Influencing the user experience of retargeting

Table of Contents:

What is the purpose of retargeting and how does it work?

Retargeting is an advertising technique that enables brands to display ads based on consumers’ previous online behavior, purchase intentions, and needs. It has been in use for many years now, and many companies implement it (especially in the ecommerce sector). But how does retargeting work?

A user visits a website (for example, an online store or a travel agency website). Several actions may be performed during the visit, such as adding products to the shopping cart, viewing offers, etc. All of these activities provide the company with some information about the potential customer’s needs and interests, and such data is of great value because it can be used to better adjust campaigns.

The exemplary retargeting scenario for the fashion industry looks as following:

Example retargeting scenario

What types of users are out there for you to reach?

To fully understand how retargeting works, you first have to learn how online consumers behave. Several types of users interact with your ecommerce website or web app:

  • Visitors – people who only view your offers but they have never put any product into the shopping cart and have never placed an order before.
  • Shoppers – these users have sometimes put some products into the shopping cart (at some time in their history), but they have never ordered anything (the reasons for that may be varied – high prices, change of heart, difficulties in the ordering process).
  • Buyers – actual customers who have placed an order before (at some time in their history).

You could choose to target any or all of them with your retargeting campaigns.

What are the types of retargeting?

Within each group, online retargeting can be used to reach out to specific customers. For example, if you run a fashion ecommerce store, you might choose to create online retargeting campaigns for new customers, or customers interested in specific collections, or shoppers who are interested in sale items, and so on. Each of these is called a retargeting scenario and allows you to target customers with products they care about. However, the real personal touch comes when you can run several scenarios alongside one another and combine the results to reach, for example, new users who are interested in sales items from your summer collection.  

From a business perspective, the main type of online retargeting campaign you run is influenced by your goals. You can run campaigns with an open or closed budget, depending on whether you are focused on gaining as many sales or conversions as possible within a set campaign budget limit or a specific cost per conversion. The most important element is to define your goals and then carefully monitor the campaign performance in real-time to check that it is hitting the mark.

Retargeting mechanisms

After users leave your website, their data can be processed by the retargeting provider. Meeting their expectations is crucial for the campaign’s success. Advanced solutions and AI-based algorithms will be applied to the data to learn what particular users are really interested in buying. The most advanced solution is Deep Learning. Ads adjusted to individual users will be displayed to them on the different websites they visit. 

Are you wondering what a retargeting campaign can look like? How retargeting works in the real world? At RTB House, we use an advanced recommendation mechanism that—based on previous and current user behavior—recognizes patterns that facilitate the optimal selection of products that particular consumers may be the most interested in at the right moment. Individual web and mobile users can be shown ads for products they have viewed before, or ads for new products they haven’t seen yet.

So, potential customers of a fashion online store who have never bought anything but have viewed the offer can be provided with ads (on completely different websites) for the exact garments they have individually shown interest in. However, a retargeting platform powered by Deep Learning can perform analyses and also recommend other products they might consider purchasing (even more tailored to their current needs). Furthermore, retargeting allows you to re-target users who have already bought something in your shop and present them with the rest of your offer. 

The process of selecting what type of banner should be displayed and deciding which offers should be presented on it is fully automatic. The system does that based on complex analysis. When users click the banner, they are redirected to the original website (for example, your online shop) and land on the site of the specific products that may suit each user’s specific needs. Using the information that is at our disposal, we make sure that each of the users is shown a dedicated set of products on the banner.

Read also: Retargeting and why it should be in the digital toolbox of every home improvement organization

Real-time bidding in today’s world of advertising

Leveraging solutions such as retargeting requires the use of real-time bidding (RTB) technology. The high level of automation in digital advertising increases its efficiency and allows companies to reduce costs by optimizing their campaigns. RTB is the modern process of buying ads on the internet. It provides business organizations with automation and significantly improves the efficiency of buying ads. The entire process of buying ads is managed with the use of SSP and DSP platforms, which are a part of a huge and complex programmatic advertising market. 

Guide to a Multiple Retargeting Strategy [REPORT]
This guide debunks the most popular myths regarding the multiple retargeting strategy and provides tips and best practices on how to get the most out of advertising efforts.

How does retargeting work more effectively when powered by Deep Learning?

Advanced technologies and real-time bidding solutions enable marketers to retarget potential customers via various channels (websites and mobile apps). But what is more important, Deep Learning allows businesses to understand their customers better. By enabling personalization, it allows brands to interpret consumer needs and requirements properly and provides them with the right offers. The Deep Learning algorithms we use work with more than just historical data. They allow us to learn from each user’s behavior. This way, we can target each person at the right time, in the right place, and with the right message.

What types of companies should invest in retargeting?

What is retargeting doing for real-world businesses to improve their results? And what are retargeting ads going to do for your specific business?

Retargeting ads can significantly increase the conversion and revenue of your ecommerce business, but years of experience in digital advertising have shown us that it is more effective in the case of some specific types of companies.

The best results could be achieved by businesses like:

  • E-shops (in various industries like fashion, electronics etc.)
  • Marketplaces
  • Comparison engines (most often price comparison websites) 
  • Classifieds (especially automotive, real estate and job portals)
  • Travel agencies with an online presence

How does retargeting affect the user experience?

Some wonder if being ‘hunted’ this way can upset customers and make them feel irritated with a certain brand. And how does retargeting work with people’s expectations of a more privacy-centered online world? In most cases, the identification of users is based on cookie files, but nowadays, retargeters are preparing for the reality of cookieless advertising. At RTB House, we use dynamic capping by default, allowing us to increase the effectiveness of a campaign. This value is set dynamically for each cookie, depending on its characteristics. That means that a user considered more interested in a particular product will probably be served the ad more times. Dynamic capping/frequency capping allows advertisers to reduce ad fatigue and adjust the intensity of advertising in order to ensure the best user experience. 

Good to Know: How to Buy Advertising Inventory Today and in the Cookieless Future?

To sum up, what makes retargeting so efficient? It helps you focus on the most promising target group that expresses interest in your product/service. Highly personalized retargeting allows us to adjust the offer to the specific user and reach them at the right time. Additionally, this approach to advertising is cost-effective, as you pay for the actual result. Ask us how to improve your advertising strategy efficiency. We’ll be happy to advise you on all the modern solutions.

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