Personalized Ads Don’t Always Work?

(cross-posted from the CQuotient blog)

According to a recent MIT study reported in MediaPost, personalized advertising doesn’t always work.

Contrary to popular practice, personalized ads not only don’t drive conversions, but are likely to be ignored, according to the study by MIT Sloan School of Management Prof. Catherine Tucker and London Business School Prof. Anja Lambrecht.

This was very provocative indeed! The key finding of the research was:

When online shoppers were simply looking at a product category, ads that matched their prior Web browsing interests were ineffective. However, after consumers had visited a review site to seek out information about product details — and were closer to a purchase — then personalized ads became more effective than generic ads intended for a mass audience.

I found this to be simultaneously obvious and confusing.

Obvious in that what you show a shopper should (of course!) be tailored to where they are in the purchase process. Confusing because the study effectively assumes that personalization is only about creating product-specific content.

In my opinion, this is a very narrow definition of personalization. The way we think about this at CQuotient, what you say to the customer at a point in time should be tailored to their current state and past history.

For example, if the customer’s current state suggests that they are near the beginning of the purchase process for back-to-school shopping for their 9 year old boy, showing them an ad or presenting them an offer for SKU #823272 (“boys short-sleeve baseball tee”) is suboptimal.

However, an ad along the lines of “Get your child ready for back-to-school. Great selection of boys uniforms and sports-themed casual clothing  in the stores right now”, with images of smart-looking 9-10 year old boys wearing the mentioned merchandise, and a 25%-off-all-purchases-this-weekend coupon, may be just right for that customer.

It may sway her to shop with us rather than the competition, spend the majority if not all of her back-to-school clothing budget with us, and do so this very weekend. A win-win outcome.

Knowing the customer’s current state helped us determine the right level of personalized messaging, and knowing her past purchase history (loves sports-themed casuals, preppy looks, and responsive to coupons) told us what to emphasize in the message and design the right promotional offer.

From this perspective, the finding that customers just beginning the purchase process don’t respond to product-specific ads is neither surprising nor a blow to personalization. But it does underscore the importance of thinking about personalization in a holistic way.