Volume 19 No. 1: Targeted marketing struggles with profitability

Targeting might be modern marketing’s top focus. Which makes sense. Every campaign should prioritize reaching the right people at the right time.

The problem is that despite a surplus of audience data and advanced targeting capabilities, we’re not targeting as well as we think we are. And it’s hurting performance.

Targeting vs Reach... Which is more effective?

Each week, we break down another marketing concept so you can skip the hype and get directly to what works.

Targeting isn't a new concept. It’s been a staple of marketing since its inception. But the language around targeting can be confusing. So let’s start by clarifying how we’re talking about it.

Targeting involves segmenting your marketing to a specific group with similar characteristics to narrow your audience. This includes many types of targeting that vary in their benefits, dangers, and prices, such as behavioral targeting, contextual targeting, and tracking-based advertising.
Hypertargeting goes beyond basic segmentation and often requires extreme precision.

The Problem with Targeting and Performance

In a study from the International Journal of Research in Marketing (IJRM), researchers discovered that targeted ad campaigns need a substantial boost in performance to match the profitability of untargeted campaigns. The research began with developing a model to compare the break-even performance of targeted vs untargeted ad campaigns on Facebook. Then, after proving the viability of that model, it was applied to Spotify ad campaigns. On Spotify, around 50% of targeted campaigns had to double their click-through rate (CTR) to outperform untargeted ones.

The researchers also found that Apple's App Tracking Transparency framework (ATT) had worse impacts on narrow audiences when comparing 86 different campaigns.

The takeaway? Targeting can be costly, and performance improvements don't always outweigh those costs.

Data Accuracy Matters

Another study from a consumer database evaluation firm, Truthset, revealed nearly half the data used for ad targeting is wrong. The study reviewed 15 data providers with 790 million unique hashed email addresses and 133 million postal addresses to evaluate matches between the two. The average accuracy ranged from 32% to 69%, with the age of the data being a major factor in driving inaccuracy. This means targeting data, on average, is wrong half the time.

Unfortunately for marketers, the high levels of inaccuracy with just one simple match make it easy to imagine the errors in a campaign relying on multiple matches and qualifications. These inaccuracies lead to poor performance and make personalization and audience identification especially difficult.

When to Lean into Reach vs Targeting

Both reach and targeting have their roles in a marketing strategy. In fact, we’d go so far as to say every campaign should be targeted. The problem is when targeting goes too far.

As digital advertising and evolving technology advance the possibilities around targeting, marketers are leaning into those advancements too quickly. The reality is the promise of highly targeted, highly profitable campaigns is still just a promise... Real-world results are lacking, for now.

But ultimately, the reach vs targeting debate is nuanced, and the right approach depends on your goals and resources. Remember, it's not about choosing one over the other but finding the right balance for your campaigns.

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