What is Targeted Advertising, and its Benefits for both Customers and Manufactures-Part 2

By August 5, 2013Marketing, SEO, Social Media

Targeted marketing is still one of the powerful tools for marketing. Marketers use this method more than ever, so it is important to realize how does it work and, how it will affect consumers life. According to The Naked Consumer, “In 1995 U.S. companies [spent]  $331.2 billion in advertising”(Larson 5). And if advertisers ignore the targeted formula they can easily waste their advertisement funds. Manufactures have to advertise and compete in order to survive, which is why some much money is spent on advertising. As a result, they have to advertise more and more to become visible in clutter of ads. In this sense, it becomes an endless cycle. This money also should bring some revenue for them as well; otherwise spending without gaining revenue is pointless. A good example of wasting advertisement money could be some of the TV commercials. Some people around the world watch these commercials without really paying attention to them. Additionally, it is hard for the intended company to track the ad results. Advertising without measuring ads success is similar to wasting money or even not advertising at all. The question is, how manufactures should measure their success and how should do they advertise.

On the other hand consumer will be confronted with thousands of ads everyday. According to Louise Story, “A market research firm, estimates that a person living in a city 30 years ago saw up to 2,000 ad messages a day, compared with up to 5,000 today.” Most of these ads may not be related to a person at all. As a result, the person will not pay attention to those ads. That ad costs marketers money, and also bother a person without doing any good either to the person or for the marketer. Marketers should advertise in a way that they do not bother consumer and also reach the potential ones.

Since consumers are shifted from old type of shopping to the online world of shopping, targeted advertisement can be the best way to avoid most of these ad clutters. Targeted advertising means that targeting potential consumer base on their interests, social status, and purchase history. According to Levin, “By 2008 search advertising accounted for over $10.5 billion of the $23.4 billion in total online advertising, and pundits were forecasting continued growth at rates of 12 percent per year over the next five years”(603). The reason for this shift is because “the combination of targeting and measurement makes search advertising extremely effective”( 603).  In the past that was not possible to implement targeted advertising completely. Thanks to technology today marketers can embrace this method with couple of clicks. According to Jonathan Levin and Paul Milgrom:

In the older media, every consumer that received a particular magazine, listened to a particular radio program, or watched a particular TV show would read, hear or see the same advertisement. An advertiser that wanted to reach an audience with particular characteristics could do so only within narrow limits. (603)

This means in the past there was no way to reach for all potential consumers. Also marketers had limited abilities to market the right consumers, but now all these things are possible. It is up to marketers to use these products correctly in order to leverage their marketing campaign and target the right consumers with the right interests.

As the Internet becomes the dominant media of choice for people, companies have changed their advertising strategies and opted for a targeted approach in reaching potential customers. As opposed to television where entertainment (the content) is periodically interrupted with commercials, targeted advertising (specially in the Internet) shows up simultaneously with the content.

When consumer receives email, searches in a search engine, looking for a place with his cell phone, sign up for club card, and many other activities like them marketers realize consumer’s interests. Marketers make a marketing profile for that person that shows her interests, social status, and her level of income. Based on that profile marketers show ads to her. For example, if a consumer searches in the Internet for the detergent she probably interested in detergent, and it is wise to show her ads for washing machine or detergent rather than ads for car oil change which she probably will be less interested.

With this type of advertising, customers can use many online and high-tech services free of charge because the costs for these services are already paid by advertisements. Consumer pays the costs of these services by watching the ads and if he is interested he will click on them. By clicking on ads consumer will goes to the store website and advertising medium will charge the store. As an example, picture above is taken from the Google search results. At the left Google shows the organic results of search and at the top and right it shows ads. Since these ads show up with the results simultaneously customer has an ability to click on them or ignore them. Additionally, since these ads are provoked by the customer search they are more likely to invite potential customers to go and purchase goods.

One common use of psychographics and targeted advertising could be found in “pay per click” ads. According to Mangàni, one type of targeted advertising is “pay per click” advertisement, which means when a person searches a keyword in a search engine, search engine will pull up relevant ads near the search results (liker the picture above), and a potential customer can easily make a decision to click on them or not. Thus, the company will only be charged if the customer clicks on its ad, which means no waste of advertising dollars. Company can also masseur it’s advertisement campaign success with measuring click through rate which is the number of clicks customers made relevant to the number of ad impressions. Also they can measure the bounce rate and customer behavior on their site and make sure that they have the optimized ads for the right consumers. In targeted advertising, the customer comes to the company instead of company looking for undecided customers.

Another type of targeted advertising that also sometimes internet marketers are combine it with the “pay per click” is using cookies to store and track consumer information. According to Kevin Fu another type of targeted advertising is by using cookies in the user’s browser. Marketers use cookies in order to “track [user’s] [movements] between [websites] because the first banner advertisement presented can set a cookie containing a unique identifier. As subsequent advertisements are read, the advertiser can construct a profile about a user based on the cookies it receives from the user ”(120). Basically, Cookies will record consumer behavior through advertising network and it try to coordinate with the advertising server in order to show the consumers relevant ads. Cookies are the small text files that websites put in the user’s browser in order to authenticate the user and also track the user’s behavior. Without cookies the user has to enter his credentials each time he navigates through the website. For example, when a user logs in to his email account, the email site will put a cookie on the user’s computer in order to track his identity and also authorize his access to his data. Another use of cookies is for tracking a customer’s behavior. For instance, when a customer clicks on a banner his click will be save in the cookie. One of the best examples of using cookies for advertising could be Facebook. According to Azizul Yaakop,

Facebook has created a way for companies to market and sell their products and services in a new different way. Advertisements that appear on every page of Facebook have enabled companies to reach potential consumers in a way that is less time consuming and cost effective. Because of that, companies can target users that are the most likely to purchase their products by accessing the cookies from the Facebook users web browser. (155)

As a result, marketers can easily make a profile for any user without knowing the user’s identity.

One of the concerns about targeted advertising is customer privacy. At the beginning of this new type of advertising, no one thought about privacy. Instead everyone was only focused on how to sell more in this way. After a while it became obvious that a customer’s privacy can be easily jeopardized. In the early years of “click and buy,” advertisers suffered a lot of well deserved criticism, and even some law suits from consumers. In those years marketers were tried to sell more without thinking about other affects of their behavior. They did not care about people privacy. Their goal was only to sell more. For instance in 1992, Erick Larson mentioned these concerns, and based on the issue made some laws about data collections,

First of all, data must seek and merge with complementary data. Second, data always will be used for the purpose other than originally intended. Data collected about individuals will be used to cause harm […] to him or others. Finally, confidential information is confidential only until someone decides it’s not. (Larson 14)

Based on these laws although marketers seek data very nice, the will use data to destroy humans life. Data privacy is not have a meaning anymore. As a result people should avoid psychographic advertising at all costs. They should not give data to anyone. Also they should expect harm to themselves or their family members because they gave their private information to marketers.

The obvious example for neglecting privacy could be DoubleClick. According to Marilynn Larkin,

DoubleClick uses ‘cookies’ residing on a web user’s hard drive to gather information about how the user surfs the web—sites that are visited, online purchases made, etc. The data can be used by large websites—mainly portals, such as AltaVista or Yahoo—to customize content and advertising according to what they think would interest you. Cookies identify computers, not their users. But when DoubleClick purchased a company that tracked people’s offline buying habits, it began tying the online and offline data together, and could then pinpoint people’s identities when they were online. Pressure from the Center for Democracy and Technology (www.cdt.org), among others, and an investigation by the US FTC, forced DoubleClick to stop this practice. (1471)

These types of tracking is definitely illegal and by doing so every company can jeopardize its existence. Law allows marketers to track only customers behavior by using cookies, but marketers cannot go further and identify consumer’s identity. This is illegal and this is exactly what Double Click did.

As a result, many companies tried to change their rules. Instead of collecting personal information, they focused on the individual’s behavior. Today many companies focus on this type of marketing. Although companies are still collecting data from consumers, they do it with more cautions and they know if they cross the line they have to deal with consequences. As a result they try to focus on the consumers behavior more than identifying her identity interests the consumer. For example, one of the tools that companies are using for their targeted advertising is Google Analytics; the picture is part of this software. The Data that is represented here belongs to an ecommerce site. As shown, no confidential information about the consumer can be seen.

As of today this type of advertising is getting more popular than before. Many companies are selecting this type of advertisement instead of the old blind way. In compare to old fashion advertisement, targeted advertising is much cheaper, more efficient, and completely traceable.

Hamid T.

Author Hamid T.

He created his first website in 2003. As of today he is a researcher and student at the University of California Irvine. He has more than 15years experience in online marketing and web design.

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