The big question for online advertisers: To personalize or not to personalize?
We use the Internet to research things all the time. Whether it’s a big purchase like a vacation or something smaller like a pair of running shoes, we often begin with a search for the topic online, eventually drilling down to find specific product reviews and details. But what happens when the pattern of websites we visit triggers personalized online ads that follow us around the Internet? If you’re later reading an unrelated article on a news site, will you really pay more attention to an ad for the specific hotel or pair of shoes you were looking at earlier?
The answer is: probably not. It turns out that when people are at the early stages of researching on the Internet — and haven’t likely developed strong product preferences — they respond better to generalized messages intended for a mass audience. Ads that are too specific aren’t going to convert
We found this to be the case in our recent study of data from an online travel company. The firm experimented between showing ads that contained specifically tailored product information and ads that were purposely generic. It also collected data on consumers’ web browsing history, including whether they had visited travel review sites or more general websites devoted to travel.
We analyzed the data to answer two questions. First, if advertisers can provide more specific ad content that reflects a consumer’s earlier product interests, is it always optimal for them to do so? Second, when is increased specificity of advertising more effective?
On average, people who saw the personalized product information ad were actually less likely to buy a travel product on the day they were shown the ad than the people who were shown the more generic ad. In other words, advertising content with a high degree of specificity was not more effective than generic messages. That was a big surprise given the school of thought among marketers that the more you can personalize ads, the better.
However, importantly, we found there was an exception. Consumers who were at the stage where they were seriously considering buying a travel product reacted more positively to the customized ad. How could we tell who they were? They were the people spending time comparing hotels on travel review sites.
The lesson for firms is that they should carefully evaluate whether and when to use new online advertising techniques. They need to pay attention to how they can identify a consumer’s mindset and then target consumers with the type of information that will be the most powerful at that time. Just because they have the data to personalize ads, doesn’t mean they should always use it.
Anja Lambrecht is Assistant Professor of Marketing at the London Business School. Catherine Tucker is Assistant Professor of Marketing at MIT Sloan. Their full paper can be found at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1795105
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