How much should you really segment your audience when running your ad campaigns on Google and Meta? The International Journal of Research in Marketing has just released an interesting (but very academic and long) article on the subject. We took the time to summarize and highlight the most important findings and added our own takeaways.
Introduction
In the age of digital advertising, platforms like Google Ads and Meta have opened up a Pandora’s box of targeting possibilities. From demographics to psychographics, from interests to behaviors—the options are endless. But with this explosion of choices comes a critical question: How much should you really segment your audience? While the allure of niche targeting is strong, it poses a risk of costing more than it gives back, especially when you factor in the workload required to create multiple asset versions for each segment.
Nische targeting costs more than you think.
The study delves into this very issue, providing a compelling example through a test-driving campaign experiment. The researchers developed a model to calculate the break-even performance for each audience segment and applied it to a real-world test-driving campaign. The aim was to determine whether highly targeted advertising would yield a better ROI compared to broader, untargeted campaigns.
The sobering conclusion? The experiment revealed that highly targeted campaigns often require unrealistically high click-through rates to break even, let alone be profitable. Specifically, about half of the audience segments studied would need to double their click-through rates compared to an untargeted campaign to achieve similar profitability. This is particularly concerning for SMEs, where marketing departments already operate on tight budgets and limited resources.
Three Takeaways for CMOs
- Data-Driven Caution: The study provides a model for calculating the break-even performance of each audience segment. Even if you don’t have the time to do a full ROI of each campaign segment, this should serve as a cautionary tool for CMOs, urging them to consider the financial viability of highly targeted campaigns. You can download the spreadsheets here.
- Asset Overload: Niche targeting doesn’t just potentially drain your budget; it also increases the workload for your marketing department and/or your agency. Creating multiple versions of assets for each segment can be resource-intensive and may not offer a proportional ROI payback.
- The Data Quality Quagmire: Research studies have indicated that data quality is far from perfect among major ad platforms and data brokers. Poor data can not only undermine the effectiveness of your campaign but also lead to wasted resources and missed opportunities.
Conclusion: The Importance of Brand Health
While the capabilities for audience segmentation are more advanced than ever, it’s crucial to remember that brand health comes from reaching a wide audience and creating meaningful memories with your audience. Over-segmentation can not only be cost-inefficient but also hamper your brand’s growth. In a time where marketing budgets are often restricted, the focus should be on broader strategies that build brand equity and deliver a more sustainable ROI.
So, the next time you’re tempted to go down the rabbit hole of hyper-targeting, remember: sometimes less is more, and sometimes broader is better.
Would you like to explore this topic further? Feel free to reach out.
