Retargeting conversion rate is a key performance indicator (KPI) that reveals the effectiveness of retargeting campaigns in bringing users back to an ecommerce platform and driving them to take a desired action.
y understanding this metric, ecommerce businesses can refine their retargeting strategies to ensure they recapture potential customers and increase overall sales. By understanding this metric, businesses can make the most of their ad spend and increase the likelihood of converting potential missed opportunities.
Key Takeaways
- Definition: Retargeting conversion rate quantifies the percentage of users who return to an ecommerce site as a result of retargeting efforts and subsequently take a desired action.
- Calculation: It is derived by dividing the number of successful retargeting conversions by the total number of users exposed to retargeting ads, then multiplying by 100 to get a percentage.
- Strategic Importance: A solid retargeting conversion rate indicates effective retargeting campaigns and suggests that businesses are successfully recapturing potential customers.
- Optimization Strategies: Improvements can be made by refining ad creative, increasing targeting precision, and offering compelling incentives for return visitors.
- Limitations: Though valuable, RCR specifically targets retargeted audiences, may encourage excessive retargeting, doesn’t fully represent overall campaign success, overlooks multi-touch attribution, can be inflated by low-value conversions, is subject to diminishing returns, focuses primarily on short-term engagement, and lacks granularity without segment analysis.
- Complementary Metrics: Evaluating retargeting conversion rate alongside metrics such as click-through rate (CTR), return on ad spend (ROAS) and customer lifetime value (CLV) can provide a holistic view of retargeting campaign effectiveness.
Why does Retargeting Conversion Rate matter for your business?
Retargeting Conversion Rate holds paramount significance for ecommerce businesses for several reasons:
- Recapture Lost Potential: Not every visitor converts on their first visit. Retargeting efforts aim to bring back those who showed initial interest but didn’t convert. An effective rate indicates success in reclaiming lost sales opportunities.
- Efficient Ad Spend: A robust conversion rate from retargeting campaigns ensures that advertising budget is not wasted on ineffectual attempts to recapture potential customers.
- Deepen Customer Relationships: Retargeting is also about deepening the relationship with potential customers, reminding them of their interest, and offering them reasons to return and make a purchase.
- Competitive Edge: In the competitive landscape of ecommerce, every sale counts. Effective retargeting strategies can give businesses an edge over competitors by converting users who might otherwise have purchased elsewhere.
- Insights into User Behavior: Tracking which retargeting strategies are effective can provide valuable insights into customer preferences and behaviors, enabling businesses to further refine their marketing approaches.
How to calculate Retargeting Conversion Rate (RCR)?
Explanation of the parts of the formula:
- Number of Conversions from Retargeting represents the total number of users who took the desired action after being exposed to a retargeting ad.
- Total Users Exposed to Retargeting Ads indicates the sum of users who viewed the retargeting ad.
- Multiplying by 100 converts the result into a percentage, representing the proportion of users who were successfully retargeted and converted.
Example Scenario
Suppose during a particular month:
- 2,000 users were exposed to your retargeting ads.
- Out of these, 100 users took the desired action (e.g., made a purchase).
Insert the numbers into the formula:
- Retargeting Conversion Rate = (100 ÷ 2,000) × 100
- Retargeting Conversion Rate = 5%.
This means that 5% of users who viewed the retargeting ads were successfully converted during that month.
Tips and recommendations for improving Retargeting Conversion Rate
Segment your audience
Segmentation is crucial for retargeting campaigns. Not every visitor to your site is the same, so why should they all see the same ads? User behavior can be a key element to base your segmentation on. For example, users who have abandoned their shopping carts may be closer to making a purchase than users who have simply visited your home page. By showing them ads featuring the products they were interested in, you could potentially pique their interest and bring them back to your site to complete the purchase.
Refine Ad Creatives
Your ad creatives are the visual and textual elements that make up your ad. They play a critical role in attracting users and convincing them to click on your ad. It is important to keep these elements compelling and relevant to your audience. Regularly testing and tweaking your ad designs and copy can help keep them fresh and engaging, increasing your chances of capturing the viewer’s attention. Use A/B testing to determine what works best for your audience in terms of color, imagery, copy, and more.
Offer incentives
Incentives can be an effective way to encourage users to return to your site. This can include exclusive discounts, promotions, or even free gifts with purchase. By offering something unique or valuable through your retargeting ads, you can make your audience feel special and increase the likelihood that they will click on the ad and make a purchase. Remember to make your incentives clear and enticing in your ad copy to maximize their appeal.
Limit ad frequency
While it’s important to stay top of mind with your prospects, it’s also important not to annoy them with too many ads. Overexposure can lead to banner blindness, where users simply ignore all banner ads due to oversaturation, or worse, annoy them, leading to a negative brand perception. To avoid this, set frequency caps to limit the number of times each user sees your ads. This way you can maintain your presence without going overboard.
Use multiple channels
Retargeting shouldn’t be limited to one platform or channel. Different users have different preferences when it comes to browsing and shopping online. Therefore, using multiple channels for retargeting can increase the likelihood of reaching your potential customers where they are most comfortable. This can include email retargeting, social media retargeting and search retargeting. By taking a multi-channel approach, you can maximize your reach and improve your conversion rates.
Examples of use
Abandoned Cart Reminders
- Scenario: An online electronics retailer identifies that a significant portion of users leave their website after adding products to the cart, resulting in missed sales opportunities.
- Use Case Application: By implementing a retargeting strategy, the retailer displays ads to these users, showing the products they left behind in their cart. The retargeted ads might include special discounts or limited-time offers to incentivize the completion of the purchase. Monitoring the Retargeting Conversion Rate allows the retailer to gauge the success of this strategy and adjust it for better results over time.
Re-engaging Past Buyers
- Scenario: A DTC fashion brand notices that many customers only make one purchase and do not return.
- Use Case Application: The brand could create retargeting ads showcasing new collections or products complementary to their past purchases. The Retargeting Conversion Rate will inform the brand of the effectiveness of this strategy, helping in recapturing and nurturing the relationship with past buyers.
Seasonal Product Promotion
- Scenario: A home and garden e-commerce store is about to roll out its new collection for the upcoming season.
- Use Case Application: To get past visitors excited about the new collection, the store uses retargeting ads showcasing the new arrivals. The Retargeting Conversion Rate provides insights into the success rate of users returning and making purchases from these seasonal promotions.
Upselling to Previous Product Page Viewers
- Scenario: An online bookstore identifies users who spent a considerable amount of time on specific book pages but didn’t make a purchase.
- Use Case Application: The bookstore can use retargeting ads to remind these users of the books they were interested in, possibly adding reviews or offering bundles. Tracking the Retargeting Conversion Rate will give the bookstore insights into whether these nudges effectively entice the readers to make a purchase.
Targeted Discount Offers
- Scenario: A DTC sports equipment brand observes that many users browse high-end items but don’t proceed to purchase.
- Use Case Application: To convert these potential high-value customers, the brand could utilize retargeting ads offering limited-time discounts or exclusive deals on these high-end products. The Retargeting Conversion Rate will indicate how successful this approach is in convincing these users to invest in the brand’s high-end offerings.
Retargeting Conversion Rate SMART goal example
Specific – Increase the Retargeting Conversion Rate by 20%.
Measurable – The Retargeting Conversion Rate will be compared before and after the new retargeting strategies are implemented.
Achievable – Yes, by optimizing the retargeting ad creatives, targeting parameters, and improving the landing page experience for retargeted users.
Relevant – Yes. This target aligns with the quarterly marketing plan to harness and convert a larger segment of users who have previously interacted with our platform, thus enhancing ROI.
Timed – Within the next three months post implementation of new strategies.
Limitations of using Retargeting Conversion Rate
While the Retargeting Conversion Rate (RCR) is a key metric for understanding the effectiveness of retargeting campaigns in ecommerce, it has its own limitations:
- Specific to Retargeted Audiences: RCR focuses only on the conversions from retargeted users. This can potentially miss out on a broader audience that might be engaging with the brand for the first time or through other channels.
- May Encourage Excessive Retargeting: A higher RCR might lead businesses to over-retarget, which can annoy users and damage brand perception. For instance, showing ads too frequently can lead to ad fatigue or a negative brand association.
- Not Necessarily Indicative of Overall Campaign Success: A high RCR does not always mean that the retargeting campaign was a success in terms of revenue or profitability. It might just show that previous website visitors were convinced to convert but doesn’t indicate the profitability of those conversions.
- Doesn’t Account for Multi-Touch Attribution: RCR doesn’t show if other marketing touchpoints played a role in the conversion. For instance, a customer might have been influenced by an email campaign, social media post, and a retargeted ad before making a purchase. Solely crediting retargeting can be misleading.
- Can Be Inflated with Low-Value Conversions: If retargeting campaigns push customers to make smaller, more frequent purchases, the RCR might be high, but the overall revenue or profit from these conversions might be low.
- Subject to Diminishing Returns: Over time, the same pool of retargeted users might get used to seeing the ads and become less likely to convert. A stable or increasing RCR doesn’t guarantee that the same trend will continue indefinitely.
- Focus on Short-Term Engagement: Retargeting generally focuses on re-engaging recent website visitors, which might not capture longer-term potential customers or those in the early stages of the buying cycle.
- Lacks Depth Without Segment Analysis: A collective RCR doesn’t differentiate between different user segments. For example, someone who abandoned a cart might have a different likelihood to convert compared to someone who just viewed a product page. Understanding these nuances is essential.
In conclusion, while RCR is an essential metric for assessing the impact of retargeting efforts, it’s important to consider it in conjunction with other metrics and not rely on it as the sole indicator of digital marketing success. By understanding its limitations, businesses can make more informed decisions and build more comprehensive ecommerce strategies.
KPIs and metrics relevant to Retargeting Conversion Rate
- Retargeting Reach: This metric identifies the number of unique users exposed to the retargeting ads. A vast reach without a corresponding increase in conversion rates may indicate ineffective ad content or targeting.
- Cost Per Retargeted Conversion (CPRC): Measures the average cost spent on retargeting campaigns to achieve a single conversion. It helps businesses understand their return on investment for retargeting efforts.
- Click-Through Rate (CTR) for Retargeted Ads: This metric represents the percentage of users who click on a retargeting ad after seeing it. A low CTR might indicate that the ad content is not compelling enough for users to engage.
- Time to Conversion Post Retargeting: Measures the average time it takes for a user to convert after being exposed to a retargeting ad. Shorter times can indicate effective retargeting, while longer times may suggest the need for improved follow-up strategies.
By analyzing the Retargeting Conversion Rate alongside these KPIs, you can gain a more comprehensive understanding of your business’s or company’s retargeting efforts’ efficiency and impact on the overall sales strategy.
Final thoughts
In summary, the retargeting conversion rate is a high-priority metric for ecommerce businesses. When interpreted correctly and coupled with optimized strategies, it can significantly increase sales and ensure efficient use of marketing budgets.
Retargeting Conversion Rate (RCR) FAQ
What is Retargeting Conversion Rate?
Retargeting Conversion Rate measures the percentage of users who, after being exposed to retargeting ads, perform a desired action, typically making a purchase or signing up. It indicates the efficacy of retargeting efforts in engaging and converting users who didn’t convert initially.
Why is Retargeting Conversion Rate significant for my business?
A successful retargeting strategy can maximize the return on ad spend by re-engaging potential customers who have already shown interest in your products or services. By tracking the Retargeting Conversion Rate, businesses can gauge the effectiveness of their retargeting campaigns and adjust strategies accordingly.
How can I improve my Retargeting Conversion Rate?
Improvements can be achieved by refining ad creatives, ensuring relevance in retargeted content, segmenting audiences more effectively, A/B testing different retargeting strategies, and optimizing the landing pages to which users are directed.
Are there other metrics related to Retargeting Conversion Rate?
Yes, related metrics might include Retargeting Reach, Cost Per Retargeted Conversion (CPRC), Click-Through Rate (CTR) for Retargeted Ads and Time to Conversion Post Retargeting.
If my Retargeting Conversion Rate is high, does it mean my marketing efforts are successful?
A high Retargeting Conversion Rate indicates that your retargeting efforts are effective in converting users. However, it’s essential to look at this in tandem with other metrics like overall conversion rates, costs associated with retargeting campaigns, and customer lifetime value to determine the holistic success of your marketing strategies.