Article

Anil Malhotra
Anil Malhotra 29 July 2021

How to Increase Revenue with Purchase Behavior Targeting Led Social Media Marketing

With clickthrough rates and high engagement coming under increasing scrutiny from CEOs, CMO and founder of Bango, Anil Malhotra, explains how digital marketers are adopting a new approach to social media marketing that has a tangible impact on the bottom line.

In 2020, digital marketers spent an astonishing £85 billion on social media advertising. Many who bought into the premise of social media ad campaigns were seduced by the high levels of reach and promises of highly-targeted demographic profiling.

But while targeting campaigns at people based on their age, job, gender, search terms and even interests sounds impressive on paper, it’s still extremely difficult to tie these factors to whether people will spend money on your product or service. More often than not, social targeting data offers a loose indication of purchase behavior, but not a direct link and so the impact on the bottom line is minimal.

As a result, the board are quickly becoming disillusioned with social media marketing. Bango’s Board to Death research of 200 CEOs revealed that 60% of CEOs believe that the marketing potential of social media has been exaggerated, and only 34% see social media marketing as a key source of new customers / sales for their business. And with social media marketing conversion rates remaining shockingly low, no one can blame them for their skepticism.

In the tech sector, for example, Facebook marketing campaigns have an average conversion rate of 2.31%, with a successful lead costing £40 on average. For some brands however, the conversion rate is even lower, and cost of acquisition much higher.

Take a mobile app developer for example. Let’s say you’ve created a game that offers in-app purchases. On average, only 3% of people who download your game will ever spend any money on it. For these types of brands, Facebook ads could cost upwards of £200 simply to generate any additional revenue.

Other verticals fare better on Facebook, with the fitness industry holding the highest conversion rate at just over 14% and education at just over 13%. Nevertheless, the average conversion rate across all industries advertising on Facebook is just 9%. The situation is even bleaker on other socials, with Instagram’s conversion rate sitting at 1% and Twitter and Pinterest at 0.77% and 0.54% respectively.

With low conversion rates meaning that social media marketing is failing to make a positive impact on revenue, the huge spend is often justified by circumstantial evidence - high engagement rates and click through statistics. But these figures are not impressing stakeholders who are looking for a positive commercial ROI from their social spend.

Bango’s research also revealed that 55% of CEOs consider digital marketing metrics “meaningless” if they don’t tie directly back to sales. And 77% expect these marketing efforts to have a measurable impact on their businesses’ bottom lines.

As pressure mounts for digital marketers to prove their activity is driving real, meaningful results, many are turning away from social media advertising as a core promotional tactic. But we shouldn’t give up. The truth is that social media advertising is a good idea — it’s just been poorly executed.

Why are Social Media Ads Failing?

The majority of paid social media marketing is based on behavioral advertising and demographic profiling. The social media providers who offer this type of segmentation use data sourced from the platform itself or third-party providers, such as websites or other apps, to inform their targeting. But there are two big pitfalls to these methods.

Firstly, what people search for — and even what they like — on social media is not always representative of what they want to buy. Secondly, by using demographic profiling, marketers risk generalizing potential customers into categories that are irrelevant to them.

As one example, companies selling pregnancy related products have come under fire in the past for targeting social media ads towards women aged 18-45; the assumption being that they are the right age to bear a child. The logic is hard to deny, but in reality, this casts the net too wide with the products failing to be relevant to a huge portion of the audience.

With 69% of UK CEOs saying that they would increase their marketing departments’ budgets if the activities could be more directly targeted towards those who buy, digital marketers need to focus on using data that shows real intent to pay.

Enter Purchase Behavior Targeting.

What is Purchase Behavior Targeting?

Purchase behavior targeting is an emerging social media advertising method that enables marketers to target campaigns directly at the people who are most likely to buy.

Purchase behavior targeting gives marketers insights into who is spending their money on what and provides a route to focus their campaigns to them through social media platforms. As such, instead of relying on demographic data — or even targeting people based on what they like, browse, search or share — purchase behavior targeting looks at purchase data to identify patterns of buying behavior.

While purchase behavior targeting was originally developed by Facebook, the platform’s relatively limited access to payments data meant that few products could be targeted in this way. Similarly, while Amazon regularly recommends products based on prior purchases, it can’t access insights about payment behavior outside of its universe.

So, where can digital marketers go to acquire the level of payments insights needed for effective purchase behavior targeting?

Payments Providers — The Next Big Data Brands

Rather than relying on the social media giants themselves to provide this data, digital marketers are now turning to payment companies to provide a rich source of online transaction data.

Companies like Bango — which processes online payments for Amazon, Microsoft and Google and other leading online merchants — are rapidly moving into the big data marketing space. By analyzing payment information from billions of pounds of consumer spending across major brands, these payment companies are able to provide valuable insight into the buying behavior across hundreds of millions of users.

Companies using purchase data to arm marketers with insights into who is spending their money on what are enabling them to direct campaigns straight at customers most likely to buy their product or service. It’s as simple as that.

Using purchase behavior targeting to go straight to people who buy is the simplest way to acquire new customers, build revenue, and justify social spend to the board.

As Purchase Behavior Targeting continues to grow, marketers can expect to get better value for money from social media ad campaigns and present a positive return of investment to stakeholders. Meanwhile, social media users can receive better focused offers and ads, not just based on what they like, but on what they actually buy.

By Anil Malhotra, CMO and Founder, Bango

Anil is responsible for Bango’s global marketing activities and partnerships with app store, OEMs and global network operators. Anil has extensive experience of creating successful partnerships between fast-moving innovators and major market players, to bring new technology to market. Before co-founding Bango, Anil developed global partnerships for Cyberlife Technology, one of Europe’s leading computer games technology developers.

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