App Increment and Retargeting: User Segmentation

For a long time, or at least since advertising began to take shape, the question of whether marketing investment is actually generating real value has always been the most puzzling question for marketers and their bosses.

Their concerns are justified. After all, just because a marketing campaign performs well doesn’t necessarily mean that the marketing spend was justified. The most valuable question is whether the users we pay for to generate revenue would actually do so themselves (i.e., users who could have gotten it for free).

To answer this question and justify the expense, incremental testing was developed.

What is Increment?

Incrementality is a measure of lift that can be attributed to marketing activity. A common approach is for marketers to compare a baseline of expected/natural behavior and then isolate the benefit of marketing on this behavior. The following diagram explains this concept:

In the whole discipline of testing the incremental effectiveness of advertising, one specific method is A/B testing. In this test, the impact on the exposed group that is served an ad is compared to a control group that is not exposed to the ad or is exposed to a shadow ad/PSA (Public Service Announcement).

Enter visitor retargeting

The concept of incremental revenue is especially important in retargeting campaigns. In this scenario, the user has already installed and used an app, so the likelihood that they will voluntarily (organically) use it again is much higher than the likelihood that the user will organically discover an app for the first time. Therefore, the question that has always been on the mind of marketers is whether to recapture visitors through paid marketing activities , and to what extent.

To help our clients understand the incremental value of their retargeting campaigns, we recently ran several A/B tests. We found that retargeting did generate incremental value in the majority of cases we analyzed.

That said, it’s important to stress that in some cases, retargeting not only fails to generate incremental revenue, but can even reduce revenue that would otherwise be generated organically. This is most likely the result of excessive intrusive advertising, leading to a poor user experience.

What really matters in retargeting is user segmentation

Analyzing a marketing campaign for a shopping app, a clear distinction quickly becomes apparent: retrieving segments of users who had not yet completed a purchase generated significant incremental revenue, while reaching out to segments that had already made a purchase had a huge negative impact.

We can see that for this app, it is not recommended to re-engage with users who have already purchased, as this may discourage those shoppers from purchasing again. Are your retargeting campaigns doing the same thing? Be sure to check it out.

On the other hand, retargeting campaigns worked wonders for the user segment that had not purchased prior to being exposed to the campaign, resulting in a huge lift just two days after install. After one month, retargeting proved to be extremely beneficial, generating significant incremental value.

This means that the app should not run retargeting campaigns in the first half of the week after install, but should allocate the largest share of its budget to retargeting campaigns only in the fourth week after install.

The example from another shopping app produced a clear result: retargeting activity for the defined segments and goals was highly incremental from day 0, especially in terms of converting users. This segment had not purchased prior to exposure, and as a result of this marketing campaign, users converted in far greater numbers than the unexposed control group—up more than 5x over time by the fourth week after install.

The campaign also had a positive impact on controlling the number of churned users, effectively reducing the number of users who stopped purchasing. Similar to the boost in converted users, this trend only increases over time.

Make sure you are properly monetizing your converted users

By running a retargeting campaign, this gaming app was able to generate a huge lift in the number of converted users. However, the average revenue of these users underperforms and in some cases even deviates from the organic baseline. A more significant revenue increase occurred in the fourth week after installation.

In this case, we can see that retargeting campaigns are bringing mixed results, and marketers are looking for ways to generate more revenue from these converted users.

Don’t forget to test your ad platforms!

In addition to testing different market segments to find those that see the biggest lift, it’s equally important for marketers to test multiple retargeting platforms. The example below is from a third shopping app, where performance analytics show that different ad platforms provided different incremental lifts for the same segment: loyal users who made a purchase before and after being exposed to a retargeting campaign.

Final Thoughts

Understanding incrementality allows advertisers to optimize their ad budgets by allocating retargeting spend in the most impactful way — leveraging the right market segments at the right time and across multiple proven ad platforms. In fact, we’ve seen that retargeting does prove its incremental value in the majority of cases we’ve analyzed.

Source: AppsFlyer