Defining Behavioural Advertising

In order to increase the relevance of their online ads, publishers and advertisers are utilising users’ data and online behaviour to segment their audiences and provide highly relevant personalised ads, offers, and marketing messages. Behavioural advertising or online behavioural advertising is a method of strengthening advertising campaigns by delivering advertisements that are tailor-made to the interests, needs, and purchasing behaviour, history, and patterns of each customer and can be the cornerstone of a successful omnichannel marketing strategy.

Nowadays, the highly-advanced technologies that enable big data management and behaviour tracking have entirely changed the way companies advertise online. In this article, we will take a closer look at what behavioural marketing is and how this online advertising technique is realised.

Through customer segmentation and highly-personalised marketing campaigns, brands of every size and type significantly reduce the risk of targeting uninterested customers. That way, the company’s money and time are used more effective by focusing resources on more specialised and ROI-efficient efforts. Increasing the relevance of its ads can help a company attracting potential customers as consumers are more likely to engage with a brand that seemingly makes an effort to personalise their ads and offers specifically to them.

Besides enabling brands to acquire additional customers, a successful behavioural marketing strategy can also deepen relationships with your existing ones. The process of user segmentation (one of the fundamental steps for a successful application of behavioural advertising explained later in this article) is all about learning more about your customers so you will be able to serve their continually changing needs better. The more you know them, the stronger their relationship with your company becomes, eventually increasing brand loyalty and improving customer retention rates.    

A behavioural advertising or behavioural targeting process can be broken down into three main parts:

·     Data collection and analysis

·     User segmentation

·     Behavioural targeting application

The first step of the behavioural advertising process is the collection of user data from a range of different sources. Mobile apps and customer relationship management (CMR) systems are two of many, but the primary source of user data is the customers’ browsing activity. The majority of websites are using cookies to collect user data. A cookie is a small file that is downloaded on the customer’s computer, tablet, or smartphone by a web browser while the user is visiting a site. Cookies are designed to be a reliable mechanism for websites to remember useful information and record the user's browsing activity.User data can include registered user login information, IP address, demographics, geolocation, search history (including visit frequency and visit duration), purchase history and transaction progress (virtual shopping cart abandonment for example), time gaps between visits, app usage data, and more. After being collected, data is stored, organised, and analysed in a data management platform (DMP). DMPs frequently use big data and artificial intelligence algorithms to process and analyse large data sets from various sources.

After the user data is being collected and analysed, behavioural patterns are starting to emerge, and that leads to user segmentation. User segmentation (also known as market or audience segmentation) is the process of dividing users into homogenous subgroups based on well-defined criteria such as:

·     Homogeneity (common needs, interests, preferences, and characteristics)

·     Distinction (uniqueness from other segments)

·     Reaction (similar response to specific marketing tactics)

Publishers and advertisers can further divide users using the following four types of market segmentation:

Demographic segmentation is one of the most frequently used types of market segmentation that divides users through variables such as age, gender, occupation, income, etc.

Geographic segmentation divides markets based on a predefined geographic boundary.

Behavioural segmentation is focusing on customers’ choices, decision-making and purchase patterns, and product or service usage.

Psychographic segmentation is developing behavioural segmentation even further by considering the psychological aspects of the user’s buying behaviour: interests, values, personality traits, lifestyle, opinions, and other intrinsic traits of theirs.  

Once market segments are created, behavioural targeting can be applied to advertising campaigns to increase the relevance of online ads, personalised marketing messages, and offers displayed to specific audiences and subsequently the prospect of engagements and conversions.

Nevertheless, although companies can potentially increase their revenue by implementing behavioural advertising strategies, the practice itself raises concerns regarding consumer privacy and personal data. For that reason, The European advertising industry has developed a set of good practice principles based upon businesses being transparent about their practices and the information they are collecting and use for advertising purposes. On top of that, the General Data Protection Regulation (GDPR), agreed upon by the European Parliament and Council in April 2016 and implemented in Spring 2018, replaced the Data Protection Directive 95/46/ec as the primary law regulating the way corporations  protect and use EU citizens’ personal data. In the days, right after the implementation of the GDPR, several US publishers the likes of New York Times and USA Today decided to remove all (behavioural targeting) ads from their European pages in order to comply with the region’s updated privacy framework and avoid fines.

It is true that most of the times, online users find irrelevant ads frustrating and unengaging. However, many of them do not feel comfortable with the idea of giving away their personal data to websites and advertisers. An alternative type of advertising that can to provide relevant ads and has the advantage of complying with the GDPR due to its minimal reliance on personal data is contextual advertising (also known as contextual targeting). Contextual advertising is advertising that is based on keyword targeting, and it is relevant to the page’s content. Instead of using personal data, contextual ads generation is based on the environment in which the user is browsing. Several companies have made a move back to contextual targeting since the arrival of the General Data Protection Regulation.

Customers are indeed more likely to engage with personalised ads, so maintaining a high level of relevance and personalisation throughout your marketing campaign will most probably lead to an increase of click-through and conversion rates, customer retention, and ROI. Nevertheless, there is always the risk of hurting your ratings and metrics or even getting fined if you appear too invasive. It is therefore crucial for every company to weigh the pros and cons before it decides to include behavioural advertising into its marketing campaign.