Dynamic Display Advertising: When Does It Work Best?

Dynamic display advertising campaigns are a staple of eCommerce marketing. It’s hard to find anyone who hasn’t been followed around by an ad reminding them about shoes or some other product they were looking at on Amazon. But dynamic display is a hammer, and not every shopper is a nail.

While dynamic retargeting on platforms like Google Display Network and Facebook are an effective part of the abandoned cart recovery process, they’re not always the best choice.

This article will cover the findings of “When Does Retargeting Work? Information Specificity in Online Advertising,” a study by Anja Lambrecht and Catherine Tucker published in the Journal of Marketing Research that examined a critical factor influencing the success of dynamic retargeting ads.

Then we’ll explain how to act on the insights provided by the study.

What is Dynamic Display Advertising?

Dynamic ads serve different content to different people based on factors like their activity with your website. Dynamic display ads allow eCommerce advertisers to remind a shopper who abandoned their cart about the product or products that caught their eye.

They can be effective, but research suggests that their performance depends on what stage of the buying process the shopper is in.

When Do Dynamic Retargeting Ads Work Best?

In the study, Lambrecht and Tucker tested a static ad (i.e., a generic ad that was the same for everyone in the audience) against a dynamic ad to see which led more shoppers to book a vacation through an online travel agency.

This might sound like a strange thing to test. Isn’t it obvious? It seems like a more specific ad would always perform better.

When Dynamic Display Ads Don’t Work

The results of the study suggest that dynamic display isn’t the best approach for most shoppers. The study found that earlier in the buying process, when a shopper had a broad idea about what they wanted but hadn’t formed specific preferences, static ads actually outperformed dynamic ads.

The generic ad outperformed the dynamic ad for people in the audience who only had a general idea of what they were looking for. It wasn’t until shoppers began to form preferences about what they were looking for (demonstrated by activities like looking at reviews) that the dynamic ad started to outperform the generic ad.

Why Doesn’t Dynamic Display Work Early in the Buying Process?

Lambrecht and Tucker attribute dynamic display’s poor performance to psychological distance. Psychological distance refers to how close an object or activity is perceived. There are multiple dimensions of psychological distance, but the researchers identified probability as the dimension at play in this case.

While we measure physical distance across space and time, we can also measure psychological distance in terms of probability. An event that seems unlikely, winning the lottery, for instance, will feel psychologically distant. Conversely, a probable event like buying a swimsuit for a beach trip will feel psychologically close.

Why Psychological Distance Matters

Understanding psychological distance is essential for eCommerce marketers because it affects what messaging will resonate with a shopper. Psychological distance leads to abstract thinking, while psychological closeness leads to concrete thinking.

That means the consumer is thinking more broadly about the product, considering high-level attributes instead of specific products or features.

For shoppers with broadly defined preferences, dynamic ads that zero in on specific products won’t resonate with shoppers as well as a static ad focusing on abstractions. But, as found in the study, as shoppers become more confident that they will take a trip and begin to define their preferences narrowly, dynamic ads are more effective.

(Also, the study didn’t mention this, but time-based psychological distance is likely a factor as well. If a shopper plans to take a trip in six months, the psychological distance would decrease as the date of the trip approached.)

How to Decide Who Sees Your Dynamic Display Ads

Lambrecht and Tucker’s findings suggest that you can improve your display ad performance by segmenting your audience based on how certain a shopper is that they’ll be making a purchase. But how will you know whether someone who abandoned their cart is at the stage in which they’ve refined their preferences?

According to a Bamyard study, the most common reason for cart abandonment is that the shopper was just browsing, which indicates a greater psychological distance. But another study, “The determinants of consumers’ online shopping cart abandonment,” published in the Journal of the Academy of Marketing Science, suggests that browsers are most likely shopping for entertainment or research.

This complicates things. Dynamic ads would likely outperform static ads if the shopper’s purpose was research but underperform if their purpose was entertainment.

How to Segment Your Audience According to Psychological Distance

One way to segment your audience based on psychological distance is to use a survey. Then use your CRM, email service provider, or marketing automation software to segment them based on their reasoning for abandoning.

You can deliver the survey through on-site retargeting and email retargeting. (Use website visitor identification to collect the email addresses of shoppers who aren’t in your CRM yet so they receive the survey too.)

Since not everyone will complete the survey, you’ll also need to develop additional criteria to segment your audience.

For example, if you have an eCommerce store with reviews for each product. Lambrecht and Tucker found that reading reviews indicates that the shopper is beginning to think more concretely. So the amount of time a visitor spends looking at reviews will help you determine what stage of the buying process they’re in.

This segmentation will also help determine which product to promote in your dynamic ads. If a shopper adds multiple items to the cart but spends most of their time looking at reviews for one of them, this is the product you should promote.

How to Use Dynamic Display Ads Earlier in the Buying Process

Since eCommerce personalization has so many benefits and is so effective in other areas of marketing, it stands to reason that it should improve display retargeting campaigns.

And, while Lambrecht and Tucker’s study suggests that dynamic display ads promoting specific products might not be effective, we can infer another approach that might outperform static ads earlier in the buying process.

A limitation of the study is that it didn’t test different versions of dynamic display ads. In their experiment, Lambrecht and Tucker served subjects a static ad with abstract creative or a dynamic ad with concrete creative.

But what if your campaigns relied on dynamic ads with high-level messaging for shoppers who were earlier in the buying process?

For example:

  • Serve a shopper who looked at shoes an ad focusing on your selection of shoes.
  • Serve a shopper who looked at shirts an ad focusing on your selection of shirts.
  • Serve a shopper who looked at dresses an ad focusing on your selection of dresses.

This way, you can tailor the message to each shopper’s website activity and frame of mind.

Dynamic Display Ads

Your eCommerce marketing toolkit is filled with gadgets and gizmos for every situation. But it’s essential to be sure you’re using the right tool in the right way for each job.

Dynamic display ads can be a powerful tool when it comes to recovering abandoned carts. By being aware of psychological distance and its role in consumer decision-making, you can make sure you’re not hammering a screw or screwing in a nail.