To Test or to Target? Where to start for best ROI?

August 26, 2010
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The previous post had concrete recommendations for proving the ROI of behavioral targeting. Several smart comments were left by readers that brought together a pretty clear picture.

However, when I was meeting with a number of experienced online bankers in Istanbul recently the question that I received was more difficult to answer than just proving the ROI of targeting.

The previous post had concrete recommendations for proving the ROI of behavioral targeting. Several smart comments were left by readers that brought together a pretty clear picture.

However, when I was meeting with a number of experienced online bankers in Istanbul recently the question that I received was more difficult to answer than just proving the ROI of targeting.

Namely, the question was whether one can expect greater ROI from testing or targeting? Whichever promises greater ROI, shouldn’t that be where you may want to start?

How to think about it

Testing tends to be much more black and white in outcomes when you first begin to optimize a website. After all, no perfect website falls from the sky. At first you can get a big impact from making changes to messaging, calls-to-acton, layout, etc.

There are case studies, e.g. from Unica web analytics customers, where website conversions were improved by as much as 1900% over time with the help of continuous testing, measurement, and improvement.

Now, I have heard many great studies of behavioral targeting online. But I haven’t seen one where a better targeted message (via email or website or ad network) drove a 1900% increase in conversions.

Sidenote: In the offline world, targeting is mandatory. If offline you aren’t targeted your campaign can easily be unprofitable because costs per individual message are much higher. So, being targeted offline can promise an infinite percentage of improvement in profits (vs. being unprofitable).  But online, the cost of an extra email or website message is negligible, except the opportunity cost of spam’ing and annoying your audience.

So, focus on site testing before attempting targeting?

Anecdotes aside, there is another reason to begin with testing. Testing is a key competency for targeting. As the previous post suggested, you would probably have a hard time proving the value of targeting if your organization didn’t know how to do (hold-out) testing.

Likewise, reporting is a key competency for testing. If you didn’t know how to measure and report on key metrics that matter, how could you prove which test candidate truly drove better results?

Growth path

That is why it does make sense to follow a maturity model where the organization grows from reporting to site optimization (with testing) and then targeting similar to the diagram below from one of Unica’s whitepapers.

5 step maturity model from web analytics reporting to behavioral targeting

5 step maturity model from web analytics reporting to behavioral targeting

Just don’t get stuck in the stage of reporting and testing but make sure you continue to climb up the maturity curve when the business value that you are generating begins to level off.

Behavioral analysis and targeting (for interactive marketing) has helped companies who do it well push up business value beyond the plateau that they reached from testing alone (see previous post).