Retargeting Ads: Don't Overpay for Customers
By Mark Harnett
Retargeting is frequently cited for amazing click-through rates, higher conversion rates, and better ROI by major marketing publications. However, there's a critical oversight: advertisers may be overpaying for customers coming from retargeting ads.
You should only pay about 10% of the CPA for retargeted ads than what you'd be paying for a truly new customer.
What Is Retargeting?
Retargeting displays reminder ads to users who previously visited a website or added items to their shopping cart. A customer browses bikes, abandons their cart, then sees targeted ads across email, news sites, and social media.
The Attribution Problem
Hypothetical scenario: - 100 people visited a product page - 90 saw retargeting ads - 10 made purchases - 8 would have bought anyway
You can't give the retargeting campaign all the credit for those 10 customers. Only 2 conversions resulted from the ads' influence. CPAs should reflect actual incremental impact.
Solution: Holdout Testing
The gold standard involves splitting audiences — serving ads to one group while withholding them from a control group. This reveals true lift from retargeting efforts. Data shows lift ranges from 4% to 15% across various experiments, justifying the 10% CPA recommendation.