Background
Marketers now have a greater ability to target advertising exclusively towards their desired consumer segments. For example, online media options such as Facebook and LinkedIn provide several targeting capabilities, allowing marketers to reach audiences based on age, interest, job title, and more. However, there is no consensus on the optimal level of targeting in advertising. Some academics argue for narrow targeting (i.e., one segment of the market), emphasising higher return on investment (ROI) and reduced advertising wastage (e.g., Dibb and Simkin, 2009, 2010; Farahat and Bailey, 2012). On the other hand, others suggest broader, more inclusive target markets (i.e., all category buyers) to facilitate brand growth (e.g., Wright and Esslemont, 1994; Danenberg et al., 2006). The way to settle this debate is through evidence, to provide guidelines to practitioners about how narrow is too narrow when creating and placing advertising.
An underlying belief among marketers is that competing brands appeal to different consumer segments or target markets (Canning, 2015). Following these assumptions, if marketers do differentiate their brand to reach and appeal to a segment of the market, then the buyer base of that brand would differ from competitors with different target markets. However, we know from years of research that brand level segmentation rarely exists (Anesbury et al., 2017; Hammond et al., 1996; Kennedy and Ehrenberg, 2001). This implies that when brands have a target market narrower than all category buyers, much actual buying is done by consumers outside of the target profile. To examine the effectiveness of target markets, the first step is to see how accurately a brand’s buyer base reflects its target.
In order to help marketers make more informed targeted advertising decisions, the key objectives in this research are to understand:
- Why do marketers target their advertising?
- How accurate are target markets compared to actual buyers?
Why do marketers target their advertising?
The data for this research was collected through an online survey that was globally distributed, with responses from almost all regions. The sample was 145 marketers who had a role in making advertising related decisions for a brand. Respondents were asked to describe the outcomes they wanted to achieve through targeting advertising creative and media placement.
A total of 448 reasons why targeting is used in advertising was collected and the verbatim were coded by three researchers into five overarching objectives (see Figure 1).
Figure 1: The Objectives of Targeted Advertising
Brand growth and equity are the two most prominent targeted advertising objectives at 32% each, whereas advertising efficiency is the least.
Overall, the most common reasons relate to stimulating brand growth or achieving brand equity (each making up 32% of objectives). Brand growth included responses relating to increasing sales, attracting new buyers, increasing behavioural outcomes, and increasing behavioural loyalty. A verbatim example of this is “Drive penetration for long term growth”. Brand equity, on the other hand, relates to increasing consumers’ knowledge and perception of a brand. Hence, responses related to increasing brand awareness, mental availability, brand image positions, and brand consideration.
Finally, while most of the literature (both academic and industry) advocates targeting for efficiency reasons, it was the least mentioned objective making up only 5% of responses. Examples of verbatim responses include “Reduce ad wastage” and “Increase ROI”.
We compared how the objectives to target advertising differed between those adopting narrow (i.e., targeting a segment of category buyers) and broad target markets (i.e., targeting all category buyers). The differences were generally not great, though marketers who adopt narrow target markets are significantly more likely to see efficiency as a key objective (9% vs 2%).
Overall, these results suggest marketers primarily use targeting to increase advertising audiences to grow rather than reducing them to achieve efficiency. As marketers are looking to achieve growth, it is vital that their target markets accurately represent the category buyer profile so that they are primed to achieve these goals.
How accurate are target markets compared to actual buyers?
Next, we wanted to understand how accurate a brand’s target market was at representing the consumers who buy the brand and category. We identified a subset of 40 brands and their respective target markets from 444 target markets collected from the online survey. Brands included in this analysis were chosen based on the availability of brand and category buying data. This secondary claimed buying data was sourced from online consumer surveys collected by the Ehrenberg-Bass Institute for industry-funded projects. This research covered 12 categories and 40 brands.
Around 60% of marketers believed that more than 80% of brand buyers would reflect their target market profile. However, the actual results showed that on average, target markets represented 62% of brand buyers and 56% of category buyers (refer to Table 1). Therefore, target markets didn’t encompass around 40% of brand buyers and nearly half of category buyers. If marketers aim to exclusively reach these target markets with advertising, close to half of brand and category buyers would not be reached. This would make it difficult for these brands to achieve the goals of increased growth and brand equity.
Table 1: Target Markets reflection in brand and category buyers
Across twelve categories and 40 target markets on average, 62% of target markets are brand buyers and 56% are category buyers.
The representation of target markets in brand buyers varies across categories with a 42 pp difference between food delivery (89%) and pet food (47%). The variation could be due to the target markets within each category. For example, the reflectiveness of target markets in buyer profiles could be contingent on how narrow a target market is. So we split the target markets into those that are narrow (i.e., targeting a segment of category buyers) and those that are broad (i.e., targeting category buyers) to compare the accuracy of target markets. Unsurprisingly, narrow target markets are much less reflective of actual brand and category buyers (see Table 2).
Table 2: Narrow and Broad Target Market reflection in brand and category buyers
Narrow target markets are significantly less reflective of brand and category buyers.
Overall, this research found that marketers target their advertising with the aim to grow their brand. However, the target markets employed do not align with a growth objective, as we found that they do not fully capture brand and category buyers. Therefore, these target markets could be hindering a brand’s potential to grow through advertising.
Key Findings
- Targeting is generally used in advertising with the goal of increasing Brand Growth and Equity.
- Brands with a narrower target market (i.e., targeting a segment of category buyers) were more likely to mention advertising efficiency than those with broad target markets. However, it was still the least prominent objective (9%).
- For brands with a narrow target market, approximately half of their brand and overall category buyers are outside of their narrow target market.
- For brands with a broad target market, nine in ten brand and category buyers are inside of target markets.
Conclusion
This research found that marketers target their advertising to attract new buyers and grow their brand. However, it was still found that a considerable amount of purchases are made by consumers outside of target markets. This highlights a disconnect between targeting objectives and marketers’ existing target markets. To address this, marketers should use purchasing data to accurately define their target markets and design advertising that aligns with their objectives. By doing so, marketers can maximise the potential for increased brand growth and equity through targeted advertising. We summarise three key actions for marketers when making targeted advertising decisions.
Key Actions for Marketers
Do use purchasing evidence to define your target market
Defining a target market should not be based on assumptions or ‘gut feelings’, but instead, rooted in evidence about who does and could buy from your category. To ensure that target markets are primed to achieve growth, it is vital that marketers use evidence about who buys from the brand and category when defining target markets for advertising. Therefore, it is recommended that marketers consistently conduct consumer research to better understand who their brand and category buyers are. If target markets are narrower than the brand and category profile, marketers are hindering their ability to achieve increased brand growth and equity.
Design advertising with your objectives in mind
The majority of marketers stated that their brand’s target market has a pivotal influence on advertising development and execution. However, it was found that only half of a brand’s actual buyer base is represented by its target market. This shows a disconnect between what marketers intend to achieve through targeting in advertising (i.e., attracting new buyers, increasing sales, increasing media reach) and the target markets they are using. Most marketing practitioners have good intentions for using targeting in advertising strategy (i.e., they use it as a tool to attract new buyers). However, these strategic intentions are not translating into the brand’s target markets.
Don’t overlook high reach media
It is common for those selling media space to tout targeting that allows marketers to exclusively reach specific audiences. However, such targeting invariably costs money. When target markets are set too narrowly, high reach media platforms can be viewed as wasteful, as it reaches ‘off target’ consumers. However, this research found that around 50% of brand and category buyers were outside of target markets. This figure could be substantially lower without high-reach media. Eliminating high-reach media means that only those in the target market would be served with advertising. This is dangerous because less potential buyers will have exposure to the brand. For more information on how to effectively choose and schedule media see Key Media Principles report.
By adopting these key actions, marketers can bridge the gap between their targeting objectives and existing target markets, ultimately driving brand growth and equity through more effective and strategic targeted advertising.
