Last year, Facebook rolled out an extremely useful tool for re-engaging with and remarketing to customers: Dynamic Product Ads. It utilizes the Facebook Pixel along with a brand’s product catalog to engage users who have visited pages on a website with ads based on coordinating sets of products.
A quick thought experiment will illuminate why this is so important:
The sales and marketing staff for a bustling eCommerce store—for example, one that sells beauty supplies—might not realize just how much customer churn they experience. Consider the fact that most businesses focus more on customer acquisition (with 80% of eCommerce marketing) than customer retention, despite the fact that 40% of revenue comes from a mere 8% of customers, according to some research. That means whatever drew a customer to the site in the first place—perhaps a great sale on foundation or a limited edition bundle designed to create a complete look—may not be enough to help drive a repeat purchase. It’s important to remember that there’s a 27% chance that a person who made one purchase will come back for a second, but if they do come back for a second purchase, the chance they’ll make a third purchase increases to 45%. Dynamic Product Ads can help remarket to them meaningfully and increase the odds that they’ll make another, potentially larger purchase.
It’s also important to understand how often carts end up abandoned without closing a sale, and the impact of this missed opportunity. In 2015, the average cart abandonment rate was about 71.4%, and the highest rate of abandonment was from smartphones, at nearly 74% (Barilliance). Even if your business is doing well, this is an indicator your business could actually be doing that much better. During the holidays, cart abandonment increases to 72% on average and 76% on smartphones (Barilliance), mainly due to comparison shopping and sometimes because customers simply get distracted by all the hype of the season. Dynamic Product Ads can help re-engage customers like these by keeping your store (and the products they were considering) at the top of their mind.
While Facebook’s Dynamic Product Ads should absolutely be considered for every eCommerce site’s marketing strategy, they need to be utilized intelligently and carefully to be most effective.
Benefits of Facebook Dynamic Product Ads (DPAs)
There are many reasons DPAs might be a good fit for your brand. We’ve included the top benefits to using this ad format, along with some examples straight from Facebook’s success story vault.
Dynamic Product Ads are really optimized for two things: (1) appealing to users who have already shown some form of purchase intent, and (2) driving sales over website clicks.
The reason this ad format is so effective is because it’s programmatic, thanks to the utilization of the Facebook Pixel. With data passed through the pixel, marketers have the option to run a single product ad or a carousel of related products, based on the user’s website behavior. For example, if a customer views blush but doesn’t make a purchase, you can retarget them on Facebook either with the exact product they viewed, or a carousel ads featuring the blush and other related products. Similarly, if an electronics shopper adds a new smartphone to their cart but doesn’t check out, you can remind them of their abandoned cart with a product ad for that model of phone.
- Food52 is a foodie-oriented community and online store, and the brand specifically sought higher conversions through retargeting based on both number of products viewed and products in-cart. After enacting a Dynamic Product Ad strategy, Food52 saw a 10x increase in conversions as well as a 75% decrease in cost-per-conversion.
- Retail giant Target also saw improved conversions when utilizing this ad format. The brand was an early adopter, and even the early results exceeded expectations by garnering a 20% increase in conversions.
Cross-selling is widely used to improve the lifetime value (LTV) of existing customers by encouraging further purchases related to a purchase they’ve recently made. This is meant to help re-engage customers, and provide them with highly relevant ads based on their purchase behavior. When cross-selling, it’s important to target customers within a relatively short period of time to best capture the inspiration of the original purchase.
For example, say the person in our last example buys some blush; you could then re-engage them through Dynamic Product Ads for makeup brushes, bronzers, or illuminators. Similarly, the electronics shopper who buys the smartphone might be interested in mobile or wireless chargers, extended-life batteries, or phone cases.
Upselling is used to increase the cart size prior to checkout by suggesting complementary products to the item previously viewed, or a similar but more profitable one. This tactic is commonly used to increase the average order value (AOV) and decrease the cost-per-acquisition (CPA) of a prospective customer, since they have already shown purchase intent.
To play off the previous examples, if a person added blush to their cart but didn’t check out, you could retarget them with an ad featuring a complementary blush brush. Similarly, since many smartphones are released in several versions (e.g., different amounts of onboard memory), you could re-engage electronics shoppers with ads for the most expensive version of that phone.
Easy to Scale While Staying Hands Off
To be honest, the comprehensive setup required to run Dynamic Product Ads effectively can be time consuming and potentially complicated, depending on the eCommerce technology and organizational systems you already have in place. Once you have everything set up, however, the campaign becomes very hands-off. Since creative pulls through dynamically, you’ll only need to focus on optimizations.
Part of the setup process includes creating ad templates that are automatically filled by the product feed with components such as product name, description, etc. Facebook will then deliver them dynamically and programmatically based on your budget and the information generated by the pixel. Since audience data generates through the pixel automatically, you can reach customers as soon as they enter the funnel (i.e., visit a page on your site).
- Oppa, a Brazilian furniture and home decor retailer, wanted to advertise at a large scale while maintaining a personalized level of engagement. Once it put its Dynamic Product Ads Strategy in place, it was capable of retargeting at large scale and saw 5 times greater CTR and a 38% increase in revenue.
Reach Customers Across Devices
Pixels play a critical role in Dynamic Product Ads, since they allow Facebook to track people and not just devices. That means it can identify the person no matter what device they use. If they started shopping on their mobile device, but are more likely to complete the purchase on a desktop (as many shoppers are), a brand can re-engage them there or at any other device touchpoint to encourage that action.
- Online footwear powerhouse SHOES.com recognized that its customers started and completed their purchases across different devices, but also has such a huge catalog that manually designing ads for all of its products was impossible. They simplified the process by utilizing Dynamic Product Ads, which ensured customers were reached by relevant products and increased their conversion to sale rate by 37% with more than 16x greater ROS.
Relevance Throughout Sales Cycle
Personalization and relevance are critical in marketing today. Facebook used to handle this along with its retargeting efforts through FBX (Facebook Exchange); this feature is being replaced by the Dynamic Product Ads and Facebook Pixel combination, and will be retired as of November 2016. The new method allows you to tap into a wealth of data about users; that means you can reach them if they’ve searched for particular products (research phase), placed products in cart (intent to purchase), or actually completed a purchase (retargeting and cross-selling).
- The Honest Company, a CPG company focused on providing family-safe non-toxic products, wanted to reach customers with ads for products that were both relevant and timely. After putting the Dynamic Product Ads strategy in place, it saw a 38% drop in cost-per-purchase and a 34% increase in CTR.
The Challenges Associated with Setting Up Facebook Dynamic Product Ads
We’ve mentioned that setting everything up to effectively run a Facebook Dynamic Product Ads campaign can be complex, time-consuming, and even difficult. This is especially true for small and middle-sized businesses that run ads in-house with fewer resources. It bears mentioning that taking advantage of professionals, such as our team at Add3, can help simplify and expedite that process. Below we touch on just a few points to illustrate.
The Facebook Pixel is actually a piece of code embedded into different pages on your website that tracks every visitor and “fires” information (e.g., page, product ID) with regards to certain actions. A pixel needs to be added to every page for which you want to track information. The complication comes not only in applying the code to your pages properly, but in associating it with the right catalog data. The back-end data layer on your website needs to correctly communicate with the pixel regarding critical information, such as product SKUs, name, description, photos, and currency.
Catalog and Product Feed
In this context, the Product Feed is a particular set of products from your website, and it’s populated from the catalog that you either uploaded manually or populated using an API. The Product Feed can either represent the entire catalog, or you can create several feeds that segment your products in various ways. This is critical because it’s what ensures the information displayed (and even which products are displayed) accurately reflects your store. It’s also meticulous work, because this is another factor that requires precise information from your data layer.
Your catalog also needs to be further divided into product sets. This is what tells Facebook which products belong in a particular dynamic ad. Each catalog can have numerous product sets, and they can be defined by category, product ID, brand, or other filters. It’s important to take into consideration what product sets will create the most relevant ads for your audience, and how to optimize upon each product set.
As you can see, Facebook Dynamic Ads are a powerful tool that can benefit eCommerce sites in more ways than one. As Facebook advertising becomes more prevalent in digital marketing, DPAs are a great strategy to build a robust paid social strategy and get a leg up on the competitor. Don’t be intimidated by how intensive the process is for setting up your dynamic ads; it’s well worth the time and effort. Remember that taking advantage of professionals can make the process much easier and relieve you of the time-consuming, detail-focused tasks.