Historically, performance marketing has never required as much strategy and execution as it needs today. With tight marketing budgets, rising acquisition costs, time-strapped teams, and a scattered user journey, search and owned platforms alone may not drive sustainable growth.
Since understanding customers is key to getting in front of them and enticing them to engage, two advertising strategies rise to the top: retargeting and lookalike targeting. While both can help solve modern-day marketing challenges, and are both often lumped together in overarching plans and budgets, they each solve a different problem at different points in the customer journey.
Understanding what each tactic really means, when each should be deployed, and the considerations and outcomes of each, will help create a campaign that executes for maximum return.
Retargeting
Retargeting is a lower-funnel marketing tactic that uses behavioral intent to serve more effective ads to nudge users into action. To be most effective, this type of advertising needs to appeal to the mindset the user has when engaging online, with a goal of conversion.
Description
Retargeting allows for people who are searching online, but have not yet taken action, to be served digital ads about the brand, product, goods, or service. The idea is to give a friendly reminder to those who have shown interest but haven’t yet converted, nudging them toward the intended activity.
How It Works
User actions (such as browsing history, clicks, engagement, or abandonments) are tracked across devices and platforms via cookies, pixels, or tags installed on your website. If a user abandons items in their cart, e.g., email retargeting would see an email sent to the user as a reminder, specifically encouraging them to return to their cart.
Benefits
Because retargeting audiences are already familiar with your brand, and are lower in the marketing funnel, retargeting tactics produce more engagement and conversion. As such, the cost per click is lower than with many other tactics, since these ads are being served to a warmer audience.
Repeat brand awareness is another retargeting benefit, as the brand, product, or service is served as a reminder. Retargeting ads can even offer personalization, based on information collected from the user or their experience, which can help to create a brand connection.
Considerations
There is a limit to both the audiences available for retargeting — i.e., those who have previously interacted with you — and how many times you can get in front of them before diminished ROAS occurs. If the campaign isn’t well optimized, ad funds may be wasted on people who have already converted.
Retargeting can also be subject to privacy concerns over use of personal data, and requires user consent for personalization through GDPR, CCPA, and other similar regulations.
Use Cases
Cart abandonment advertising is a strong use case for retargeting. This can show up as an ad featuring a product a user browsed online, or an email reminding them they have items in their cart. These users have gone far in the purchase process, and enticing them to complete a transaction is direct revenue for the business.
Lookalike Targeting
Description
Lookalike targeting finds new potential audiences who share attributes or characteristics with your existing customers. This information comes from your first-party customer data.
How It Works
When you feed current customer data into ad platforms, they use this information to analyze other users and find the ones that match the profile of your customers. This gives you a warm audience to work with, since they match your existing audience through multiple dimensions and common attributes.
Benefits
Because this is a new audience, there is a larger pool of potential customers to target, as opposed to retargeting campaigns, which focus on a current audience. This tactic is relatively easy to get off the ground, using data you already have from your current customers. Some models can even adjust and refine targeting and messaging based on campaign learnings.
Lookalike audiences are a higher-funnel tactic, meaning that fresh leads are being added to the marketing funnel for more sustainable funnel growth.
Considerations
Since this targeting is directed at people who have not yet shown engagement or interest in your brand, it likely will take longer to warm them up, and more touchpoints to see significant results.
Use Cases
As lookalike targeting is putting you in front of a net-new audience, it’s a good tactic to expand awareness when you need to fill prospects higher in the marketing funnel. If cost per acquisition is an important metric, lookalike targeting is a solid solution that can increase conversions in a cost-effective way. With a strong database of current customer data, you can create nuanced lookalike campaigns based on product, behavior, time, location, and more to boost the likelihood of positive results.
How Does Retargeting Compare to Lookalike Targeting?
| Feature | Retargeting | Lookalike Targeting |
| Privacy Compliance | Relies on first-party data, server-side tracking | Relies on both first- and third-party data, consider geographic privacy laws and regulations, needs consent |
| Campaign Goal | Conversions, increase intent | Awareness, reaching new prospects |
| Setup Complexity | Moderate, with more technical and strategic planning and implementation | Low, based on quality source audience data |
| Audience Scalability | Fixed to current audience as the maximum | Unlimited, based on quality of data and budget |
| Immediate Performance | High, since this audience is warm and lower in the funnel | Moderate, since this audience needs to be created and nurtured |
| Long-Term Brand Lift | Shorter timeframe focused on conversions rather than brand lift | Longer timeframe, but expands brand influence and reach |
| Cost Efficiency | Strong at first, but becomes a diminished return on ad spend from messaging fatigue | Good cost per acquisition compared to other tactics, can shift if audience isn’t responding |
| Automated AI Integrations | Can display dynamic ads based on personal user behaviors and actions | Refine audience and messaging based on response and information learned from existing customers and new leads |
| Brand Safety/Suitability | Main consideration is placement next to or within other platforms that don’t align to brand or product | Improves with quality of seed audience data |
| A/B Testing | Testing creative and messaging and adapting based on response, and adjusting segmenting | Test lookalike audience sizes, adjust segmenting, test creative |
How to Decide When to Choose Retargeting
Retargeting works well when you have a lot of stalled lower-funnel audience near conversion, or significant monthly traffic (for a larger retargeting audience potential). If you need a quick win, or have abandoned products you’re looking to move, retargeting could be a great tactic to drive completion.
How to Decide When to Choose Lookalike Targeting
If you have more time and need to bring more people into your marketing and sales pipeline, lookalike is a smart tactic to expand reach and awareness. Devoting time to testing audiences, segments, and creative will result in more success.
Key Takeaways
Both retargeting and lookalike targeting have a place in the marketing and sales plan. With retargeting focusing on moving your current audience closer to conversion, and lookalike targeting focused on bringing awareness to new audiences, a mix of both addresses short- and long-term needs. Budget and current audience data will both factor into results for each campaign.
Frequently Asked Questions (FAQs)
What is the primary difference in audience intent between retargeting and lookalike targeting?
Regargeting targets users who have previously shown intent to purchase. This was demonstrated through actions including product views, content engagement, and cart abandonment. Because they have already interacted with your brand, they are more likely to convert on first impression.
Lookalike targeting is aimed at users who have never interacted with your brand, but share characteristics with your existing customers. While they haven’t shown intent, their behavior patterns suggest they are more likely to be interested than other audiences. Still, because they have not yet interacted with your brand, they may need further nurturing before a conversion.
How does lookalike targeting help scale my performance campaigns beyond retargeting?
Retargeting has a limited reach based on your existing audience and, once that audience is saturated, offers diminished return on retargeting spend. Lookalike targeting, however, allows for scaling through different methods such as increasing ad spend, or adjusting or expanding targeting attributes. With lookalike targeting, new prospects enter the marketing funnel, and can later become retargeting audiences.
If my site has significant traffic but a high cart abandonment rate, should I invest my remaining budget in lookalike targeting to find new prospects, or in retargeting to bring back those who left?
Lookalike targeting can be a great way to grow upper-funnel awareness for the future, while retargeting can provide quick wins on those audiences already expressing an interest. Each has a place in the marketing and sales funnel. You should also consider a thorough appraisal of your checkout page to see what’s causing the high cart abandonment rate.
