Category based pricing: Variable pricing for focused retargeting
March 3, 2017
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This blog post introduces a new class of business models- Category based pricing that allows Advertisers to exercise more granular control over the returns on their retargeting budgets.
Every e-commerce website organizes the products/services sold on its website into hierarchical logical groups to improve product discovery for users. E.g. Apparel->Men’s Apparel->T-Shirts or International Flights – Domestic Flights etc. The interesting thing about categories is that their products, more often than not, have similar financial attributes. The sale prices of products in a category are in the same ballpark and offer similar margins to an Advertiser. It is also not uncommon for e-commerce companies to structure their teams around the different product categories detailed on the website.
All Categories are not created equal
Time for a pop quiz! As an advertiser, let’s say
You have multiple categories retailing on your website, each with different Average Sale Price (ASP) and Profit Margin. You have a limited digital marketing budget (of course!) and you want the best bang for your buck. What do you want your affiliates to do?
You have just introduced a new product line/category. You have spent a great deal on above-the-line marketing campaigns to create awareness and draw users to your website and check out these cool new products. Should this have any implication on your retargeting campaigns?
You are in a crowded e-commerce market. You want to protect your turf but cannot declare an all-out war in all the categories (why else, that limited budget again!). What’s your next move?
The rationale behind the answers to the above questions is the same: regardless of the context, not every category could possibly be equally important. If you want better returns (ROI), you want to drive up sales in high value (price, margin) categories. You want your affiliates/partner to take cognizance of the newly introduced product category and push sales in it. If you want to entrench your position in a crowded market, you aim to be the market leader is a select set of strategic categories and align your affiliates with the strategy.
Clearly, some categories are more equal than the others and you want to influence the sales mix based on your strategy (both organically and affiliate driven).
Ok, but what about users?
Please check out the recently published Whitepaper on Industry Driven Retargeting if you have not already done so. Our research clearly shows that end user browsing/buying behavior differs significantly based on the industry/product / category of interest.
Category based pricing
In light of the above data and feedback from some of our clients, we recognized the growing need for Advertisers to exercise a greater degree of control over their marketing spends. We have overhauled our systems to allow our clients to monitor and influence campaign performance at individual category level granularity. Our algorithms and reporting systems now factor in the category that a user is interested in and that allows campaign optimization to be taken to a whole new level of detail!
Using the new pricing models, our clients can now:
Define category level payout rates for strategic categories
Analyze the performance of these categories on Vizury Central
Nishant Kadian takes care of content marketing for mFaaS. He is passionate about sharing his learning on the ad technologies, mobile ad fraud preventions, and more. Drop him a 'Hello' on LinkedIn or Twitter to start a conversation with him.