Effective Mobile Retargeting Hinges on Segmentation

Segmenting your audience effectively is one of the most important components of a mobile retargeting strategy, writes Alexei Chemenda (pictured below), CRO for apps and managing director, U.S., Adikteev, exclusively for TheGamingEconomy. It sounds like digital advertising 101, but most marketers – even seasoned ones – repeatedly make mistakes that gravely impact their results. These missteps include segmenting their audiences ineffectively and using suboptimal KPIs to measure and optimise their retargeting campaigns.

Marketers, you may not even be aware you are making these errors, but please rest assured, you are not alone. Players at every level of the mobile marketing ecosystem are guilty of perpetrating misconceptions about the right and wrong way to segment audience groups and run retargeting campaigns. It is worth analysing your audience segmentation to determine if there are ways to improve your approach and, in turn, improve your marketing.

The value of retargeting is well-documented across verticals, but it is a particularly powerful tool for mobile gamers, since 80% of revenue is generated by a small percentage – typically around 30% – of users. According to recent research, less than 4% of gamers make in-app purchases, and these users are key to profitability for app developers. Acquiring new high-value users is challenging and often costly. Retargeting existing app users, including active ones, can be a more cost-effective way to drive bottom-line revenue.

One overarching mistake marketers make as they build out their retargeting campaigns is overlooking the 'Day 0' segment – people who have lapsed zero days, or in other words, people who are actively using the gaming app. Often, marketers think there is no need to target this segment since these users are already active. They worry they will waste ad dollars or give their marketing credit for actions that would have happened anyway. Yet there are ways to retarget active users, and doing so can deliver significant results for your game. Keep this in mind as we take a closer look at segmentation best practices.

Segmentation for gaming apps

For gaming apps, segmentation is simple. Begin by dividing users into payers and non-payers (people who spend money in your app and people who don’t). Next, divide each of these groups into three categories: active, recently lapsed, and churned. This will leave you with six segments.

Active Payers
Active Non-Payers
Recently Lapsed Payers
Recently Lapsed Non-Payers
Churned Payers
Churned Non-Payers

This sounds straightforward, and of course, this is just a starting point – you can get very granular – but many app developers and marketers do not approach segmentation this way. They often get hung-up on trying to convert non-purchasers into purchasers, or lapsed non-purchasers into active purchasers. That is a very difficult conversation to make. Generally, you are either going to spend money in an app or you are not.

Segmentation for non-gaming apps

Alexei Chemenda, CRO, Apps & MD, U.S., Adikteev

It is useful to understand segmentation best practices for non-gaming apps, too, as well as common mistakes players in other industries are making. Here, segmentation should revolve around three use cases, or goals. These goals are:

1.     To drive more revenue

2.     To increase conversion rates

3.     To 'reawaken' users who haven’t used the app in a long time

Each of these use cases requires a different KPI. If you are trying to drive overall revenue, you should use incrementality to measure and optimise your campaign, not 'return on ad spend' (ROAS). Incrementality is the measure of the lift your campaign generates. As mentioned, incrementality is a useful metric for gaming app developers, too, because it allows you to safely retarget active users.

To calculate incrementality, you divide your segment into two groups – one that will receive ads and one that will not (the control group). Then you compare the activity of the control group and the retargeted group over the same time period and subtract that difference, if any, from your initial spend.

Let’s say you spend USD$30,000 and generate USD$50,000 in purchases. That sounds great, right? But what if some of those purchases would have happened even if you had not retargeted users? That is why incrementality is so important: it gives you a more honest look at your campaign effectiveness. Imagine you had created a control group and observed that it spend USD$20,000, whereas the group who saw ads spent USD$30,000. The difference here is only USD$10,000 – less than you spent in the first place! Now the campaign does not seem so stellar.

For the second category – converting people who have installed the app into more active users or purchasers – the relevant KPI is incremental conversions or conversion rate. For the third category, acquiring churned users, the KPI to measure is 'cost per open' – how much you are spending to get users to open your app again.

As basic as segmentation might seem, it is easy to get mixed up, especially since we have more data on our users than ever before and, in turn, ways to group and divide our audience. I truly believe the simple breakdowns I outlined above will deliver the best results for your retargeting campaigns and help you avoid common missteps.

With so many KPIs to choose from, and partners emphasising their metric of choice, it can be challenging to match the correct campaign goal with the most accurate benchmark. The good news is that taking a step back to assess your segmentation and correct it as needed will make a meaningful impact on your marketing. For gaming apps, proper segmentation is the key to deriving the most value possible from retargeting.