What Is Targeted Advertising? Tips and Steps (2024)

Imagine shopping for a new pair of running shoes online. You click on a product page but ultimately choose not to buy them. A few hours later, you see an ad for the exact pair of running shoes with a limited-time discount code while scrolling on Instagram. Excited, you decide to snatch them up.

This is an example of targeted advertising. Brands can deliver ads that speak directly to their customers’ interests instead of casting a wide net and hoping to capture attention. Targeted advertising is now best practice; without it, you might be stuck wasting resources on a one-size-fits-all marketing campaign that doesn’t result in sales.

Learn more about targeted advertising—what it is, the different types, and how to implement it for your advertising campaigns.

What is targeted advertising?

Targeting advertising refers to any type of advertising with a clearly defined audience. You can base targeted advertising on customer data, focusing on people who show purchase intent. In the example above, the sneaker company used your browsing history to display an ad for the exact pair of shoes you were interested in. Brands can also target ads to customers based on demographic data; think a mattress company targeting 35- to 50-year-olds in the Vancouver area.

Targeted advertising goes hand-in-hand with targeted messaging. Digital consultant Nik Sharma, also known as “The DTC Guy,” stresses the importance of narrowing down your target market on an episode of the Shopify Masters podcast. “It’s like that saying, ‘If you stand for everything you stand for nothing,’” he says. “It's the same with marketing and thinking of who your customer is. You have to really think of no more than four people you're trying to sell to.”

There are different ways to target potential customers, each leveraging unique types of data:

1. Interest-based targeting

Interest-based targeting serves ads to customers who have shown an interest in a particular subject, usually inferred from the websites they visit or social media accounts they engage with. For example, if a customer frequently visits a Lord of the Rings subreddit, you can infer that they’re likely interested in fantasy. Based on this, Reddit advertisers could serve them advertisements for similar fantasy novels.

2. Demographic targeting

Demographic targeting uses a specific group’s characteristics to create targeted ads for them. Some examples include age, income level, education, and gender. Websites and social media platforms typically collect or infer this data based on information users provide. For example, social media platforms ask for users’ birthdays and genders when they sign up.

By segmenting audiences according to specific traits, businesses can tailor their targeted ads to speak directly to that group. For example, a luxury skin care company could segment audiences to women aged 40 to 50 and shape their ads’ messaging on the skin care challenges in that phase of life.

3. Geographic targeting

This type of targeted advertising serves online ads to target audiences in a specific area, such as a country, city, or neighborhood. This strategy allows businesses to focus their marketing efforts on targeted ads relevant to local audiences. For example, a clothing company may target ads for winter gear to social media users in colder regions and lighter clothing to those in warmer climates.

4. Behavioral targeting

A behavior-based targeted marketing campaign displays ads to internet users based on specific actions that imply purchase intent. For example, a user visiting a particular product page multiple times or clicking Shop Now on a Meta ad is likely interested or curious about that product. You can also look at search behavior. For example, specific product searches like “best nonstick frying pan” or “affordable walking shoes” can indicate purchase intent.

5. Programmatic targeting

Also known as algorithmic targeting or lookalike targeting, programmatic targeting lets you input data into an ad platform and then use its algorithm to find users with similar traits. Unlike interest or behavioral targeting in which you would manually set specific audience criteria, programmatic targeting lets the ad platform’s algorithm identify and target users based on data correlation. For example, a company could input data about its best customers into Meta, then let the platform’s algorithm find more users with similar interests to target for a new campaign.

How to implement targeted advertising

Define your buyer persona(s)
Choose targeting criteria
Select your platform
Think outside the (intent) box
Craft tailored ads
Conduct A/B tests
Use retargeting
Monitor and optimize

Targeted online advertising isn’t as simple as choosing an audience and serving ads to them. Here’s how to effectively implement targeted advertising to get the most return on ad spend:

1. Define your buyer persona(s)

Start by creating buyer personas, semi-fictional representations of your ideal audience based on your segments. These help you humanize your audience to gain deeper insights into their buying motivations. Each buyer persona should include the following:

Demographic details like age, gender, and marital status

Pain points and challenges that your product will solve

Buying motivations and the outcomes they’re seeking

Shopping behaviors, like how they make purchasing decisions

Preferred communication channels, like email, social media, or traditional media

Use market research, your personal experience, customer databases, website analytics, and customer relationship management (CRM) data to inform your personas.

2. Choose targeting criteria

Determine the targeting criteria for your ad campaign. Start by defining your campaign’s goals to select the most appropriate targeting. Here are some guidelines for choosing targeting:

Interest-based. If your audience has clear hobbies or passions such as hiking or camping.

Demographic. If you have a clear understanding of your audience’s characteristics.

Geographic. If your products are region-specific or your business serves only a specific area.

Behavioral. If you want to drive conversions by retargeting customers.

Programmatic. If you have large volumes of data and want to scale your campaigns.

3. Select your platform

Where will you display your targeted advertisements? Different ad platforms are beneficial for different types of targeting. For example, Google Ads and its Google Display Network (GDN) of digital ad surfaces offer demographic and behavioral targeting. Social media platforms like Facebook and Instagram allow you to target users based on interests and connections.

4. Think outside the (intent) box

Targeted advertising isn’t just about getting as tight on purchasing intent as possible. Sometimes, you need to get creative about who could have high intent. Nik gives an example about selling cooling creams. “The audience of people who would want to buy a cooling cream is probably very small, but the audience of people who want to buy a solution to stop itchy feet is probably much bigger,” he says. Look for ways to think outside of the box to expand your targeting and find relevant audiences.

5. Craft tailored ads

Once you know who your potential customers are, create ad content that will resonate with them. Here are some examples of matching ads to targeting:

Send a “low in stock” ad to users who clicked on a popular handbag.

Advertise special offers based on events in a specific location, like baseball games.

Use models for your clothing company’s ads that match your target audience’s characteristics, like gender and age.

Serve an ad for carry-on-size backpacks to people who recently visited the r/onebag subreddit, with a video showing how easy it is to fit all your belongings in it.

Razvan Romanescu, founder of direct-to-consumer business Underling, advises brands to differentiate their products to cut through the noise in competitive niches. He recommends using before-and-after images and highlighting impressive benefits that competitors lack. “We almost socially engineer the marketing story and pick our hero product and then build the brand around that, " he says, on an episode of the Shopify Masters podcast.

6. Conduct A/B tests

Sometimes, even the best targeted ad doesn't quite land. That’s why it’s important to keep testing and trying new ways to reach and convert your audience. A/B test different targeting types to find the mix that works for your business. An online ad that fails as a search ad may perform much better as an Instagram ad.

7. Use retargeting

As the saying goes, “If at first you don’t succeed, try again.” The same goes for your targeted advertising campaigns. Someone may not be ready to buy today, but another nudge may be what they need to push them over the edge. Retargeting keeps your brand top of mind, allowing you to personalize messaging according to your target segment. There are two types of retargeting:

Pixel-based retargeting. Uses a tracking pixel on your website to retarget previous visitors.

List-based retargeting. Uses email lists and customer data to target potential customers on different platforms.

8. Monitor and optimize

Set key performance indicators (KPIs) to track and measure success. Sometimes, an ad might seem to perform well, but a deeper analysis of KPIs uncovers issues. For example, your targeted ads might get many clicks but low conversions. Or, the clickthrough rate (CTR) may be high, but the return on investment (ROI) is low. Ultimately, your goal is to understand if the audience you’re targeting is converting into customers.

Targeted advertising FAQ

What are the pros and cons of targeted advertising?

Targeted advertising lets you better control who your online audience will be and allows you to tailor your ad content to them. However, it’s usually more expensive than non-targeted advertising and may be based on assumptions about your audience that are inaccurate.

How effective is targeted advertising?

Ad targeting is effective if you understand your audience well and want to serve tailored ads to them. On the other hand, a broader reach can sometimes be more effective in increasing brand awareness beyond a specific audience.

What factors contribute to successful targeted advertising?

Accurate audience segmentation
High-quality customer data
Relevant messaging and ad quality
The right targeting criteria