We're not even to Labor Day, but DRIVEpm's Scott Howe recommends testing targeting schemes and planning for Q4 buys now.

Marketers have no respect for holidays. After all, it seems that key calendar milestones are increasingly hyped months in advance. Back-to-school shopping starts in late July -- only weeks after school ends for many students. Halloween planning begins weeks before October 31. And Christmas holiday marketing now seems to commence closer to Labor Day than the day after Thanksgiving!

Marketers realize that holiday planning starts now, before all the bargains are snapped up by competitors. Consider these daunting realities:

• Fueled by a surge in demand, inventory prices for online media have increased upwards of 15 percent over the past year
• In the fourth quarter of 2004, online media prices surged by as much as 25 percent in certain categories versus the prior quarter -- an increase which may harbinger the coming months
• The increases in pricing, coupled with a shortage of inventory, complicate the task of designing effective media plans.

Since most advertisers have little to no control over inventory prices, they must instead rely on intelligent planning and aggressive optimization of poor performing placements. Enter targeting. Given the advances in targeting options and technology over the past year, marketers can afford higher holiday pricing by eliminating expensive waste to irrelevant consumers. However, unless targeting methodologies and segments are tested well before the holiday blitz, such campaigns may fall flat. Recognizing this fact, marketers are testing ideas now so that they may become smart holiday shoppers. 

"We're already planning for Q4 so we can secure the best inventory for our clients," says Michael Hayes, vice president, interactive marketing for Initiative -- agency to major online advertisers including Best Western, Hardee's and Lucas Arts. "Targeting is going to be a key lever of our strategy." 

Start making your list

These days, it seems as if there are more targeting options than stores at the mall. Just as most holiday shoppers won't buy from every store at the mall, so too should online media planners use caution in choosing one's targeting providers. For example, if a marketer simply wants to generate affordable awareness, then a smart choice would be to utilize the genre targeting available from any major ad network. To generate lift in brand favorability, such marketers may tighten their buys to include only larger, highly reputable sites. 

For more established online marketers, where driving sales is the primary objective, developing relevant customer segmentation schemes and targeting media only to a more qualified audience can produce the strongest results. Consider the example of a national specialty retailer that employed online image advertising. Against an untargeted approach, messaging only to online surfers who had previously searched for related products tripled conversion effectiveness. Meanwhile messaging only to surfers who had previously visited that advertiser's website generated a 10-fold improvement in conversions.

This study only confirmed what many direct mailers have long known: catalogs mailed to a recent customer base typically generate the greatest returns. Likewise, for online retailers, remarketing to past site visitors can yield strong results with very little targeting investment.

Turn naughty into nice

Unfortunately, not every segmentation scheme will generate strong results. By testing in Q3, marketers can determine what works most effectively and utilize those targeting schemes in their Q4 campaigns. "We're using behavioral-based targeting extensively," says Hayes. "And we're testing now, so that we can secure premium inventory in the next four-to-six weeks -- before it's gone." 

Rather than abandoning targeting tactics, smart marketers can often significantly improve results simply by adding targeting filters and further narrowing the intended audience. In other words, rather than canceling an underperforming segment, adjust frequency, messaging only during peak day parts, or add other targeting criteria (e.g. gender, geography or connection speed) in order to reduce waste and significantly improve performance.

A recent national retailer provides a relevant case study: By utilizing one targeting variable, the retailer was able to generate nearly five times stronger results. But expanding their scheme to three variables, the retailer was able to increase lift to 10 times that of untargeted media.

Be good for goodness sake

Of course, any targeting campaign carries with it the burden of responsible data usage and consumer privacy adherence. In choosing a targeting partner -- whether an ad network, targeting technology specialist or publisher -- advertisers should demand safeguards around data exclusivity and confidentiality. By choosing established, reputable providers, advertisers can find a partner to grow with -- testing new segments, generating ideas and delivering outstanding results.

Like it or not, the holiday season is upon us. By testing targeting schemes and planning for Q4 buys now, this holiday season's winning marketers are ensuring the only thing they'll need to worry about in December is what to wear to the holiday party.

Scott Howe is general manager for DRIVE Performance Media (DRIVEpm), an operating unit of aQuantive, Inc.