Home Depot spent, on average, $6.3 million on search ads last year, a 2.0% increase from the $6.2 million it spent a year earlier.

The reason that Home Depot Inc.,  No. 8 in the Internet 2017 Retailer Top 500, spends the majority of its ad dollars on digital ads is simple: Digital ad formats enable the home improvement chain to customize its marketing messages to the signals that consumers are sending, says Drew Keenan, the retailer’s senior director of paid media.

Home Depot has plenty of company among retailers allocating more than half of their ad dollars to digital ads: 47.2% of retailers in Internet Retailer’s 2017 Digital Marketing Survey spend the majority of their ad budgets on digital ads.

However, Home Depot isn’t just shifting its ad spending dollars around, it is rethinking its objectives. “The shift isn’t just where we’re advertising, it’s how we’re advertising,” Keenan says. “There’s no one-size-fits-all approach. We want to customize the marketing experience we present shoppers and that starts by ‘listening’ and working hard to understand the journey that each customer is on in each purchase occasion. Then, we can tailor our message and media appropriately.”

Listening takes many forms, ranging from analyzing consumers’ online actions to their search queries to their offline actions (gathered in part by connecting consumers’ online accounts to the emails they share to receive an e-receipt) to insights it gathers by mining the massive swath of data it collects about its customers’ online and offline actions, he says.

By understanding the signals shoppers are sending and connecting them to the actions they’re taking, the retailer aims to use what it knows about a shopper to present him with a relevant ad. For instance, if a shopper searched online for a snowblower, clicked a search ad to arrive at HomeDepot.com, but then made the purchase in a store, the retailer can use that knowledge to avoid wasting impressions by presenting him with ads featuring snowblowers and, instead, show him related products or other items he may have expressed an interest in (or that shoppers like him have purchased).

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The shift isn’t just where we’re advertising, it’s how we’re advertising.

Beyond the consumers’ direct actions, Home Depot also uses weather-triggering ads that enable it to deliver a message in an ad that a consumer is likely to be interested in when they’re online. For instance, if there’s snow in Chicago, Home Depot might run a display ad campaign featuring indoor projects for consumers in the Chicago metropolitan area, while running a display ad campaign featuring outdoor projects in other markets in Illinois, Indiana and Wisconsin. At the same time, it might launch a paid search campaign targeting shoppers in the Chicago area who are likely in the market for snowblowers.

The retailer also uses Google’s local inventory ads that are deployed based on the inventory levels the retailer has in a specific store or market. And it uses geofencing (or digital fences) in specific sections of its stores to understand consumer traffic patterns and to better understand areas where it may be over- or under-penetrated. It also geofences the perimeter of its stores to enable it to “surgically” target mobile shoppers with the right ads. “[Geofencing] enables us to spend marketing dollars in both offensive and defensive ways based on customer mobility patterns,” Kennan says.

The fine-tuned approach has helped Home Depot keep its paid search costs in check. It spent, on average, $6.3 million on search ads per month last year, a 2.0% increase from the $6.2 million monthly average a year earlier, according to Adgooroo data.

In addition to paid search, Home Depot drives more than 4.3 million consumers from emails to its site every month. That’s a dramatic 44.6% jump from roughly 3.0 million a year earlier. That’s more consumers clicking from emails than all but 10 retailers ranked in the Internet Retailer  2017 Top 1000, which Kennan attributes to the content within those messages, Keenen says.

The retailer’s emails feature a dynamic feed that changes based on the time of day, product availability and other factors. That means that a consumer who opens a week-old email that had featured an offer that expired days earlier will instead see Home Depot’s most current promotion. “That makes a big difference,” he says.

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