Personalized Advertising: How it Works and Examples

With third-party cookies fading, brands must use first-party data to personalize ads while maintaining trust and privacy. Learn how to balance both.

The way brands advertise to customers has changed. With third-party cookies fading from existence, getting the right data you need to send relevant ads is becoming harder. 

This shift has pushed marketers to leverage first-party data, or information taken directly from customer interactions like form fills and website visitors. 

But with great data comes great responsibility. As brands collect more detailed information about their customers, they must carefully balance personalization with privacy. The key lies in using this data thoughtfully and ethically, always keeping customer trust at the forefront.

Ahead, you’ll learn how to do personalized advertising correctly and earn higher ROI on your ad spend. 

Why personalized advertising

Personalized ads are no longer a nice-to-have. In the age of unified commerce, where every channel intersects, they are the link between your marketing efforts, and sales. 

Brands that learn how to create personalized advertising meet customer expectations better. They can provide better product recommendations in ads, for example, and see higher engagement. 

Below are reasons why personalization is important. 

Meeting customer expectations

Over 70% of consumers expect brands to deliver personalized interactions. That means not just addressing them by first name, but sending them ads based on their buying behaviors, and even their loyalty status. 

For example, if a customer explores a product in a mobile app, you can show them an ad related to that product on social media. You can also show relevant display ads or send email campaigns depending on user behaviors.

Increased engagement

Personalized ads outperform generic ads because they cut through the noise. When your ad shows up in their feeds and solves a specific problem, your audience responds with clicks and purchases. 

With platforms like Shopify, you can track and analyze customer activity across channels, so every piece of creative you produce is aligned with what you know about your shoppers. 

You can even use apps like Nosto to add AI-driven product recommendations to your ads to highlight items that align with shoppers’ preferences. 

Improved ROI 

Personalized ads lead to more efficient ad spend. When ads are tailored to a specific audience segment, you reduce the cost of wasted impressions and clicks. In fact, Happy Hippo achieved a 4.7x ROAS and 72% lower CAC by personalizing ads with Shopify Audiences.

Your commerce platform can also help here. With live inventory data, you can set up personalization campaigns that automatically push products with high inventory and high interest to the forefront, improving your ROI. 

Enhanced shopping

Half of consumers feel their shopping experience improves when brands offer personalized promotions. From the consumer’s perspective, personalization feels like an added layer of service and convenience.

Brands can even implement loyalty programs that sync across all channels, so shoppers can receive specific ads based on their loyalty status and redeem points easily.

Smarter affiliate marketing

Influencers, content creators, and bloggers sway consumers more than traditional ads. Recommendations from affiliates or brand ambassadors who know and trust your products can lead to meaningful conversions.

When you integrate your affiliate or influencer relationships into your unified commerce strategy, you track the full customer journey from the initial recommendation to the final purchase, and back into post-purchase retention. 

You can give affiliates personalized referral links, discount codes, or influencer-specific landing pages, so every click and conversion is properly attributed.

The effectiveness of personalized ads

Personalized ads resonate with audiences because they align with individual shopping behaviors and preferences, delivering timely and relevant messages. 

This isn’t anecdotal: brands using targeted Shop Campaigns have driven up to 24% new customer growth, and 50% saw their first order within 48 hours of creating a personalized ad campaign. 

Shop Campaigns is a marketing solution in the Shopify ecosystem that allows brands to create and manage targeted advertising directly from the Shopify platform. It’s designed to use data from across your store—product listings, checkout insights, and customer segments—to serve highly relevant ads.

You can pair it with tools like Shopify Audiences, which helps identify high-intent buyers. Shopify Audiences has helped brands achieve a 3.6x lower cost per purchase and double the size of their retargeting audience.

Using customer insights and proven technology, personalized advertising guarantees that each campaign hits the mark and your spending stretches further. 

Types of personalized ads

Different types of targeting help you show ads to the right people. You can target ads based on how people behave or basic facts about them (like age). 

Here's what the main types of targeting look like:

Demographic targeting 

Demographic targeting focuses on attributes like age, gender, income level, and location. It’s commonly used when a brand has well-defined buyer personas, or sells products that cater to specific demographic segments. For example, a luxury men’s watch brand would show ads only to men aged 35 and up+ with high incomes in major cities.

Behavioral targeting

Behavioral targeting uses customer data like browsing history, purchase habits, or app usage to serve ads. It captures users at specific points in their journey, like cart abandonment or product-view events. 

Marketers rely on these signals to refine messaging, ensuring each ad feels personal and timely. After browsing running shoes, for example, you see ads for athletic footwear on your social media feed.

Because it adapts to real-time behaviors, it often yields higher engagement and conversion rates than more generalized targeting like demographic.

Contextual targeting

Contextual targeting serves ads that match the content a user is currently viewing. It relies on keywords and subject matter to determine relevance. 

For example, an outdoor gear ad might appear on a travel blog or a hiking forum. It’s useful for reaching prospective customers who haven’t yet engaged directly with your brand, but share an interest in a related topic. 

Retargeting

Retargeting shows ads to people who have already interacted with your brand. They may have visited your website, added items to their cart, or opened an email. 

Retargeting ads keep your product top of mind. Ad campaigns using Shopify Audiences Retargeting Boost lists can demonstrate two times more orders for every marketing dollar spent, compared to other tactics. They typically rely on tools like tracking pixels or cookies to “follow” customers around the web with tailored ads.

Lookalike audiences

Lookalike audiences target people who share characteristics similar to your existing customer base. They are built from data points—like demographics, interests, and online behaviors—of your highest-value customers, and then applied to a broader pool of potential new customers. 

By using tools like Shopify Audiences, you can precisely identify traits—browsing habits or previous purchase patterns—that make a customer valuable. This drastically improves cost-effectiveness. For example, using Audiences for awareness and consideration can help lower customer acquisition cost (CAC) by up to 50%, meaning you pay less to bring in new, qualified shoppers.

Personalized offers 

Personalized offers provide unique deals, discounts, or packages to different customer segments. These incentives are more relevant because they are based on individual customers' data. 

They are often implemented through automation—think dynamic coupon codes sent after someone abandons a cart or hits a certain spending threshold. When done right, personalized offers feel more helpful than pushy, and increase your ROAS.

Location-based offers 

Location-based offers use geographic data to create hyper-relevant promotions. Think discounts for in-store visits or nearby pickup. 

Brands can use GPS-enabled apps, mobile notifications, or store locators that detect when a shopper is near a retail location. The tool then encourages the customer by sending them a personalized deal. 

Brands with both physical and online operations often integrate location-based offers into their broader omnichannel retail strategy for a seamless experience.

Ethical considerations and user privacy

Privacy and ethics matter more than ever in digital advertising. As brands collect more customer data to deliver personalized experiences, they need to handle this information responsibly.

Here are the key ethical considerations for protecting user privacy: 

1. Transparency: Explain how and why you collect user data, including what information is gathered and how it will be used. Being upfront builds trust and creates an open relationship with your target audience.
2. Consent: Always ask for explicit permission before gathering or using personal data for advertising. Users must be aware of and agree to the ways their data will be utilized and stored.
3. Data security: Protect customers’ personal information with robust security protocols to prevent breaches or unauthorized access. Encryption and regular audits also help uphold your brand’s reputation and your customers’ trust.
4. Data minimization: Collect only the information necessary to achieve your advertising goals, rather than gathering data indiscriminately. 
5. User control: Give customers a clear, simple way to manage their data preferences and opt out of personalized advertising if they wish. 
6. Respect for privacy: Understand that some customers are cautious about sharing personal details online. Respect their boundaries and you’ll build stronger, more loyal customer relationships.
7. First-party data: As third-party cookies continue to disappear, data directly collected from your own channels is more important than ever. Leveraging first-party data allows you to craft personalized customer experiences, and maintain a higher level of compliance and user trust.

Tips for personalized advertising

Respecting privacy and consumer rights is non-negotiable, but there are still plenty of ways to personalize responsibly. Below are practical tips to get it done:

Collect data directly

In a cookieless, privacy-conscious future, you can’t rely solely on third-party or even second-party data. 

First-party data, the information you gather yourself through website interactions, mobile apps, emails, loyalty programs, and in-store (POS) sales, is accurate, owned by you, and aligned with customer consent. 

Some ways to collect this data include:

1. Gather immediate feedback with Shopify partner apps like Zigpoll to embed short surveys on the Thank You page.
2. Offer perks, early access, or additional discounts in exchange for sign-ups.
3. Track on-site user actions (e.g., clicks, product views, wishlist additions) via tools like Shopify’s built-in analytics.
4. If you use Shopify POS, unify offline and online data in a single profile. Customers can leave their email or phone number at checkout for future loyalty or marketing touchpoints.

Value exchange is the key. People will share their info when they trust your brand and receive real benefits like personalized offers and a smoother shopping experience. Shopify's first-party data tools help you:

• Maximize ad and email performance through targeted campaigns
• Lower customer acquisition costs through smarter audience targeting
• Track and identify customers across multiple devices and sessions
• Enrich customer profiles with compliant data collection
• Create a cost-effective marketing system that increases customer lifetime value

Build a customer data platform (CDP)

A customer data platform unifies all your customer interactions across channels into a single source of truth. It combines what customers do online (like browsing your site or opening emails) with what they do offline (like shopping in your store or attending events).

Managing all this customer data can be tricky. You need clear rules about how you collect and use data, especially to comply with privacy laws like GDPR and CCPA that protect customer information.

To build your CDP in Shopify, connect your key data sources. This includes your Shopify store data, marketing tools, and any third-party apps you use for customer service or loyalty programs. You can use Shopify's native integrations or connect custom data sources through the API.

Shopify then automatically combines your orders, customer profiles, and marketing data into unified customer profiles. You can use these profiles to:

• Create personalized product recommendations
• Build targeted email campaigns
• Track customer lifetime value
• Customize the customer’s shopping experience based on purchase history

Use pixels

Pixels are small scripts that help you track customer events—like product views, cart additions, or checkouts—so you can measure digital marketing performance and retarget shoppers. 

However, poorly managed or incorrectly placed scripts can slow your site, create privacy-compliance risks, and even break parts of your checkout experience. Shopify addresses these issues with a Pixel Manager that runs your pixels in a controlled sandbox environment.

Shopify’s pixel manager lets you centralize all pixels—both app-based and custom—in one place. It gives you a secure and centralized interface to run essential tracking scripts without hurting site performance or violating customer privacy. 

Segment customers

Customer segmentation helps you turn raw customer data into actionable groups based on how people shop and interact with your business. For example, you can group customers by their purchase history, location, or how often they open your emails.

Creating and updating these groups manually would take forever—and would never be finished. Your customer information constantly changes as people shop and browse your store.

Shopify makes segmentation easy by doing the work for you. Your customer groups update automatically when:

• New customers make their first purchase
• Regular customers buy again
• Someone signs up for your emails
• A shopper leaves items in their cart

This helps you send more relevant marketing messages and create more targeted campaigns, without taking a lot of your time.

Personalize experiences 

Personalization sets you apart in a competitive market. Showing customers products, recommendations, or content tailored to their interests dramatically improves engagement and lifetime value. First-party data drives these user experiences. 

By unifying real-time activity (e.g., items browsed or added to a cart) with broader behavioral history (loyalty points, quizzes, wishlists), you can make every interaction, from onsite recommendations to loyalty rewards, feel tailor-made.

Some ideas:

• Gather customer data to recommend suitable products and create a memorable onboarding experience instantly.
• When shoppers add items to a wishlist, you learn exactly what they’re eyeing but haven’t yet purchased. You can then send targeted in-stock or price-drop notifications, boosting the chance of conversion.
• Combine browsing history and prior purchases to alert certain shoppers first (e.g., those who bought a similar item) when something new is about to launch.
• Send VIPs bigger “thank you” offers and early invites, while nudging casual customers with helpful guides, smaller discounts, or an educational quiz to spark interest.
• If someone frequently buys in-store, show them relevant products online or email them about store events they might enjoy. If they shop online, promote your nearest retail location’s exclusive workshops or try-ons.

With modern privacy laws, you need to make sure your personalization efforts are lawful. Shopify’s built-in privacy tools ensure you only run marketing pixels or personalized scripts if customers opt in.

Create a unified customer view

Every interaction, whether online or in person, is captured in Shopify and displayed in a single customer profile. You see their entire order history, returns, support tickets, and more.

This insight powers more personalized shopping experiences. For example, customers who frequently buy performance dress shirts might see ads for complementary styles, while those who browse but don’t purchase can be retargeted with the exact products they’ve shown interest in. Even stock limitations become an opportunity, with personalized ads notifying shoppers that an item they wanted is now available online.

By connecting every touchpoint, you can make ads feel relevant rather than random, and strengthen customer relationships.

Shopify tools for personalized advertising

Shopify offers all the tools you need to create highly targeted campaigns that speak to each customer's needs.

Shopify Audiences

Shopify Audiences is an ad optimization tool powered by data and insights from a network of businesses on Shopify. Audiences helps refine retargeting on top ad platforms to find the shoppers most likely to convert. Some features include:

• Retargeting Boost audience: Reach people who have engaged with your brand but not yet purchased.
• Existing Customer audience: Target existing shoppers for remarketing, or exclude them from prospecting campaigns.
• Prospecting audience: Find potential new customers similar to those who have bought your products.
• Lookalike audiences: Reach a large list of potential customers, using the Retargeting Boost list as a source to find similar people.

Mac Duggal partnered with digital agency Prospect Knight to implement Shopify Audiences, helping them overcome challenges with digital advertising in a privacy-focused environment. 

By using Shopify Audiences' Retargeting Boost custom lists, the brand achieved impressive results, including 2.3 times larger retargeting audience size, 3.6 times lower cost per purchase with their retargeting ad set, and double their return on advertising spend (ROAS).

💡Read Mac Duggal’s story

Segmentation 

Understanding who your customers are and how they behave helps create marketing that speaks to their interests. Use your first-party data to create customer segments for targeted ads with Shopify’s segmentation tools. 

Target each segment with highly tailored messages, like exclusive offers for your VIP group or re-engagement incentives for dormant shoppers, rather than broadcasting the same ad to everyone.

Want to find customers in California who spent over $500 last month? Or first-time buyers who browsed your sale items? ShopifyQL makes these complex searches simple. Type in natural language and ShopifyQL will translate your words into precise segments. 

Shopify Magic, our AI assistant, then reviews your search and explains in plain language exactly who you're targeting. For example, it may say, "this will find 342 customers from California who made single or combined purchases totaling more than $500 between January 1-31," helping you confirm you've built the right segment before you launch any campaigns.

Connect your segments directly to Shopify's automation tools to make your marketing work more effectively. Use Shopify Flow to trigger specific actions for different customer groups, set up automatic discount campaigns, or push targeted messages across email, SMS, and ad channels. The system even supports custom data points through Shopify metafields, giving you endless ways to divide and organize your customer base.

Shop Campaigns

Shop Campaigns is a risk-free paid customer acquisition tool that allows you to diversify ad spend into a new channel. It helps brands get better returns on their ad spending while spending less to acquire each customer. 

Shop Campaigns reaches millions of shoppers through the Shop app and other ad platforms, and uses smart algorithms to show relevant offers to the right buyers. Tell us how much you want to pay for each customer and what return you want to make.—we'll handle the rest, running and improving your campaigns. 

You only pay when someone makes a purchase, not for views or clicks. This means there's no risk, and it's easy for you to manage. Shop Campaigns can drive up to a 24% growth in new customers(as of Q1 2024). In 2023, Shop Campaigns helped brands acquire over one million new customers—and 50% of brands get their first order from a Shop Campaign within 48 hours of creating it.

First-party data collection tools

We offer multiple ways to collect first-party data. Unlike third-party data (often hampered by privacy regulations and user tracking restrictions), first-party data is consent-based and highly accurate. 

For starters, Shopify unifies data from all your selling channels into one central view. This single source of truth lets you track behavior and purchase history across touchpoints, fueling more targeted advertising. 

You can gather compliant, privacy-friendly behavior data from site visitors via Shopify’s Web Pixels API. And use our native Forms app to capture emails, phone numbers, survey responses, and more. 

Our partner apps also help with data collection:

• Yotpo: Build loyalty programs that encourage customers to share data in exchange for points or discounts. 
• Searchspring: Analyze onsite searches, clicks, and browsing patterns to learn which products resonate most with your customers. 
• Zigpoll: Collect post-purchase customer feedback via emails or Thank You pages. 

With high-fidelity data straight from your customers, you can personalize ad creative, messaging, and product suggestions based on genuine preferences and purchase intent.

Shopify POS

Shopify POS is the only point-of-sale system that unifies both in-store and online customer profiles. Having a 360-degree view of each customer’s purchase history and shopping behaviors allows you to tailor experiences and offers across channels. If someone loves a product in-store, they can receive personalized follow-ups online, and vice versa.

Learn more about how Shopify's enterprise-grade personalized advertising tools can help scale your business. Explore our complete suite of growth solutions.

Run more effective ad campaigns with Shopify

Tailoring ads to individual customers can be incredibly effective, but it must be done correctly. When brands are upfront about how they use customer data, respect people's privacy, and rely on information that customers have willingly shared, they can build genuine relationships that benefit everyone. 

By finding this balance between ad personalization and privacy, you can create advertising that actually connects with people and helps your business grow.

FAQ on personalized advertising

What is personalized advertising?

Personalized advertising is a marketing strategy that delivers targeted ads to specific users based on their demographics, interests, and online activities. The ads show users products and services most relevant to their needs and preferences.

How does personalized advertising work?

Retailers build a digital picture of who shoppers are based on their online footprint, the websites they visit, things they buy, and content they engage with. This data is used to figure out what they’re likely to be interested in, then serve up ads that match those interests.

How do you make personalized ads?

Creating personalized ads involves first collecting and analyzing user data to identify distinct audience segments, then creating multiple versions of ad content tailored to each segment's preferences and behaviors. The ads are then delivered through various platforms (social media, websites, emails) using ad targeting tools that match the right ad version to the right user segment.