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The Lookalike Audience Is the Marketer’s Dream Come True

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Lookalike audiences have become a powerful tool to reach people outside your existing customer base, but are they worth exploring in the ad space?

Digital advertising has gone beyond finding the ideal channel and placement. It’s about targeting the primary and lookalike audiences – those most likely to purchase your products and services. 

Let’s face it – online advertising has become dynamic. Gone are the days when marketers were restricted to specific targeting options. Now, you can expand your reach by targeting your potential customers and those who share similar characteristics with your primary audience. 

Imagine discovering that you can sell to more clients beyond your existing customers. Think about how much more profit you would amass by leveraging lookalike targeting. In online advertising, that dream can come to reality.

This blog explores lookalike audiences, where you can find them, their features and benefits, and how to utilize them effectively.

What is a Lookalike Audience?

A lookalike audience is simply a group of potential customers with similar characteristics as your existing target audience. This audience consists of people likely interested in a product or service because they share characteristics with the business’s existing customers. 

Lookalike targeting helps advertisers discover new potential customers with similar behavior and buying habits as their current audience. They are derived from data supplied through customer lists, website visitors, and app users.

You may ask, where can I find audiences similar to my existing list of customers? Most advertisers think you can only see them on Facebook ads, but no. Google Ads, LinkedIn Ads, TikTok Ads, and X Ads (Twitter) use similar approaches with slight variations. For instance, Meta and Google collect data on user interests and behaviors, while LinkedIn is based on professional characteristics. X leverages topics that interest users.

All the above-mentioned platforms provide lookalike or similar audience functionalities, enabling advertisers to use data about their current customers to find new prospects with similar interests. Therefore, lookalike audiences aren’t just peculiar to Facebook ads.

A lookalike audience may be very different from the current customers, depending on the origin of the existing audience and data. The best way to have an effective lookalike audience is to have qualitative and sufficient data from the primary audience. This way, you can have a mirrored target audience, not too different from the existing one.

How Lookalike Segments Work

A typical lookalike segment works in the following ways:

  1. Gathering data, such as email addresses and phone numbers, about your current customers, website visitors, and app users.
  2. Uploading the collected data to the advertising platform, which uses the data to create a custom audience that serves as the basis for lookalike audiences.
  3. Algorithmically analyzing the seed or existing audience to identify common traits and purchasing behaviors, which are used to generate a lookalike audience.
  4. Using the lookalike audience to target relevant ads, ensures you reach more people likely to become customers.

Why Lookalike Audiences?

Every business person loves to make more sales, achievable by reaching out to more potential customers. Lookalike audiences allow businesses to scale their digital marketing efforts by reaching out to people with similar characteristics as existing customers. This increases conversion and expands reach.

Another benefit is enhanced targeting. Traditional targeting can be inaccurate sometimes due to a lack of detailed data analysis. Lookalike target audiences remove this imprecision through sophisticated algorithms, which analyze detailed data about existing customers. Of course, the result is highly accurate targeting, improving overall ad campaign performance.

Other advantages include:

Maximizing Ad Spend

Lookalike audiences can maximize ad spend. By targeting people who have the potential to buy your products or services, you can significantly reduce ad costs. That’s because your marketing efforts will be more directed and focused on high-potential leads. Apart from maximizing ad spend, you gain a better conversion rate.

Higher Conversion Rates

Given that lookalike audiences are based on current customers who have already interacted with or purchased your products, the chances of converting new prospects from an existing segment are higher. It leads to better ROI.

Improved Customer Insights

Lookalike audiences can provide more valuable data into your customers’ behavior. Understanding these traits can help you to refine your marketing strategies by creating tailored and effective campaigns.

Combining Custom Audiences and Lookalike Audiences: The Ideal Targeting Approach?

Many advertisers use the retargeting audience to build their lookalike audience. To clarify, retargeting audiences are lists of users you’ve already targeted. They are users who have visited your website, added a product to a cart without purchasing, or performed a significant action. 

Marketing to this retargeting audience with a ‘persuasion campaign’ can make them buy. The right message and incentive can persuade them to purchase. However, using a retargeting audience to source for a lookalike audience may not be effective because they aren’t your existing customers yet.

That’s why I recommend you combine custom audiences and lookalike audiences. Extract your ideal clients from your CRM database and upload them to Facebook. Meta will match them with their user profiles and eventually create an audience you can market to. You can create your potential lookalike customers from your custom audience segment by finding users with similar interests as your seed audience.

How to Use Lookalike Audiences for Your Small Business Advertising

As mentioned, many platforms provide lookalike audiences based on varied data. However, the strategy is similar. Let’s see how you can use lookalike audiences for your small business advertising:

Define Your Existing Audience

Your existing customer base or seed audience is the basis of your lookalike audience. You can extract your seed audience from a CRM or a pixel captured on your website. When creating your seed audience, it must be of a decent size. Facebook recommends a minimum of 1000 contacts. More is always better in determining the quality of your lookalike audience.

When extracting data, use data from your most valuable customers, such as those with frequent buying behavior. 

Comply with Regulations

You don’t want to be flagged for the wrong reasons during your online advertising. Privacy regulation is a big deal now, as there are now stricter requirements on using email addresses. You need permission to use personal data in an email address in your CRM or newsletter subscription. 

Match Your Primary Audience with their User Profiles

The next step is to match your seed audience with second-party data. A good practice is to encrypt email addresses to make them inaccessible to other platforms. This doesn’t prevent them from being matched with their user profiles.

The matching level doesn’t have to be 100%. Note that many individuals don’t get matched eventually to user profiles due to wrong email or because the users aren’t on the online platform. 

Test Your Audience Size

Let’s say you want to create a lookalike audience on Meta. The platform lets you define the percentage of you want to create from your seed audience on a scale of 1% to 10%. If set to 2%, Meta will create 2% of existing, Facebook lookalike audiences, similar to your seed audience.

The higher the scale, the less precise the similarity. However, you’ll have a broader audience segment, which can be essential in driving awareness. While it’s better to experiment with different source audience sizes to find the right balance for your campaign objectives, I recommend a smaller lookalike audience (between 1% and 5% similarity).

Wait for Your Lookalike Audience to be Created

The waiting period to get a lookalike customer base differs from platform to platform. On Facebook, the waiting period is usually 24 hours. While waiting, you can prepare your ad campaign and tailor it to your new audience. You can brainstorm ideas using SwipeBuilder, which allows you to create ad swipes of your competitors’ Facebook ads. You can also make swipes on platforms like Google, Meta, X, LinkedIn, and TikTok.

Best Practices for Using Lookalike Audiences

Maximizing the effectiveness and engagement of your lookalike customers should be your objective. Here is how to make your targeted lookalike audience even more powerful.

  1. Combine them with other targeting options to enhance your campaign’s effectiveness. Adding demographics or interest-based targeting can help you reach the most relevant prospects.
  2. Stay updated with customer behaviors and market conditions. The advertising space is dynamic, and so are customer buying habits. It’s essential to regularly update your seed audience with the latest data from CRM databases and website visitors to keep your lookalike audience precise.
  3. Monitor performance metrics and optimize your marketing strategy based on insights for more success.

Expand Your Reach with Lookalike Audiences Today!

Audiences beyond your existing customers can help you reach more targeted users likely to purchase your products or services. They can be an excellent digital marketing strategy tool to maximize your ad spend and generate a good return on investment.

Remember, the quality of lookalike targeting depends on the seed audience data. Therefore, a higher data quality will generate a better lookalike customer base.

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