Why First-Party Data Might Not Be Enough

The following is republished with the permission of the Association of National Advertisers. Find this and similar articles on ANA Newsstand.

By Tom Affinito

Consumers expect and crave individualized attention and unique experiences from the brands they interact with across every touchpoint. Put another way, consumers are saying, “Show me you know me.” The caveat is, they also don’t want to be creeped out.

A 2019 Harris Poll survey for Redpoint Global, which polled more than 3,000 consumers and 450 senior marketers in the U.S., U.K., and Canada, found that 63 percent of consumers expect personalization as a standard of service. Yet, as Boston Consulting Group notes, 83 percent of consumers surveyed by Salesforce for its 2019 “State of the Connected Customer” survey said they are concerned about sharing personal data online, and 72 percent said they would stop buying from a company or using a service because of privacy concerns. Marketers need to develop customer relationships, build the necessary trust, and earn the data needed to succeed in delivering on expectations.

It’s important to understand the distinction between first-party relationships and first-party data. The relationships brands forge with their customers are predicated on the experiences they provide them and the trust they build. Nothing is more valuable for a brand than delivering experiences consumers expect and welcome. But first-party relationships are not transactional, they flow from value exchanges over time. When done well, the net result is robust first-party data and, more importantly, a deeper understanding of a customer. Both are also a competitive advantage because they are exclusive to that brand.

Fostering First-Party Relationships

Value exchanges over time are akin to the marketing funnel. In the case of a retailer, consumers may click on an ad or follow the retailer on social media and even like, comment, or retweet their content. They might stop in at a store and ask salespeople questions about different products. These would all be considered upper-funnel engagements that mark the beginning of a relationship. Every touchpoint matters. Marketing is not the only team that builds that relationship or trust.

To strengthen a first-party relationship, retailers need to deliver valuable experiences however and wherever the consumer engages and provide opportunities to move them down the relationship funnel. For example, experiences may include allowing consumers to create a wish list, subscribe to a newsletter, receive alerts when a favorite writer or topic is posted, or be notified via text message when a desired item is available to ship. These particular engagements happen at the middle of the relationship funnel — the point at which a retailer can gain an increased level of authentication or hand-raising from the consumer. Brands should nurture these relationships by always creating value.

Marketers have to change how they evaluate success in a first-party world. The question to ask now is, “How can I help this person with what they need?” Not “How can I get this person to convert?”

Over time, if a retailer (or brand) has done its job well, consumers will move into the bottom funnel and willingly provide deeper levels of first-party data. At that point, they’re converting into a longer-term customer. For some, that might be the end game, but leaders often consider this just a milestone in what they hope is an enduring relationship.

Going Beyond First-Party Data

Retailers usually have direct relationships with customers and first-party data at their fingertips, but that’s not the case for many brands. Both retailers and brands often need to collaborate with trusted partners to enrich, extend, and enhance customer data.

It is valuable for a brand to form data partnerships with the major retailers that sell their products, in addition to adjacent brands for comarketing. For example, if a CPG company sold shampoo for children, they could consider working with a hospitality group popular with families and more accurately assess partnership potential by comparing customer databases in a privacy-first manner.

An example of this comes from food and beverage company Danone, which needed to strengthen its consumer intelligence to sharpen its media strategy and boost ROI. By collaborating with retail and adtech partners to revise consumer modeling and addressability, the brand was able to gain a better understanding of the impact of digital advertising on audience segments and their path to purchase at one large retailer, as well as how to optimize omnichannel activations based on transactional data provided by that retailer.

Danone increased addressable reach by 34 percent and e-commerce sales by 17 percent. The techniques and teams used to achieve these results now form the basis for Danone’s new internal marketing operations, allowing the brand to own its data and build direct relationships with consumers — a rare feat for a CPG, but not an impossibility with data collaboration.

Second-party data partnerships in various shapes and forms have been explored and discussed for years, and have been accelerated by changes in the ecosystem that have led to data loss. Data collaboration is increasingly becoming the norm as more brands want to build direct customer relationships and invest in the ability to do so in a way that upholds consumer privacy and preserves data fidelity.

Despite the many prognostications of its demise, third-party data is still a key component in a brand’s strategy, thanks to the availability of diverse and unique sets of reputable data. But maximizing these possibilities requires preparation. First, third-party sources must be scrutinized for their allowed usages and ethical data sourcing so the brand remains compliant with applicable consumer privacy regulations. Second, unifying and consolidating a brand’s internal data sets using identity-resolution technologies will lead to more accurate and valuable data enrichments.

Identity resolution involves tying a brand’s disparate consumer touchpoints together to make the related data sets joinable, consumable, persistent, and portable. Once resolution is complete, third-party data can be efficiently associated with individual customer records to provide a more nuanced understanding for optimizing customer segmentation, understanding audience responses, enabling more consistent messaging across channels, and even providing crucial context for measurement when product exposures and purchases are analyzed.

When working with partners, it’s critical for brands to consider their privacy standards first and foremost, and how flexible and interoperable they are second. The best partners are those who can work within the systems an organization already has to keep first-party data secure. It can take a long time to earn a consumer’s trust and seconds to lose it.

With consequential changes impacting how brands and retailers use data to know and serve their customers, creating a new data strategy is essential. Fostering first-party relationships and data partnerships will be the critical foundation for success for brand and retail marketers.

About Author: Tom Affinito is the global product marketing lead, identity at LiveRamp, a partner in the ANA Thought Leadership Program.