Welcome to part 2 of this 3-part series meant to be a comprehensive guide for consumer product goods marketers on how to employ first-party data for a competitive edge and sustainable revenue growth: You’ll learn how your CPG can obtain CRM insight (part 1); obtain advertising insight (part 2); and obtain business operations insight (part 3).
Online Advertising Without First-Party Data is a Waste for CPGs
Traditionally, third-party data from cookies, along with demographic information for targeting, has been how CPG marketers sought to connect with potential customers online. Unfortunately, while cost-effective, it also introduced wasteful spending due to the difficulties in sending relevant messaging to consumers. A common scenario, unfortunately, would be ads that are sent to your customers who just bought your product.
Some CPG advertisers invade the privacy of their consumers and annoy them. There is a better way, a far more effective and helpful approach.
It starts with reevaluating ad measurement by looking at how well a campaign converts, as opposed to just tracking the overall media spend. Having access to your first-party transactional data via shoppable media (for sites, marketplaces, apps, social media and video channels) provides the advertising transparency that is required to avoid this tremendous advertising waste. You’ll be able to see the complete customer journey and your full funnel campaign analytics.
Why settle for just ad impressions, when you could also be tracking actual orders?
With Shoppable® Ad Experience™, Shoppable® Instant Shop, and Shoppable® Checkout API™, you no longer need to wait for a campaign’s conclusion to determine performance. Your advertising results, including closed-loop attribution, are provided in near real-time. You have the ability to optimize mid-campaign and make data-driven decisions to apply the remaining budget towards your highest-performing media, products, and creative content. Increase your efficiency, whether your products are DTC or non-DTC.
Own Your Consumer First-Party Data for Better Advertising Results
There is an “outsourcing dilemma” according to Bain & Company in consumer brands. They cite an example of a brand that outsourced its advertising to an agency. This global brand had 40+ segment targets and the brand discovered, after the campaign, that only two variants of their ad had been run, because the agency lacked first-party data.
Having access to the data and the resulting performance transparency is key to success according to Bain (they cite a 10-15% boost in media ROI).
Their survey of 430 CPG marketers further revealed that leading brands (those having gained 3 percentage points, or more, of market share, and having increased revenues by 10%, or more, over the past two years) are 10x more likely to consistently use first-party data.
Additionally, leaders are:
- 7x times more likely to constantly optimize media across channels;
- 5x more likely to adjust budgets based on effectiveness;
- 5x more likely to use tailored messaging based on individual behavior.
The more you know about your customers, the more targeted and personalized an experience you can offer them, producing repeat purchases and building long-term customer relationships. It’s a competitive advantage that you can develop with your owned first-party data.
Determine the Value of Your First-Party Data & Prioritize for Advertising
Step one, per Boston Consulting Group (BCG), is using analytics to discover the value of your first-party data. Start by examining the value of the customer (margin per product x frequency of purchase) x incremental sales driven by data (typical marketing ROI x marketing improvement from data). You are, then, able to determine which brands/products can produce the highest value and prioritize them.
Contextual Targeting for Immediate Short-Term Results
Rather than one-on-one personalization, BCG favors the much more economical contextual targeting approach for short-term results. “At the start, these brands should analyze data to uncover triggers, such as weather conditions or specific events, that impact purchase decisions. The next step is to target customers in the context of these triggers by measuring the value created against the costs of data collection and management. Targeting should then be scaled for segments where there is sufficient return on investment (ROI).
“For example, a consumer packaged goods company increased its collection of first-party data. Testing revealed, however, that one-to-one personalization was too costly to implement. So, the company instead used a small amount of data to learn about its customers’ habits. After learning that purchases were highly correlated with certain events, the company was better able to target customers at scale and realize a much greater ROI.”
Bain & Company also advocates for this initial targeting/testing approach, “Driven by an experimentation mindset, brands can develop hypotheses on drivers of sales, then prove or disprove hypotheses by testing marketing tactics with varying customer segments to determine key drivers of sales.”
Personalization for Long-Term Results
Personalization may be more expensive than targeting, but the long-term results make it worth attempting, at scale, after your initial targeting testing and proof of concept have been achieved for your key segments. Your goal is to move from insight to action.
The Bain & Company article makes the point that, especially during a recession, rather than focusing on price discounts and promotions, investing in personalization is more sustainable, long-term, “brands should seek to assess marketing spend and customer targeting using resources at hand and adapt marketing operations with a reimagined approach to stay connected with their customers. This can be accomplished by following three steps: (1) data collection and segmentation, (2) data activation via small-scale testing and validation of hypotheses, and (3) personalization.”
This McKinsey overview of their Next in Personalization Report 2021, concurs with this conclusion that personalization fuels long-term growth. “When asked to define personalization, consumers associate it with positive experiences of being made to feel special. They respond positively when brands demonstrate their investment in the relationship, not just the transaction. Thoughtful touchpoints such as checking in post-purchase, sending a how-to video, or asking consumers to write a review generate positive brand perceptions.
“…Over three-quarters of consumers (76 percent) said that receiving personalized communications was a key factor in prompting their consideration of a brand, and 78 percent said such content made them more likely to repurchase.”
From the McKinsey report, here are the top ten personalization experiences (in the order of the customer ranking of their importance):
- Number one, at 75 percent, is making it easy for your customers to navigate in-store and online (the ultimate goal of Shoppable’s Universal Checkout technology).
- Provide your customers with relevant product/service recommendations (67%).
- Tailor messaging to your customers’ needs (66%).
- Offer your customers targeted promotions (65%).
- Celebrate customers’ milestones (61%).
- Send customers timely communications tied to key moments (59%).
- Follow up regarding past purchases (58%).
- Personally address communications to your customers (54%).
- Send triggers based on customer behavior (53%).
- Engage and onboard customers when they buy for the first time (51%).
The benefits of first-party data become apparent when reviewing the above list. Especially for non-DTC brand marketers that have been using traditional affiliate link-off vendors (and, therefore, lack their first-party data), they are missing out on many opportunities to utilize personalization in order to sell more products.
For CPGs, “personalization can also be a revenue accelerator even for businesses that typically lack direct access to customers such as companies in the consumer-packaged goods segment. Among these companies, those with the fastest rates of revenue growth were far more likely to prioritize personalization than slower growers. The research suggests that even small shifts in improving customer intimacy create competitive advantage—and these benefits grow with maturity.”
The McKinsey article further sums it up, “Personalization drives performance and better customer outcomes. Companies that grow faster drive 40 percent more of their revenue from personalization than their slower-growing counterparts.”
The Future of CPG Advertising and Marketing is Here
In this Forbes article titled, "With Data And Analytics, Consumer Products Companies Seize New 'Moment Of Opportunity,' " the author predicts, “50% of consumer products industry growth will occur through a direct business model. Consumer-facing companies will need to build compelling consumer experiences based on:
- Consistent master and consumer data across all channels to enable a consistent and meaningful experience;
- Full visibility of the entire value network, from sourcing and partner networks to all consumer touchpoints, both physical and virtual, and actual consumption;
- Live access to, and use of, both structured and unstructured data to assess demand drivers and market dynamics in real time;
- Scaled, quantitative and qualitative analysis of consumer perception, sentiment and feedback to deliver a unified, personalized user experience.”
How Shoppable® Can Make a Difference
Shoppable's Commerce Suite is your toolbox for success, now, and in a cookieless future. Our triple patented technology provides a more accurate measurement of attribution and conversion, including your target audiences' shopping behavior and purchase history, allowing you to eliminate waste and improve the efficiency of your advertising campaigns. Set up your personal demo, today.