“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
As third-party data becomes scarce, established CPG brands are collecting first-party data through sweepstakes, sampling programs and direct-to-consumer (DTC) commerce. These experiments are fueling new concepts and customized products.
But these DTC programs are a long way from replacing the ways brands previously used third-party data in their digital marketing. They just don’t deliver enough scale to impact national metrics.
Instead of going all in on DTC commerce and first-party data collection, many brands, startups and well-known CPGs are missing the more effective retailer data sets at their disposal: loyalty programs.
DTC tactics and first-party data collection may miss the mark
Incremental sales are the lifeblood of CPG brand marketing. Marketers try to increase velocity in several different ways: Either get more units in a single shopping basket, drive more frequent purchases or, most importantly, add new households to the customer set.
But DTC tactics are most efficient at driving engagement with devoted fans – not new households.
And there’s another obstacle as well: Consumers are more sensitive to how data is collected and shared or used for marketing purposes. The ever-present cookie pop-up and app-tracking notification has increased awareness of where our data goes and who is using it. People need a strong reason to opt in to sharing personal information with a brand.
Brands in high-consideration categories may offer a compelling value exchange. But are consumers going to establish a direct, consent-based first-party relationship with every brand in their pantry or refrigerator? Probably not.
And this is where retailer loyalty programs fill the gap.
Consumers aren’t defined by single purchases
Retail loyalty programs are a proven mechanism for consumers to earn value in exchange for shopping. And creating a purchase history over time is what makes retailer first-party data more valuable than DTC purchase data.
Even if a consumer signs up to receive emails from a brand or makes a DTC purchase, that one data point doesn’t define the customer. A single purchase signal doesn’t tell marketers if someone is a new shopper, a loyal shopper, ready to upgrade, open to new categories – or if they will never buy again.
Compare that with loyalty data that retailers collect. Retailers know how many times a consumer has purchased a single item, as well as their total product mix. An oat milk brand will know if their consumer regularly purchases dairy alternatives. A beverage company launching a new watermelon flavor can target shoppers who purchase watermelon-flavored items in other categories. These are prime considerations for incremental household acquisition.
Retailers know their customer better than anyone else because they see the continuity of shopping behavior over time, aggregated at a scale of millions of transactions every year.
Unlocking predictive analysis
The new age of retail media has unlocked a wealth of purchase data.
In this inflationary age, brands need their media dollars spent effectively. Retail data helps by optimizing spend based on actual sales performance through predictive analytics. While third-party data can be used to create proxy metrics for success, retailer data provides straightforward and accurate campaign attribution.
Retailers are the original first-party data companies. Their data has informed business decisions for years. While DTC efforts will continue to be powerful levers for some high-consideration categories, most brands will find that retailer data can be much more effective for data-driven advertising.
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