Global supply chain disruption, consumer privacy regulation, the COVID-19 pandemic, and changing consumer behavior have already fundamentally shifted how consumer packaged goods (CPG) companies market and distribute their products. But more change is coming thanks to the demiseOpens a new window of third-party cookies, which will have a tremendous impact on how CPGs target, execute, and measure the effectiveness of their digital advertising campaigns. Sam Ngo, Director of Product Marketing at BlueConic, shares how data clean rooms can help the industry in relevant data-driven advertising.
Despite being some of the biggestOpens a new window advertising spenders, CPG is a historically data-poor industry. Since retailers own the customer relationship and limit the amount of behavioral and transactional data they share, CPG companies often struggle to understand the impact of their advertising on purchases.
In lieu of this customer data, CPGs have long relied on data management platforms (DMPs) to create segments for targeting and personalization across the web. But since these technologies rely on third-party data to create these audiences, they will soon be rendered useless in the wake of third-party cookie deprecation.Â
Fortunately, a first-party data strategy that includes sharing second-party data with trusted retailers and partners via data clean rooms could offer a much-needed lifeline.
See More: 4 Ways To Improve Prospect Data Quality in the Wake of the Great Resignation
Dealing with Data Deprecation
With the third-party cookie’s imminent demise, more CPG companies are moving away from third-party data (and legacy tech like DMPs) and embracing first-party data and solutions like a customer data platform (CDP).Â
CDPs are designed to collect, store, and manage first-party customer data. By building their own first-party database, CPG companies can gain rich insights about their consumers and use those insights to build smarter segments, centrally manage them, and optimize their media spend.
Some CPGs are shifting to a direct-to-consumer business model to improve their ability to collect first-party data, while others are getting more creative in how they create value in exchange for consumer data – whether that’s through online touchpoints, like sweepstakes and virtual events, or offline touchpoints, such as sponsored sporting events and music festivals.
However, this data still doesn’t account for transactions that occur via retail stores or delivery partners – meaning CPG companies still don’t have a way of attributing a sale back to a particular advertising campaign.
Modern data data clean rooms are built to solve that problem. These secure platforms can help bridge the data gap by providing a privacy-compliant environment for CPGs, retailers, and online delivery partners to share data and use it for targeting, measurement, and analysis.
How Clean Rooms Work
Data clean rooms combine first-party and second-party data from both CPGs and retailers. Typically, a CPG will share advertising data, while a retailer or delivery partner will share transaction data. As data is ingested into the clean room, it is fully pseudonymized, meaning all personally identifiable information (PII) is replaced with artificial identifiers. Both parties can also ensure that consumers have consented to having their data shared for this purpose.Â
Instead of randomly being replaced, as with anonymized data, pseudonymization uses advanced encryption techniques to create a one-way hash of the identifier that is used to link consumer profiles. Only aggregated data (‘how many people did X’) can be accessed, without exposing individual data (‘who did X’). For example, users can see that 150 out of 200 people saw a marketing message but not which 150 people. This way, CPGs get the insights they need for attribution so they can finally understand which campaigns drove actual purchases and use that insight to optimize performance – all without ever exposing individual customer data or falling afoul of consumer privacy laws.
What to Look for
Just like any technology, not all data clean rooms are created equal. When evaluating a clean room for insights, CPG companies should look for solutions that:
- Insulate your business from the risk of GDPR, CCPA, and other consumer data privacy laws’ fines: Non-compliance with GDRP, CCPA, and other consumer data privacy laws is only growing steeper, with fines topping €158.5 million ($192 million)Opens a new window in the past year alone. Ineffective data and consent management also pose a risk to innovation because it leads to legal and governance teams taking control of when, where, and how business teams can use data to improve customer relationships and drive growth for the company. If profiles start with consent before storing or sharing data, you reduce your risk of non-compliance.Â
- Enable a neutral and open ecosystem with any trusted partners of your choosing: Tech giants like Facebook and Google offer data clean rooms that will enable CPGs to measure ad performance, but only within their closed ecosystems – limiting insights and targeting to those channels specifically. Look for a neutral, channel-agnostic solution that doesn’t restrict you to a network of partners or dictates how, when, and where you can use insights from a clean room.
- Allow pseudonymized second-party data sharing without requiring additional IT involvement to maintain and add trusted partners over time: The value from data clean rooms is realized when data and insights are put into marketing, ecommerce, audience monetization, and other growth-focused teams. These teams need the ability to add partners independently without having to wait on already overburdened IT teams.Â
- Connect to the same unified, consented first-party dataset used for other growth-focused business processes: A data clean room shouldn’t create more silos. Instead, look for a solution that can connect to the same unified first-party dataset you’re already using for customer segmentation, marketing orchestration, and analytics.
See More: Why Marketers Should Not Be Too Confident About Their Data Privacy
Powering a Data-driven Future
The CPG industry will continue to rely on external data for marketing, but this doesn’t have to come from third parties. While first-party data and CDPs constitute the heart of a good advertising strategy, brands will need to build partner relationships to drive campaign performance further. Data clean rooms provide a safe and effective environment for sharing data, presenting the ideal investment for the sector whatever lies ahead.
Could there be safety concerns around data clean rooms even though they are a more secure option? Tell us what you think on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We’d love to know!