First-Party Data: An Oldie but a Goodie
Ever since Sears & Roebuck launched its famous direct-mail catalog in 1893, brands have used first-party data to grow and compete. Today, direct-to-consumer upstarts are making savvy use of first-party data to edge out older incumbents. But there are only so many brands a typical consumer has the time or inclination to directly interact with, so the race to cement consumer relationships is on.
Digital Privacy Throws a Big Wrench into First-Party Data Strategies
There’s always a catch! Recent developments concerning Digital Privacy are seriously eroding a common first-party data strategy: the use of third-party data as a means of Seeding and Amplifying a brand’s first-party data.
This data strategy took the form of a tidy Digital Advertising funnel. The upper funnel started with broad audiences who were winnowed down into a mid-funnel stage. This mid-funnel stage was powered in large part by third-party data that helped identify intent consumers and usher them along. Finally, if all went according to plan, sales revenue and first-party data came out the bottom.
But in a stroke of Digital Marketing brilliance, the resultant first-party data could then be recycled and used to “short-circuit” the ad funnel by helping to optimize mid-funnel tactics and find lookalike and intender audiences, thus reducing upper-funnel waste and providing fuel for a self-reinforcing loop. It was a nice system for marketers who could get it tuned up and humming.
However, this data-driven strategy isn’t holding up very well as of late—specifically the mid-funnel tactics that run on third-party data. The wires on the mid-funnel short-circuit have been gnawed away by regulations, browser privacy features, and plain old public opinion. The door is closing on brands’ ability to advertise their way into first-party data superiority.
First-Party Data Doesn’t Just Grow on Trees. What are the Brands Supposed to Do?
If advertising itself can no longer be reliably engineered to generate first-party data, what can? How is a brand supposed to build direct consumer relationships while refraining from targeting those same consumers out of respect for their privacy? People say they want Personalization and Privacy simultaneously. It’s enough to make a marketer’s head explode!
To resolve these seeming contradictions, we have to look beyond Advertising.
People Don’t like Being Chased, so Give Them Experiences They Want
It’s worth recounting why there would be a backlash against targeted digital advertising in the first place. “Advertising” is a one-way street. However precisely targeted a Digital ad may be, it’s still a unidirectional message pushed from brand to consumer. This consumer expectation of advertising being a benign one-way medium makes it only natural that people would have a visceral aversion to feeling cornered and perhaps exploited by ads that chase them everywhere.
To be clear, unidirectional (or “traditional”) ads will continue to work fine in more broadly targeted contexts where consumers won’t get the feeling of being chased, but the mid-funnel is left a bit gutted.
If brands want to drive engagement that enriches their troves of first-party data, they will have to build more and better two-way streets where there can be an exchange of value between brand and consumer. This exchange of value is encapsulated in Customer Experience (CX). A strong Customer Experience strategy can take the lead as a brand’s first-party Data Gathering and activation workhorse, working hand in hand with paid media.
If “Customer Experience” feels too academic or transactional, think of it as a “give the people what they want” strategy. And what is it that people want? Well, that depends. It’s going to be different for every brand and audience demographic. People want one-day shipping with free returns. They want 24x7x365 live customer support chat. They want to earn reward points. They want to see if that new couch will fit in their living room before they drive 45 minutes to a crowded IKEA to buy it. They want to be entertained. Millennial consumers are desperate to save time. And consumers are quite willing to share data in return for getting what they want. Thus, we begin to see a path forward.
Cultivating and Scaling Customer Experience Isn’t Easy (But Nothing Good Ever Is)
The nice thing about using third-party data was that it scaled well, and as long as your money was green, you could buy-in. CX, on the other hand, is perhaps less “democratic” as a means of enriching first-party data. Because good Customer Experience is built on a mutual exchange of value (where “value” is often not monetary and is entirely intangible), it’s not something that marketers can just buy off the shelf.
In fact, for many brands, the refinement of CX strategy won’t fall to the marketing team at all—it will require fundamentally changed business models. In less extreme cases, marketers can double down on existing CX channels such as rewards programs, chatbots, deal-finders or mobile apps. And for brands that lack their own CX channels, there is the option of closely partnering with publishers or content producers and setting up data co-ops. (On a related note, private publisher deals are set to become the top buying method for digital display ads.)
But where there are barriers to entry, there are opportunities for first movers and true competitive differentiation. The phrase “never let a good crisis go to waste” certainly applies. Let’s also not forget that with a greater focus on mutually beneficial interactions, rather than forced exposure to overly persistent ads, consumers might end up loathing digital advertising just a little bit less.
Marketers ought to be excited.