Shifting Regulations and Changing Customer Behavior Spell Trouble for Brands

The digital marketing industry has known for years that the landscape for customer data collection and utilization is changing. From Google’s third-party cookie phase-out to the proliferation of regulations like GDPR and CCPA, the loss of concrete behavioral signals and efficient audience targeting means that brands that relied on high digital ad spend for growth will no longer see the returns on their investment that they’ve grown accustomed to.

The changes represent a confluence of several compounding factors: privacy regulation was evolving before the Covid-19 pandemic, but the pandemic forced a huge swath of consumer activity online when millions were forced to order what they needed rather than risk the health exposure of shopping in-person.

The unsettled market that resulted has meant that brands have a harder time reaching new customers and hanging on to old ones, while at the same time previously reliable behavior signals and shopping habits no longer serve as good indicators of future conditions. There is surely a path forward for the industry, but in order to find it we must first understand how the current environment came to be.

Evolving Privacy and Consumer Awareness

Between June 2019 and February 2020 the New York Times published a series of articles in their “Privacy Project,” which aimed to educate readers on the tracking and surveillance they’re regularly subjected to through their smartphones.

While most consumers recognized that they were getting retargeted ads based on their browsing history at that point, very few understood the extent of surveillance they were subjected to by a dizzying array of third-party data brokers who sold their profiles and behavioral patterns to the highest bidder.

The Times’ Privacy Project roughly coincided with the rise of GDPR in Europe and CCPA in California. Both laws require companies to obtain explicit consent from consumers before sharing any personal data with third parties. People began opting out of cookies and other behavioral tracking as awareness grew, and consumer trust cratered alongside.

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The Pandemic: A Perfect Storm

Almost immediately after the New York Times completed their Privacy Project, the Covid-19 pandemic became a global emergency and upended commercial activity across every geography and industry. Offices closed, transportation slowed to a trickle, and consumers spent a large part of the ensuing two years confined to their homes. People shifted to shopping online wholesale, and they bought different items than they used to (fewer clothes and more home goods, for example).

After the initial shock, the marketing industry recognized that people were switching brands and behaviors, and that the behavioral models they once used for audience segmentation were no longer proving as valuable. With their established patterns and habits upended, consumers were more open to switching brands and exploring new options for getting what they needed.

The Path Forward

Whatever the new paradigm for consumer activation and engagement looks like, a few things are now clear. First, brand relationships have been reset in large part, and consumers are more adamant than ever about doing business with companies that share their values and demonstrably appreciate their trust and privacy.

At the same time, new behavioral models and practices are being built on different foundations. Gone are the days when vast lakes of behavioral data at scale could provide digital advertising performance on-demand. The new commercial world will depend on relationships, trust, and intelligence based on consumers’ future interests rather than their past actions.

In order to flourish, smart businesses will need to develop a more honest and transparent relationship with their customers. They can look at it as a balanced exchange with the customer whereby the business says, “Tell us your specific interests, needs and perceptions as they relate to buying our products and we’ll only send you content that relates to those needs.” The business then has to respect that promise in order to secure a relationship.

Customers want to know that the companies they are buying from are listening to them, not that they’re just saying they’re listening and blitzing them with messages. Technology can help nurture customer relationships that are based on true values and interests, rather than models of past behavior.

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