From Data-Poor to Data-Rich: A Strategic Blueprint for CPGs in the Age of Retail Media Networks

Consumer Packaged Goods (CPG) brands have historically been considered “data-poor,” struggling to effectively link customer sales data to impactful marketing campaigns since they often do not own the storefront from which consumers buy the goods they produce. 

However, with the rise of digital marketing, a transformative change has emerged, enabling direct-to-consumer (D2C) brands to harness rich datasets and establish powerful marketing connections.

This digital surge has come with its challenges, particularly in the areas of privacy and data collection. Deprecating third-party cookies, mobile identifiers, and stringent data protection regulations have complicated data collection. 

These factors have consequently increased the costs associated with advertisers acquiring customers. In 2022, the average cost of acquiring a new customer stood at $29, up from $9 in 2013. Digital advertising spending is expected to reach $627 billion in 2023, but analysts believe half of that investment is at risk.

Despite such difficulties, CPGs have found a promising advertising source in retail media.

The Power and Potential of Retail Media

Retail media are ads strategically placed on retailers' digital platforms, such as e-commerce websites and mobile applications, to influence customers' purchasing decisions at crucial moments. Walmart, Amazon, and eBay are leading the charge in this domain.

Retail media can offset the broader macro changes other brands face while putting brands in an advantageous position. For CPGs, this means a goldmine of data, courtesy of Retail Media Networks (RMNs). 

These networks seamlessly merge advertising exposure information with consumer transaction data, offering CPGs unparalleled consumer insights comparable to those traditionally reserved for D2C brands. It is an innovative strategy for addressing the challenges posed by broader market shifts and capitalizing on rich data streams.

Specifically, brand teams need to have great analytical maturity working in and with data clean rooms.

CPG Marketing: Bridging Contradictions in Consumer Behavior 

Consumers present a perplexing paradox today. On the one hand, 85% chose to opt out of mobile app tracking in 2021. Yet, on the other hand, a majority (66%) anticipate tailored experiences from brands. They want personalized offers and an inherent understanding of their unique preferences. 

For CPGs, navigating this contradiction requires a multifaceted approach. They should collaborate with retail media networks (RMNs) and publishers through data clean rooms (DCRs) to enable precise ad placements. Though mostly publishers and retailers manage consumer consent, CPGs also play a role. 

Concurrently, they need to leverage insights derived on both RMNs and through traditional channels, championing and creating convincing, value-centric personalization strategies. Adapting these insights for targeted personalization is key to ensuring that ad spend leads to actual sales. 

All the while, marketing approaches must continually evolve to align ad investments and correlate ad spend with tangible sales. 

Achieving these goals hinges on several critical strategies: enhancing first-party data repositories, fostering collaborations within data clean rooms, and iterating strategies to influence customer behavior on retail media networks.

Data Clean Rooms: Overcoming Complexity, Maximizing Potential 

A pivotal tool in the modern CPG marketer's arsenal is the DCR. Imagine a secure, controlled environment where partners collaboratively share data. Here, sales and transaction data from a retailer seamlessly connect with consumer advertising exposure, creating a holistic view reminiscent of what D2C can accomplish. 

With RMNs, CPGs can operate on more granular, richer insights, allowing brands to understand what drives marketing performance while leveraging those insights to understand broader market trends to spur product innovation.

Major publishers, such as Disney, Paramount, Amazon, Facebook, and Google, are at the forefront of this movement, offering valuable transactional and interaction data. For example, many beauty brands have their own apps that help customers virtually “try on” products. 

By bringing usage and interaction data into the clean room, brands can understand how that engagement affects sales and loyalty and how investments in media influence engagement with apps or loyalty programs. 

However, the path to DCR integration isn't without challenges. Each publisher and RMN demands a unique analytical solution, necessitating expertise and time. The process can be overwhelming, but the rewards are immense.

A 6-Step Roadmap to Build Future-Proof DCR and RMN Capabilities 

To harness the full potential of DCRs and RMNs, brands should:

1. Negotiate permissions and data rights: Negotiate data rights and permissions with the retailer and publisher. Many RMNs are still evolving, so understand the full scope of available data.
2. Brands should own the data: Ensure brands own impression logs and relevant RMN data. As privacy laws/regulations tighten, having data ownership becomes crucial for seamless sharing of first-party data.
3. Sharing data back: Determine what data will be shared, then use identity services to reduce legal and privacy risks and improve accuracy in the clean room.
4. Standardize and unify: Establish a common set of extract, transform, and load (ETL) to unify data within the clean room to allow apples-to-apples comparisons. Standardize product performance metrics between retailers and brands.
5. Use AI-driven segmentation and targeting: Understand how AI can be employed within clean rooms. With AI, brands can improve return on ad spend, reduce biases in targeting, and focus on high-value consumer segments based on strategic goals.
6. Standardize data outside the collaboration: Create a unified reporting layer for data. Standardize ETLs for easier data extraction and performance reporting across multiple collaborations, streamlining tasks like media mix modeling.

In conclusion, although the marketing landscape poses new challenges, CPG brands with an in-depth understanding of DCRs and RMNs have an excellent chance to succeed. Through planned execution and dedication to consumer-centric strategies, success is not only possible in a world dominated by privacy; it is inevitable.

—Neerav Vyas, Vice President, MarTech and AdTech, Tredence Inc. & Dio Favatas, Director, Head of Identity and Marketing Clouds, Tredence Inc.