How Pepsi, Kroger and other top brands balance data privacy and personalization at scale
As part of The Drum’s deep dive into all things CX, we surveyed top experts as to how brands and agencies can provide consumers with the kind of tailored experiences they’ve come to expect – while also offering transparent data practices ahead of the cookie’s demise. Here’s what they had to say about striking this delicate balance.
Some brands have struck a balance between privacy and personalization, while others have struggled / Adobe Stock
Consumers have come to expect custom-tailored brand experiences at every turn – music streaming platforms create individualized playlists according to their listening patterns, their social media ads display products they’ve been searching for and customer service representatives offer personalized support informed by their purchase history. While these perks streamline the customer experience (CX) and promise relevance to the individual consumer, they come at a cost. They are only made possible through the ongoing collection, storage and exchange of consumers’ personal information – their demographics, geographical location, search history, purchase behaviors and more.
Meanwhile, a growing demand for consumer data privacy has seen increasingly stringent data regulations introduced around the world, and newly transparent and consent-based data practices rolled out by tech companies such as Google and Apple. It is worth noting that even Google – which is phasing out third-party cookies come 2023 to inhibit user tracking-based ad targeting – has found itself in hot water as recently as December for failing to adequately protect user data.
Striking the balance between personalized experiences and genuine data privacy is becoming an ever-more challenging task for brands. While some lack the touchpoints needed to gain access to first-party datasets, others are actually managing too many touchpoints to create a unified picture of identity. In either case, deploying privacy-safe personalization is a tall mountain to climb.
Brands are facing challenges on at least three fronts, according to Myles Younger, vice-president of go-to-market, data at S4 Capital-owned Media.Monks. “Firstly, brands know that consumers expect relevance by default and want everything they interact with to ‘just work’ – and get annoyed when it doesn’t.” At the same time, “brands are beset by digital privacy changes that are making it technically more difficult to satisfy consumer expectations using the tried-and-true methods of the last five to 10 years.” This, of course, includes cross-site tracking and data collection that does not require consent. Finally, Younger points out that brands and their advertising and technology partners haven’t “had the time to catch up and master whatever the state of the art will look like in the coming years – largely because it’s still being invented.”
CPG brands and retailers go all-in on first-party data
Navigating the various challenges of balancing privacy with personalization is difficult for all brands – but perhaps none more so than consumer packaged goods (CPG) companies that are traditionally what Younger calls “data poor.” Because these companies – which sell, say, packaged snacks or cosmetics – tend to sell through third-party retail distribution channels, they don’t have a direct line to the customer who is considering or purchasing their products. As such, it’s difficult for them to build out an accurate picture of first-party data.
Some CPG brands of course are managing better than others. Pepsi, for example, has increasingly shifted from mass market messaging to personalized approaches. Last year, the beverage giant decided to get granular with its targeting. To promote its zero-sugar cola, it decided to specifically target men in their 30s and 40s looking to make the switch to a healthier soda option. To reach them in a personalized way, it assessed its internal data and paired data with Google Audience Insights to pinpoint specific behaviors of its target demographic and channels on which to reach them. Pepsi then used Google’s Director Mix technology to create over 70 different custom voiceovers using the recognizable voices of actors and late-night hosts most likely to be associated with programs that its target demographic enjoy. Finally, it deployed customized variations to the audience members who would most likely recognize and relate to the specific voice used in the ad.
And while Pepsi is setting a strong precedent, other CPG brands without the rich datasets of an industry giant like Pepsi struggle to offer effective personalization. To bypass their lack of owned data, they are increasingly employing privacy-enhancing technologies that allow them to license others’ first-party datasets in order to execute their own first-party strategy.
Retailers have also supplied an answer for these brands. Recognizing the goldmine on which they’re sitting, category players including Walmart, Target, Instacart, Lowe’s and Kroger have in recent years begun launching their own media networks, giving brands of all kinds firsthand access to shoppers’ personal information and buying habits.
Kroger launched its programmatic marketplace last fall. Powered by 84.51°, Kroger Precision Marketing’s Private Marketplace enables marketers to reach consumers by applying Kroger audience data to programmatic campaigns across their preferred ad-buying platforms. As a result, brands are able to create more relevant, tailored experiences to their audiences. “For example,” says Michael Schuh, vice-president of media strategy at Kroger Precision Marketing at 84.51°, “a brand can use Kroger purchase data to make brand advertising more effective on Roku’s streaming platform or while consumers are searching Pinterest for inspiration.” He points out that these kinds of personalized experiences “shorten the bridge between discovery and purchase on our commerce platform.”
How retailers like Kroger are able to collect, store and sell access to consumer data is dependent on consent-based data collection frameworks, Schuh says. He argues that the retailer’s media data offers so much value to brands precisely because it was gained through “a trusted and consented value-exchange.” He says that tens of millions of households belong to the retailer’s loyalty program for the personalized benefits they get out of it. “The more I shop with Kroger, the more I earn – [in terms of] personalized savings, fuel points, cash back and community rewards.” By opting into the loyalty program, they exchange their personal information for these perks. And such programs are extremely popular – some 96% of the company’s sales are connected to a loyalty account. Of course, the extent to which the average consumer understands that their shopping data may also be sold to brands on the back-end remains to be seen.
Looking toward the future, both Schuh and Media.Monks’ Younger advocate for a strategy based primarily on transparent, value-adding zero- and first-party data collection. “The gold standard is that the information provided by consumers ought to be a key ingredient in the value exchange consumers are getting in return,” says Younger. “If you want to send people coupons, then have your customers sign up for discount notifications. Don’t try and hide your discount promos behind an unrelated newsletter sign-up.”
It’s easier said than done, Younger says. “The rub is that doing this right may require deeper changes to business models, meaning the marketing team can’t necessarily pursue the gold standard unilaterally.”
Centralizing dispersed data for better privacy and personalization
Other media experts agree with Younger’s assessment that creating a robust ecosystem of privacy-safe data collection channels comes with a lot of work. Jessica Simpson, senior vice-president of global identity, data and tech consulting at Publicis Groupe, argues that both brands’ and consumers’ biggest headache stems from juggling the various data protection and privacy needs of countless audience touchpoints.
“[Let’s say] I was coming into a brand website, and the brand offered me a pop-up and said, ‘Hey, do you opt-in to cookies for my website, yes or no?,’” she says. “And then I make a purchase and they say, ‘Do you want to sign up for my newsletter, yes or no?’ And then I get shipped over to an app experience. ‘Do you want to be part of my app ecosystem and opt in to [Apple’s] Identifier for Advertisers, yes or no?’ Then you’ve got a bunch of other experiences across microsites that [a brand] may host. [And then] what if I have an experience in a metaverse? [That’s not to] even mention connected television (CTV). In the course of the day, you could be offered up a handful of experiences from just one brand.”
Simpson isn’t the only one to outline this debacle; Tom Chavez, chief executive officer and co-founder of data control platform Ketch, has suggested that a typical mature brand has 30-plus point solutions as part of its entire CX stack.
This deluge of touchpoints creates consent fatigue among consumers. They don’t take the time to read the fine print or understand the terms and conditions of the agreement. Seeking efficiency and speed, they either opt-in or opt-out, either missing critical privacy concerns or passing up opportunities for beneficial value exchanges. On the flip side, marketers and technology professionals are grappling with the input of countless individuals across all of these touchpoints so they can comply with data privacy laws and personal preferences – all while gathering the individual-level data that enables them to create and deliver personalized experiences to their audiences. Unfortunately, the data they’re working with is often stored across different databases and in different ecosystems, inhibiting marketers from rendering an accurate, reliable picture of identity that enables personalized CX.
Younger identifies a similar problem, saying: “We’re telling clients, ‘Make sure your digital experiences are supporting your first-party data strategy and make sure your first-party data strategy is supported by meaningful value exchanges and digital experiences.’ However, that’s not the easiest symbiosis to generate because typically your digital experiences and your data strategy are going to come from different partners who don’t talk to each other.”
The solution for brands, Simpson suggests, is to not only focus on zero- and first-party data collection, but to break down the silos between CX, marketing and tech stacks to centralize data and make it easier to create an accurate and precise picture of identity. “There are very few technologies that can actually do this. You can call them consent management platforms or privacy platforms; some people call them privacy-as-a-service,” she says. “[They] plug in with your dynamic creative platforms, your CDP platforms, a clean room or a cloud platform [with] embedded identity. And all of those first-party platforms then push out into the paid ecosystem. These full-stack automated privacy platforms truly do consent orchestration and allow you to proactively create a privacy experience and enforce those obligations – versus react to each privacy change as it happens. That’s what allows you to drive holistic personalization, because you’re actually able to focus on the experience holistically and embed data collection points across key customer touch points versus grabbing at fragmented experiences and keeping data in silos.”
Ultimately, it’s clear that transparent, zero- and first-party data approaches will win out in the ever-more rigid future of consumer data privacy.
For more on The New Customer Experience Economy, check out The Drum’s latest Deep Dive.