CPGs may have embraced data collaboration, but they need to take it further

To unlock addressable audiences that truly drive business outcomes, consumer packaged goods brands (CPGs) need to explore multiple data partnerships, says Oliver Klander, head of CPG at LiveRamp

What a difference six months makes in a UK marketing sector confronted by a cost-of-living crisis. 71% of UK consumers have changed their spending behavior in this time, with store cards and sales promotions taking center stage. With consumer loyalty under duress, it has never been more important for marketers to gain a clear picture of who their consumers are, what touchpoints they’re being exposed to throughout the purchase path, and ultimately where they are buying. Indeed, according to LiveRamp’s recent research, the main focus for UK marketers in 2023 is “understanding the whole consumer journey.”

Of course, this puts brands without access to large swathes of up-to-date, first-party data on the backfoot - including CPGs.

Historically lacking direct relationships with consumers, CPGs have also tended to fall behind other verticals when it comes to first-party data . This has restricted their ability to access consumer insights by themselves, relying instead on in-store shoppers, cultivating a fairly one-sided relationship between CPGs and retailers. Eager to persuade the retailer to stock their products, it was always (according to retail media expert Colin Lewis) the brand who was ‘buying lunch.’ However, this dynamic is changing.

A new dawn

With the new premium on getting to know consumers better, more and more CPGs are utilising data collaboration, bringing together data from external and internal data sources to unlock valued insights. Indeed, our recent research found that 94% of marketers were eager to collaborate with a partner to enhance their first-party data strategies (or indeed to fill the void of no first-party data).

The atmospheric rise of retail media networks in the past few months alone is a testament to this demand from brands for collaboration. Through these retailers’ media properties, and the data clean rooms that underpin them, brands can reach addressable audiences and understand consumer habits across the purchasing funnel. For example, a CPG can access insights into the consumers who are buying their products, their competitors’ products, and the general makeup of the buying audience in a privacy-centric manner.

As a result, a new dawn is breaking on the age-old CPG and retailer relationship. Instead of CPGs lining up to court solely the biggest and most valuable retailer, retailers are starting to battle with each other to deliver CPGs the most competitive platform, best consumer insights and largest addressable audiences.

Of course, many retail media networks are very advanced in this regard, especially those with long-standing loyalty schemes, who have access to a ‘firehose’ of first-party data. For example, retailers like Tesco and Boots can tell with great transparency which of their multi-million shopper audiences will buy a partnered CPG’s product. However, many other retail media networks are coming up short.

In particular, CPGs can encounter roadblocks when the audiences available through their partnered retail media networks are too small. This seriously hinders addressable reach and so too, the ability to drive business outcomes. Therefore, there are some key questions CPGs need to ask of their retail media networks: Does it offer key metrics such as incremental return on advertising spend (ROAS) and sales lift? How does it find net-new consumers? And how does it find people that aren’t part of the network?

Scaling up

The answer to building addressable audiences that tick these boxes lies in striking up relationships with multiple data collaborators operating within clean rooms. For example, a useful partner exists in aggregate data companies, namely Circana. Taking point-of-sale transactions right at the till for every product that’s bought, Circana scales these up on a regional basis to identify market share, price sensitivity, distribution and propensity to purchase. Although not traditionally addressable, this data becomes so when part of a clean room.

In the case a partnered media network does not have specific types of required data, partnering with a third-party data company can offer critical scale. By taking the small audience segment provided by this data and looking at the national audience profile. If you then combine this with demographics and attitudinal insight, for example, drawn from surveys, a mix of four data sets will together deliver far more accurate and truly scalable addressable reach. This can directly impact incremental ROAS through net new consumers, enabling a true data strategy rather than just relying on the usual retail channels.

The CPG brands that are currently leading the industry in reaching scalable addressable audiences are those that already have collaborated with a plethora of clean-room data partners. Data collaboration strengthens CPGs’ position in the long term, as they build their own first-party, addressable and scalable consumer data sets. Meanwhile, for retailers waking up to this new reality and eager to keep up, this will inevitably drive the departmental convergence of trade and shopper marketing with digital media.

The traditional scenario where CPGs were always buying retailers lunch is no longer the case. Retailers are increasingly recognizing the influence in attracting consumers, realizing that CPGs possess the ability to drive foot traffic as effectively as they promote their own products. This realization should solidify CPGs’ commitment to this approach, bringing the two sides closer over time.