Will Grobel, Marketing Transformation Director in Deloitte Digital, explains how marketers can embrace the potential of first party data.
Despite media reports, it’s clear to me that the party for the cookie is far from over. In fact, the party has hardly even started.
Cookies are, of course, little sections of code, dropped onto web browsers by brands in order to track users’ behaviour across different websites. There are three main types. First-party cookies are owned and operated by brands just on their own websites and can identify an individual’s online preferences. Second-party cookies are shared by another party and can be used both on a brand’s own domains and beyond, which can be linked to an individual or kept anonymous. Third-party cookies are anonymous and acquired through websites beyond a brand’s own platforms. There is also zero-party data, which is data provided to a brand knowingly by a customer, such as date of birth, age or preferences.
Of these four types of customer data, only the third-party cookie is going away, following consumer and regulatory demands for increased privacy.
This change has been brewing for a while: from GDPR being introduced in 2018 to Google announcing that from 2022 it too would block all third-party cookies in Chrome, if a viable alternative solution could be found, and many more announcements in between.
Cookies have been the marketer’s kryptonite for the past 20 years, with research from eMarketer suggesting 20% of US advertiser marketing budgets are spent on these identity solutions. So, the removal of the ability to track users across devices and platforms, and therefore personalise communications and experiences for them, is a big deal.
However, it’s not all bad news for marketers.
Firstly, using third-party cookies is not always that effective. Research undertaken by Flashtalking found that ad reach using programmatic retargeting was overstated by an average of 89%, while frequency was understated by 47% and conversion for display and video by 41%.
Secondly, the complexity of third-party cookies tracking users across multiple devices and sessions can create a considerable margin for error, resulting in marketers’ personalisation efforts lacking relevance.
Thirdly, in some circumstances, third-party cookies have created a degree of complacency among marketers who are too reliant on their quick fix and ease, at the expense of brand building, genuine engagement and creativity.
On top of this, it’s reported that approximately one in four internet users are now using ad blockers. What’s more, the elements of advertising that are most likely to drive sales are not those most attributable to third party cookies. While targeting contributes 9% and reach 22%, creative accounts for 47%[i].
Reducing reliance on third-party cookies therefore has benefits for not only customers but also brands. According to Deloitte’s Global Marketing Trends 2021 report, 68% of consumers in Britain say they are concerned about the amount of information companies have on them, rising to 74% among respondents aged over 54. As brands’ reliance on cookies decreases then, consumers trust in brands should therefore increase, as they know that only the data they’ve consented to sharing is being used. Indiscriminate targeting should also stop, in favour of more genuinely personalised experiences.
Given 2022’s current proposed timeline, marketers need to act now to mitigate this impact and capitalise on the opportunity. Collecting more first-party data in a responsible way is the obvious and key action needed. However, this needs to be done in the context of a wider data strategy.
The cornerstone to any strategy is defining the destination, the strategic goal and ultimate, desired customer experience and business strategy. With this, the data required to deliver this vision can be identified along with the gaps. Plans can then be developed to determine how to capture the additional required data, how to store it, manage it, analyse and use it, whilst constantly evaluating which data drives the necessary value.
There are many ways of capturing and augmenting first-party data, from asking customers for input directly, such as via email newsletter sign-ups, webforms, feedback surveys or when they contact the call centre, to indirect ways such as capturing their browsing or transaction history. The important factor here is to ensure customer verification and authentication in addition to consent, to avoid falling foul of privacy regulation and to maintain customer trust.
However, marketers will need to re-think their authentication strategy – understanding when and where they should ask users for their consent – as well as what ‘value exchange’ (for example a benefit or customer experience) is offered in return. Alternative ways include creating communities or building strategic alliances with large web platforms such social media sites or search engines to receive data available exclusively on these platforms.
CDPs – customer data platforms – will also be essential components of a brand’s marketing architecture, becoming the central record for all customer interactions and data. CDP’s will effectively replace DMPs – data management platforms – which were the unifying platform for multiple cookie sources mainly used for advertising, with real-time customer data.
With all data available or accessible from one source, and with the additional first-party data collected, marketers will increasingly be able to become less reliant on third-party cookies. Third-party cookies record historical activity, but increasingly, AI and machine learning will enable marketers to forecast future behaviour using CDPs. For instance, data stored in these platforms could be combined in a compliant manner with additional sources, such as search, weather or location data for example, to predict consumer behaviour – something not possible with a third-party cookie alone.
Above all, organisations will need to implement new ways of tracking, measuring and attributing the impacts of media, brand and sales. Many out-of-the-box solutions have been reliant on third-party cookies to define the channel effectiveness. In the new world, marketers will need to take a blended approach and implement different solutions for long-term budget decisions, tactical insights and optimisations, and validation of experiments – while evaluating how to use machine learning and modelling techniques whilst respecting privacy.
The demise of the third-party cookie is presenting marketers with many choices and opportunities. It is a win-win situation when marketers get it right. Consumer privacy will be protected, with more sensitive, personalised experiences, while marketers will accelerate their attribution and personalisation strategies.
The invitations to the party have been issued. It’s up to each individual whether they choose to accept.