The future of ad targeting – why retail media is part of the solution, not part of the problem

The tide of privacy is coming in, and it feels like the water is rising fast. Eleven US states now have consumer privacy laws in place, and four more have bills in committee. Meanwhile, a recent report found that 81% of consumers worry about how companies use their personal data, although 72% said they would be more likely to buy from companies that they trust with it.

Combine all this with the coming cookie-pocalypse, and it’s easy to see why brands are concerned about their ability to target and personalise advertising at scale. Not only are they worried that their ads will become less relevant, resulting in more wastage, but that returns on ad spend will fall as a result.

The good news is that in Europe, where data protection laws are among the toughest in the world, retail media is proving to offer a solution to the privacy problem. Retail media networks haven’t grown in spite of GDPR but because of it.

Retailers are now the key data owners

Retailers are now the only people who have explicit, permission-based data that is also attached to shopping behaviours - what customers buy, how they buy it, what they browse, and what they look at. This means they now sit in a powerful position as key data owners. As long as retailers are collecting data responsibly and getting the right permissions, their media networks offer a massive opportunity for advertisers.

As long as retailers are collecting data responsibly and getting the right permissions, their media networks offer a massive opportunity.

What’s more, with data-sharing technology advancing very quickly, brands and retailers can combine their data in a privacy-compliant way to improve their targeting and, crucially, measure the impact of campaigns in the backend.

So, what does this mean for advertisers in Europe? Quite simply, there’s no need for advertisers to fear the impact of privacy legislation and consumer concerns. But, if they want to gain or maintain a competitive advantage, they do need to embrace retail media networks now. Here are four key areas that need to be considered:

It’s important to make sure that all of the elements of your current tech stack comply with the relevant privacy regulations, including how you collect and compile the data, how you hold it, and how you transfer it. 

Working with the right partners and people who understand the relevant privacy legislation will ensure that you’re doing it right. Bringing in third parties into the tech stack who are privacy compliant will also ensure regulations are adhered to, for example, the Trade Desk and Google.

Critically, your tech stack needs to be dynamic and agile. This will allow you to adjust how you operate based on how the market and privacy regulations change over time. 

When you’re asking customers to sign up for a loyalty scheme, you need to provide real value in return. This is why UK retailers like Tesco and Co-op are now offering preferential pricing for members of their loyalty card schemes. 

The Morrisons More loyalty scheme, which we helped launch earlier this year, drives price perception amongst Morrison’s customers whilst the data collected via the scheme is used to power their retail media network.

You also have to be honest with customers over how you’re going to use their data and how that will help them. A recent survey found 83% of consumers are willing to share their data if you provide them with value in return and with a more personalised experience. 

Building the right customer segments to target is a balancing act between getting the right scale and the right accuracy. If your targeting is too granular, you won’t reach enough people to have any impact. But if your segments are too large, your targeting will be too broad, and you’ll be wasting your budget.

There are certain retailers in the UK whose targeting is so broad and whose cadence is so frequent that they lead to high unsubscribe rates. These will eventually diminish the value of their data and the impact of their communications. In contrast, we’ve worked with our partners like The Very Group, Co-op and Boots to target customers by segment so that the messaging they receive is highly relevant and limits unsubscribe rates as a result.

This is where 90% of sales happen, so make sure you’re using that first-party data in an omnichannel way. You can target people offsite using that data via e-commerce platforms, but how do you continue that experience when they’re swiping their card in-store? Can you use things like digital screens to target people using that first-party data as a guide?

A good example is Co-op’s recently launched membership deals. When members swipe their cards, they get special pricing on specific items. The first-party data that comes from this can then be used to identify customers who have a high propensity to buy particular products and target them through upper-funnel channels. That drives footfall into the store, which then leads to an incremental sale.

Therefore, on a hot day, high-propensity ice cream buyers within a geo-located area of a Co-op store can be targeted with a digital message – whether that’s through their phone or their social media – with a coupon that drives them in-store, and that sale is served at the till within the same day.

Do the right thing

Ultimately, success in this space is all about doing the right thing for your customers. If you spam them or use their data in a way that isn’t appropriate, you’ll undermine their trust and devalue the media you’re selling to advertisers. But if you use their data with a conscience, you’ll build a brand dividend over time, which then increases the value of your media. And if you start from a place where you have that trust already, then you’ve got a head start on everyone else.