How FMCG brands are benefiting from second-party data

With the shift to online-oriented behaviours that accompanied the Covid-19 pandemic has come new opportunities for brands selling and operating online.

Although ecommerce penetration has not remained as high as it once was in the depths of the pandemic, many more consumers have integrated online buying into their day-to-day lives in some way, while channels such as q-commerce (quick commerce) and click-and-collect have sprung up and expanded in order to cater to additional moments and behaviours. This has presented new opportunities for brands that historically may not have had access to much data on consumers’ buying habits and preferences, such as fast-moving consumer goods (FMCG) brands.

In the first instalment of this two-part series, I looked at the opportunities that have arisen for FMCG brands to form direct relationships with their customers and gather first-party data, such as by selling direct-to-consumer (D2C), operating loyalty schemes, or offering discounts and prize giveaways.

However, as beneficial as it is for FMCG brands to form direct customer relationships, there is still a limit to the insights that can be gained from first-party data – particularly in FMCG, where brands rely on businesses like retailers or pubs to reach consumers with their products at scale, and those types of businesses tend to hold much richer information about customer behaviour.

Fortunately, new opportunities are also opening up in terms of access to second-party data: data owned and collected by another business that is licensed to the brand for its exclusive use. From media networks of retailer data to data ‘clean rooms’ and partnerships, this article will look at the different opportunities available to FMCG brands in the realm of second-party data and how brands are taking advantage of them.

Retail media

As shopper behaviour has shifted online, retailers have increasingly woken up to the potential of the first-party data that they gather on customers’ shopping habits, product preferences, spending and much more. Retailers who have loyalty card programmes are in a particularly strong position in this regard, due to their ability to gather and connect data across both in-store and online purchases.

This has resulted in the emergence of retail media networks: advertising networks built by major retailers that use their owned data to target shoppers with offers and ads.

FMCG brands that enter into data partnerships with retailers are benefiting from these insights, which allow them to ‘close the loop’ on their advertising and understand what leads shoppers to convert. As Digital Marketing Transformation Consultant Julian Smith told Econsultancy in March 2021,

“Where [FMCG brands are] selling on third-party platforms rather than their own platforms, advertising is very much dictated by the amount of retailer data they can get hold of. Because if they can’t close the loop and understand how their media tactics and investment are driving actual purchase, it’s less worthwhile.”

Retail media networks have taken hold in the United States in particular, with major retailers like Walmart, Target, Albertsons and Kroger developing and scaling retail media offerings, but retailers from all over the world are taking advantage of the opportunities that retail media networks offer: in the UK, supermarket brands Tesco, Sainsbury’s and Asda have been building out retail media offerings, with Morrisons recently joining their number. French supermarket Carrefour recently partnered with Publicis Groupe on a joint retail media venture across Europe and Latin America, while in China, eMarketer has projected that ecommerce as a channel will take a whopping 42% of digital ad spend in 2022.

Delivery platforms like Instacart, Doordash and Grab have also recognised the potential to build out an ad offering using their owned first-party data, targeting shoppers who are buying groceries on their platforms, or ordering drinks with a meal. In Indonesia, for example, Coca-Cola partnered with Grab Ads to bolster sales of Coke during Ramadan 2021, during which sales from bazaars and dining out had dwindled due to lockdowns.

The brand used Grab’s first-party data to target 18-34-year-olds specifically as a group that was likely to add on fizzy drinks when ordering a meal, and ran advertising promoting the Coca-Cola Feastival, a weekly contest that offered prizes to top spenders on Coca-Cola bundle deals. Between 15^th March and 13^th May 2021, the campaign brought in 105 million impressions, more than one million transactions, and a 44X Return on Ad Spend (ROAS), up 17.9% on 2020 with the same budget.

Television advertising has long been a staple in FMCG due to its potential for building brand awareness and reaching consumers at scale. With the rise of connected television (CTV) and streaming services, and their potential for offering more granular targeting without compromising scale, broadcasters have begun teaming up with retailers to offer bespoke advertising solutions to FMCG brands. For example, 4Sales, the commercial division for Channel 4, recently announced a partnership with Nectar360 – the insights and media agency behind Sainsburys’ Nectar loyalty programme – to offer tailored advertising on its All 4 streaming platform to FMCG brands.

PepsiCo, McCain and L’Oréal are among the FMCG companies testing the new product, which will tailor adverts to groups of users based on their recent shopping habits within Sainsbury’s supermarkets, and will be able to provide visibility over how many customers purchased a product after seeing it on All 4.

ITV has unveiled a similar partnership with Tesco data partner Dunnhumby and Boots Media Group, which will layer in loyalty card data from both retailers for targeting and measurement on ITV ad buys. FMCG advertisers will be able to target category shopper audiences watching content on streaming service ITVX, and will be able to measure sales uplift across both digital and in-store purchases.

Digital Transformation Monthly: The Rise of Retail Media Networks

Data clean rooms

Retail media networks aren’t the only means for FMCG brands to take advantage of the first-party data collected by retailers. Data ‘clean rooms’, the name used for a private, neutral space for two parties to share data without one party gaining access to the other’s customer information, have increasingly gained favour among FMCG brands and retailers or media owners as a means of combining data.

While retailers might once have been reluctant to offer up their datasets due to the risks of losing control, compromising users’ privacy, and diluting the value of their data, data clean rooms offer a means of collaboration that mitigates these risks. FMCG brands can use data clean rooms to combine their own first-party data with second-party data e.g. from a retailer: for example, combining customer data with transaction data to learn about transactions taking place away from their platform, including offline for retailers who have a loyalty programme that can provide insight into offline transactions. FMCG brands benefit by gaining additional data insights that enable them to close the attribution loop on campaigns, while retailers gain an additional incremental revenue stream from their data, without needing to compete with other data providers as they would do if they were selling the same data off-the-shelf.

Not all data clean rooms are created equal, and as the trend catches on and more of these solutions are launched, it’s important for brands to be aware of the attributes that make a good data clean room, as well as the potential challenges:

• Data control and privacy: a data clean room should allow both parties to maintain full control of their data, with strict governance and permissions to determine how data can be accessed and used. Data is typically encrypted to enhance privacy.
• Automation: the more manual interaction is required to share the data, the greater the risk of compromising privacy, and so a good data clean room should be as automated as possible in order to reduce this risk.
• Standardisation: currently data clean rooms lack standardisation, which can lead to significant additional effort to pool datasets across formats.
• Data quality: the success level that data clean rooms can guarantee depends on the quality of data being shared. It’s incumbent upon the data provider to offer high-quality data, but it can be difficult to verify whether data is of a high quality or even accurate.
• Cost: data clean rooms have existed for some time, but are not widely used due to the cost involved as well as the logistical and operational challenges they present. However, as more solutions are launched, clean rooms will likely become more affordable as brands have the freedom to choose between offerings.

Some data clean room offerings cater specifically to FMCG brands: for example, earlier this year, data analytics provider IRI, which specialises in FMCG data, announced a collaboration with Epsilon that enables CPGs to take advantage of Epsilon’s data clean room and IRI’s FMCG transactional dataset to “create their own closed-loop data ecosystem for insights, audience development, activation and measurement”.

Another solution was released by Habu, a data collaboration software specialist, aimed at “guid[ing] [FMCG] companies on how best to get started and see value quickly in data clean rooms.” The solution, a Consumer Packaged Goods Clean Room Starter Package, includes pre-sourced transaction data in order to simplify the process of finding the right partners; pre-packaged use cases; and pre-built queries and visualisations.

Data partnerships

Other types of data partnership can allow FMCG brands to contextualise their owned data and gain insights that allow them to branch in new directions.

For example, in June, Swiss confectionery company Lindt & Sprüngli expanded a multi-year partnership with IRI that allows the brand to gain visibility into FMCG big data sets. The partnership, which has been ongoing since 2014, provides Lindt & Sprüngli with new category insights, giving it access to additional business opportunities while also enabling it to more effectively collaborate with retailers.

While first-party data is highly valuable and in-demand due to the snapshot it provides of a business’s own customers, their preferences and their habits, second-party data has the potential to place that data into new contexts and broaden its application.

With the steady demise of third-party cookie tracking and the ongoing march of data privacy laws forcing brands to reinvent the way they personalise and measure their campaigns, second-party data from trusted partners offers a way for brands to broaden their data horizons and cast a wider targeting net in a privacy-safe manner.