In our ever-digital world, privacy is the hottest commodity. Brands want to buy it, users want to keep it for themselves, and the middleman collecting all this information doesn’t quite know what’s right.
Apple has been one of the biggest names to crack down on their privacy and data sharing policies in recent years, and this doesn’t go unnoticed. Advertisers and marketers have been turned on their heads as they try to navigate the digital landscape sans customer data.
In this Q&A, I’ll be talking to Jeff Truong, Partner at VMG Catalyst, about Apple’s decision to protect people’s privacy, how brands/advertisers/marketers have been responding to this, and what the new age of marketing looks like.
Gary Drenik: What does Apple’s announcement mean for brands?
Jeff Truong: The last decade was a golden age for brands using DTC strategies to reach their customers via social media platforms. Not only did they have success with DTC, but some even went public (e.g., Hims, Allbirds, Warby Parker). But with Apple implementing ATT within the iOS 14 update this year, the way marketers are deploying these types of strategies will likely change forever. Cookies are still used by some ad networks as a way to track users across multiple devices, but they provide less information than they once did (and much more limited functionality).
In the last 6 years customer acquisition costs have already nearly doubled, but the privacy changes exacerbated the problem. No matter what you were optimizing for, as a brand you saw declines across the board in clicks, conversions, ROAs, CAC, or payback.
Marketing is quickly changing, but one thing for certain, the old ways won’t work anymore. As a result, there is a once in a decade diversification of marketing mix underway.
Drenik: How are marketers thinking in this cookie-less world and how will the changing digital privacy rules impact conversions for brands?
Truong: Marketers are finding themselves in an increasingly challenging position given cookie deprecation and decreasing marketing budgets due to inflation-driven cost pressures, operating headwinds, and rising costs of capital. Marketers are constantly updating their marketing mix (brand building, trade, retail, SMS, TikTok etc.) and are finding new ways in the customer journey to personalize it with each individual’s preferences. And those efforts don’t go unnoticed. According to Prosper Insights & Analytics™, Monthly Consumer Survey, 40.2% of Apple iPhone users state that they use their phone for every possible function: messaging, calls, emails, work, school, social media, GPS, entertainment, streaming, everything. The modern-day marketing mix has a lot of ground to cover.
We’ve seen across the board that conversions are down significantly due in part from privacy changes which have resulted in 30-50% increases in CACs over last year alone. Many brands have pulled back on their digital ad spend as budgets are constrained and the market has moved away from a growth-at-all-cost model. The key to operating in this environment is experimentation, there is no silver bullet – what works for one brand will not necessarily work for another.
Drenik: What marketing channels are smart marketers focusing on following Apple’s new GDPR privacy upgrade?
Truong: Following Apple’s privacy changes, we found that the smartest marketers are leaning into channels that enable them to own their data collection initiatives by gathering first-party data to personalize and enrich the customer journey.
At VMG Catalyst, we believe the future of commerce will be conversational. Communication mediums like SMS/Whatsapp have become increasingly important channels for brands given privacy changes as it empowers brands to gather first-party data through real-time, two-way conversations. In the US, SMS is the prevailing communication platform and companies like Attentive Mobile (VMG portfolio company) are leading the way by enabling brands to connect with their customers via text. Mobile phone numbers are also great identity markers as people typically only have one phone number and rarely ever change it, enabling markets to tie behavior and actions to individual consumers. We’re also seeing conversational commerce emerge globally with companies like Charles in Europe, Wati in ASEAN, Treble & Yalo Chat in LATAM, and GupShup in India.
Another channel we’ve seen marketers lean into are brand loyalty programs. A properly designed and executed loyalty program is a powerful owned-media channel that collects first-party data, builds engagement, grows market share, and drives sales. When successful, these loyalty programs can be incredibly lucrative. According to the Q3-2022 Starbucks earnings release, the Starbucks Rewards launched in Spring 2008 and represents 53% of spend in stores and boasts over 25 million members.
Drenik: How can marketers leverage first-party data further to drive growth?
Truong: The power of first-party data has never been more important to marketers. First-party data is your most valuable source of customer insights. It’s the only data you have direct access to, and it’s also the most reliable because it comes from customers themselves. First-party data is the best way to understand what makes your customers tick—their preferences, behaviors, and motivations. You can use this information in three ways:
- To drive growth by better understanding who your ideal customer is based on their buying habits and how they behave online.
- To improve product design so that products are more attractive or useful for users; and/or
- To optimize marketing campaigns through personalized messaging that resonates with each user’s needs (e.g., a discount code sent only if someone has purchased an item recently).
Technological innovation in personalization has matured from manual A/B tests that require significant oversight to machine learning models that automate and individualize each customer’s journey. Using technology, marketers can deliver personalization at scale, creating dedicated landing pages, tailored product recommendations, unique content & offers and more.
A couple examples of disruptive technology companies enabling personalization at scale are:
- DataMilk.ai enables marketers to maximize uplift and minimize effort by using machine learning to deliver customer user experiences that drive growth.
- OfferFit.ai leverages machine learning to select the best message, incentive, timing, and channel for every customer.
Drenik: How are the best marketers diversifying their ad spending following Apple’s GDPR announcement?
Truong: The best marketers are diversifying and experimenting across multiple channels. Here are a few examples channels where we have seen success:
Community building is a process that requires more than just selling products. It’s about creating relationships with your audience, being authentic and good people, standing for something meaningful. Songs used to be on the top charts for 20 weeks and now only sit there for up to 2 weeks. It’s easy to lose consumer attention, so you need to build a brand that connects with them emotionally, not just provide a product. Brands need to establish why they exist and need to develop a communication strategy that authentically doubles down on that proposition. Bobbie Baby (VMG portfolio company) is an organic baby formula company that has built a brand that connects with moms emotionally, beyond just providing a product. They’ve established why they exist and have developed a communication strategy that authentically doubles down on that proposition via their community-led approach to brand building.
It’s time to stop talking about the death of retail. In fact, we think it’s time for retailers to embrace a new way of doing business: one based on creativity, curation, and inspiration. People still want the experience of being able to touch and try on a product before they buy it. They enjoy seeing what other people are buying, getting advice from experts on their shopping journey, and even just hanging out in a store with friends or family members who enjoy shopping too. The customer journey isn’t linear; it’s multi-dimensional and takes place across multiple channels—online, mobile, in-store and social media. According to a recent Prosper Insights & Analytics survey, 52.5% of Apple iPhone users are using their phones to locate physical stores and store hours, 31.1% are researching specific products, and 23.8% are paying in store via mobile payment, mobile wallet, etc. The desire for a true customer experience is still very much there. Retailers must adopt a unified approach for all aspects of their omnichannel strategy: marketing campaigns; merchandising; digital tools like apps or websites; fulfillment capabilities such as distribution centers (DCs).
TikTok has been one of the fastest growing social media platforms in recent years. It’s also one that brands are having a hard time marketing on. TikTok is not just a place for creative content, it also provides a unique opportunity for brands to engage with their audience in a meaningful way—a way that will help them grow over time. Leveraging influencers is a good way to reach new audiences and build brand awareness, but they may not drive revenue. Influencers can be used to drive traffic to your website, promote products and services. They can also help you create content that is relevant for your audience.
Drenik: Do you foresee a trend towards greater privacy protection in the future, and what would be your advice for digital marketers?
Truong: As more people become aware of how their data is being used by big tech companies, they are starting to ask some very important questions: Can I opt out? What’s happening with my information? How can I stop sharing it? These questions have led to an increase in demand for better privacy protection from consumers. In fact, 59.1% of Apple iPhone users state that they are unhappy with personal data being shared for advertising purposes, according to a recent Prosper Insights & Analytics survey.
Privacy is an issue that marketers must embrace. Digital marketers need to build strategies to be put into place now in order to stay ahead of the curve when it comes to protecting customers’ personal information while still getting results from your marketing efforts.
Even though consumers are concerned about their privacy, they are willing to provide personal information in exchange for a good customer experience. The key is to provide value in exchange for data. The more transparent the company is about how the data is being used, the more likely consumers will be willing to share it. Companies that are transparent about how they use data are more likely to have a positive impact on consumers.
One example of this is Klover, they’re providing consumers with a suite of free financial services in explicit exchange for personalized product and services offerings.
Drenik: Thanks, Jeff, for your insights on privacy protection and data collection, and how this new age of digital marketing and advertising is rising from the ashes of stricter, more people-centric policies.