Data Clean Rooms: The Next Era of CPG

Data Clean Room|8 Minute Read

Data Clean Rooms: The Next Era of CPG

This past decade (this past year especially!) fundamentally shifted how CPG companies create, market, and distribute products. Whether it’s global supply chain innovation (and disruption), changing consumer behavior, or the ubiquity of social media, the game has changed.

We’re going to talk all about the next game-changer: second-party data sharing with retailers and partners via data clean rooms. But first, we need to understand how we got here.

One of the biggest external factors creating a paradigm shift in CPG marketing has been third-party cookie deprecation, and organizations are scrambling to adapt.

As a historically “data-poor” industry, CPG was (and still is) among the most dependent on third-party data. Advertising makes up the lion’s share of CPG marketing budgets, but retailers and online delivery partners often take months to provide any transaction data, if at all, which leaves CPG brands flying blind when it comes to understanding the impact of their advertising on consumer purchase behavior in-store and on delivery apps.

With new consumer privacy policies and third-party cookie deprecation, the advertising challenges CPGs face are further exacerbated in two ways:

  • Targeting. CPGs have relied on technologies like DMPs to create segments to send to their digital ad channels. But these technologies have been rendered useless in the wake of third-party cookie deprecation because they rely on third-party data to create these audiences.
  • Attribution. Attribution has always been a sore subject for CPGs. Retailers don’t want to give up their transaction data, and CPGs can’t measure the impact of their ad campaigns on purchases without that data, especially if they don’t have their own DTC channel.

So, what’s a marketer to do when DMPs have become a legacy tech that’s all but extinct, attribution gets even murkier – but budget is still being poured into advertising? Hint: the answer involves first-party data.

Dealing with Data Deprecation

Customer data platforms (CDPs) are built from the ground up for first-party data. For CPG companies navigating data deprecation, a CDP with the right data deprecation solutions enables them to run towards first-party data into the era of customer privacy.

In fact, HEINEKEN USA is a shining example of that. Knowing the demise of third-party cookies was imminent, HEINEKEN USA put BlueConic at the center of their tech stack to eliminate their DMP, gain insights about their consumers, and optimize their media spend based on their own first-party data. HEINEKEN gathered data about their consumers at live and virtual events, through sweepstakes, and more to build ‘golden consumer records’ to develop 1:1 relationships with consumers. For the first time, they are launching an email campaign for their Tecate brand.

Now that CPGs have invested in first-party data strategies, what’s the next frontier for growth focused teams in CPG?

Second-party data sharing via data clean rooms.

Coming Clean on Data Clean Rooms

Before we dive into clean rooms themselves and how they can help your organization, it’s important that we get some definitions out of the way so we can move forward with a shared vocabulary.

First-Party data:

  • Customer data stored at your own touchpoints (web, apps, email, social, call centers) and systems (CRM, subscription databases, etc)
  • High quality in terms of confidence, utility, and access
  • Earned because of a direct relationship with the customer

Second-Party data:

  • Another company or brand’s first-party data is shared directly with another brand
  • One-to-one transfer or connection in private data exchanges or in clean rooms

Third-Party data:

  • Aggregated data from a wide variety of un-owned sources typically purchased from data providers
  • Purchased from vendors, usually as a file or as a managed service, and then used for targeting audiences, mostly for marketing campaigns, and segmentation exercises
  • Collected discretely and typically without consent from the individual

Now, the moment you’ve been waiting for – what is a data clean room?

Forrester defines clean rooms as “a secure platform where brands can access advertising data and use it for targeting, measurement, and analysis. The advertising performance data provided in a clean room is aggregated and has controls to ensure privacy.”

This definition perfectly describes data clean rooms now offered by walled gardens like Facebook and Google’s Ad Data Hubs (ADH). It will certainly change the way some advertising attribution and lookalike modeling are done in the post-cookie era, but it is not the front lines of this new frontier. After all, Google’s still in it for Google. Walled gardened clean rooms will always work with their own self-interest at heart and within a single ecosystem.

The real innovation comes when CPG brands can take control of their own destiny by setting up their own clean rooms. Here, retailers and online delivery partners of their choosing can share data in a privacy-compliant environment for a mutual value exchange.

In other words: a clean room is a privacy-safe environment to facilitate second-party data sharing.

CPGs will finally be able to do closed-loop attribution to understand which campaigns drove actual purchases in a privacy-compliant manner. With more retailers creating media exchanges (see CVS, Kroger, and more) to diversify their revenue, this presents a new opportunity for CPGs to gain invaluable data and insights to optimize customer lifecycles and improve campaign performance.

How it Works

BlueConic is the first customer data platform to offer a data clean room solution.

Here’s a breakdown of how it works:

  • Each party brings data to a secure clean room environment. Typically, the CPG company with their advertising data and retailer(s) with their transaction data.
  • As data is ingested into the clean room, it is fully pseudonymized, meaning all personally identifiable information (PII) is replaced with artificial identifiers.
  • Instead of randomly being replaced, as with anonymized data, pseudonymization uses advanced encryption techniques to create a one-way hash of the identifier. As an example, taylor@blueconic.com becomes: 167fbd31b25b58a52b.
  • Because each set is being encrypted using the same method, taylor@blueconic.com in one dataset will result in the same string as taylor@blueconic.com in the other data set, which allows those two records to be matched in the clean room, while at the same time preventing anyone from reverse-engineering the identifier – so Taylor could never be identified.
  • What’s more, users aren’t given access to the record-level data, only aggregated data and technical safeguards are put into place to prevent re-identification attacks like manipulating segments to isolate individuals.

You can visualize it like this:

 

CPG companies and retailers can get the insights they need like attribution and lookalike audience insights, without ever exposing individual customer data. It’s a win-win.

Real-World Example

Let’s look at a real example with a fake alcohol brand. We chose an alcohol brand because of all the CPGs they represent the epitome of the struggle: DTC selling is not permitted by alcohol brands in the U.S., data governance is paramount because of age restrictions, and little to no transaction data has been provided from retailers.

Our alcohol brand sees the writing on the wall. They’ve read the countless cookie-related puns (we’re guilty of these too) and decide they want to start prioritizing first-party data.

They start by creating compelling digital experiences on their owned channels, possibly a sweepstakes or event sign-up, collecting consented first-party data like email addresses in the process. The result is a rich database of first-party data.

“Great!” they think… the marketing team is happy because they now understand their consumer better than ever and are building relationships. But when the consumer navigates off-channel to order through an alcohol delivery app or in a grocery chain, they still have no way of tracking that conversion to attribute it back to an advertising campaign.

But what if you could?

With BlueConic’s clean room, the alcohol brand’s marketing team could automatically push their pseudonymized first-party data into this privacy-safe environment. The delivery app could then pass their pseudonymized transactional data. Because the consumer logged in to make their purchase, our clean room recognizes the two encrypted email addresses are the same, and a conversion registers.

An offline transaction can also generate a conversion. A grocery chain can opt into the same clean room and provide point of sale data. When the consumer purchases using their grocery chain loyalty card, the same pseudonymized email address (or a phone number) will be available to match as well, and a conversion registers.

Consumer PII is never revealed to either party, and the record-level data isn’t accessible, but our alcohol brand still gets the attribution insights they need to measure and optimize campaigns. They can even use these insights for lookalike modeling to power future marketing efforts.

The icing on the cake? Marketing did all of this on their own, including data transfer, without pulling any resources from IT.

While it’s a no-brainer for CPG companies, the retailers and delivery apps are also incentivized to participate because they can productize their insights for new revenue streams and improve operations.

A CDP is at the center of your first-party data strategy and a clean room is a natural extension of a customer-first strategy. It requires managing first-party data in a way that drives operational efficiencies across your organization without putting the onus on you to manage and maintain that data.

BlueConic was purpose-built for getting the most out of your first-party data, and our hundreds of customers around the globe can attest – we’re ready for this new era of CPG marketing. Are you?

Are you ready to join the future of CPG? Download our ebrief to learn more about how you can turn first-party data into a strategic business asset.

See what BlueConic can do for you.