How First-Party Data Helps Subscription Services Build Relationships

October 23, 2018 | By

In October 2016, I wrote a blog post about James McQuivey’s digital disruption research. I argued that “the digital relationship formed between consumer and brand revolutionizes multiple dimensions of the company – not least of which is consumer insights;” and “a CDP gives you the knowledge to discern what utility needs to be delivered, what value you’re providing, and knowledge over time.”

Two years later, I stand by that argument but also think I understated it. I see a deeper, underlying phenomena. Namely, I’ve realized the only sustainable way to grow a business is to build a mutually beneficial bridge between your business and your customers.

Data builds this bridge. This data isn’t black-boxed by a vendor partner or an agency. It isn’t imperfectly counted (i.e. “people as cookies” or “people as pageviews”). It’s not superficially collected (“there’s a 38% chance this visitor is a woman living in Boston”), or questionably valid (“impressions”). It is completely unique and impossible to commoditize – it’s first-party data.

BUSINESSES PROVE FIRST-PARTY DATA BUILDS GREAT RELATIONSHIPS

Using first-party data to build a bridge to customers predates trendy subscription business, certainly. To name a few examples:

  • Neither Netflix nor Amazon use purchase data for content or product recommendations; they use data about their audience/shopper data and both are considered best-in-class.
  • UnderArmour bought MyFitnessPal for a whopping $475 million after buying MapMyFitness for $150 million, giving the analog fitness brand an incredibly rich understanding of consumers’ (and potential shoppers, of course) fitness regimens and lifestyles.
  • Hearst diversifies its business model based on data. They have data on 90 million users across all of its markets. For those users, they track behavioral patterns and content consumption categories to better understand them. As Rob Barrett, president of digital media at Hearst Newspapers put it, “With profiling, we can mine larger audiences for those that can convert and create channels to drive subscriptions.”
  • Disney spent more than $1 billion on the infrastructure and experience associated with their MagicBands. As explained in Wired, “For Disney, the MagicBands, the thousands of sensors they talk with, and the 100 systems linked together to create MyMagicPlus turn the park into a giant computer—streaming real-time data about where guests are, what they’re doing, and what they want. It’s designed to anticipate your desires.”

In all of these cases, one thing is true: understanding the actual, realized, authentic individual engaging with the brand is fundamental to a successful business relationship with them. With first-party data, brands can answer questions that lead to sustainable growth:

  • What kind of products would this person want to buy more of, more often?
  • Can I suggest a curated selection of content that I know will resonate with this person’s style and interests?
  • What content will they want to come back for more of and result in higher engagement?
  • Where are opportunities to reduce friction in their journey?
  • When is the right moment to engage and in what channel should I do so?

SUBSCRIPTION BUSINESSES ARE POISED TO CAPITALIZE ON DIGITAL DISRUPTION BY USING FIRST-PARTY DATA  

The rise of subscription services fundamentally changes to how customers interact with brands. Subscription services aren’t creating more products; they’re simply selling differently and it’s working. Today, about 50% of US online shoppers say that they subscribe to a media subscription service (e.g. Netflix, Spotify) and/or a product delivery service (e.g. BirchBox, Dollar Shave Club) according to research from McKinsey.

Whether it’s an actual subscription business model or just the subscription mentality, this is the ultimate reflection of part of McQuivey’s disruptors thesis: “Instead of focusing on how to sell the product we create…obsess about aligning the total experience of our product with the customer’s desires, giving them what they want, when and where they want it.” Subscription services interact directly with consumers and are in control of the entire customer experience.

As the authors of the HBR article How Subscriptions are Creating Winners and Losers in Retail argue, it’s about relationships:

“If the primary benefit is convenience/replenishment, subscriptions present an opportunity to create an ongoing relationship with the customer, redefining the conventions of traditional retailer/consumer engagement. Subscription is a form of partnership, a new dimension that moves beyond the transaction. Subscription is therefore not simply a replacement of the in-store experience but rather an expansion to the way a retailer or brand can engage.”

Time and again, it comes back to a value exchange based on first-party data. Consumers want great experiences. Unifying and activating first-party data can help you do just that. It’s why the CDP hype is right up there with the return of House of Cards this fall. Well, among the right audience anyway.

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