Companies need to look beyond cookies when they seek customer connection

Cookies are on their way out, and marketers who want to stay relevant are increasingly investing in a zero-party data approach. Story by Tim Glomb

Customers and cookies — the future beckons.

For years companies have been using cookies — small text files stored on computer browsers that keep track of website visits — to monitor consumers’ online behaviour. Cookies can provide rich data that helps brands get a better sense of who their customers are and enables them to target those customers with more relevant offerings. Yet this level of personalisation comes at a cost: consumers increasingly are concerned about who is collecting this data, how much of their behaviour is being tracked, what companies are doing with this information and to whom their data is sold.

A recent Pew report found that 79 per cent of Americans were concerned about how companies used their data. Forty-one per cent of US consumers regularly delete cookies and 30 per cent have installed ad-blocking software. Government regulations increasingly are reflecting this growing distrust. One of the most well-known pieces of legislation targeting cookies was the 2018 General Data Protection Regulation, which substantially expanded data privacy requirements in the EU.

More recently, European regulators called for a complete ban on ad targeting, Virginia and California passed comprehensive privacy bills and Google Chrome announced plans to end its support of third-party cookies by next year.

The era of cookies is ending. But that doesn’t mean that companies should abandon personalisation — it’s just time for a new, better approach.

THE RISE OF ZERO-PARTY DATA

What does it take to leverage the benefits of data-driven targeting without falling prey to the privacy issues (and mounting regulatory obstacles) related to cookies? The answer is a concept known as zero-party data. In contrast to third-party data, which is collected passively from cookies and used by companies to make inferences about broad demographic groups, zero-party data refers to information that is intentionally and proactively shared directly by individual consumers.

Specifically, many brands use polls, quizzes, sweepstakes questionnaires or interactive social media stories to collect data that customers explicitly give brands consent to use. This provides precise insights into consumer prefer­ences. Opt-in data collection is a win-win: it offers customers greater control and transparency into exactly what data is collected while giving companies access to more useful information that enables them to create personalised offers.

When setting up these systems, companies should remember that the problem with cookies isn’t personalisation, it’s a lack of respect for consumer privacy. Consumers increasingly are interested in personalised offers, and zero-party data makes it possible to offer much better personalisation than cookies ever could (without the privacy issues). A recent survey of more than 5000 global respondents found that between last year and this year, there was a 33 per cent increase in the number of consumers interested in personalised offers.

Customers are happy to receive ads and product offers that have been effectively matched to their needs. But they don’t want to pay for this personalisation by having their data collected in an opaque, insecure manner where it is sold to the highest bidder. Zero-party data puts customers in control of what information they share and who they share it with, enabling greater transparency and more effective personalisation.

For example, in my job as vice-president of content and data for enterprise marketing platform Cheetah Digital, I worked with one company that pivoted from traditional targeted ads to a zero-party data strategy in early 2018. Over three years, this company conducted more than 300 sweepstakes initiatives, reaching 750,000 unique entrants and gathering more than 15 million data points. Consumers voluntarily provided information on which products they wanted to purchase, their budget for those products, and where and when they would prefer to make the purchase. Cheetah Digital leveraged that detailed dataset to develop dynamic, hyper-personalised email and text message campaigns that had higher success rates than their past campaigns, which were driven by data collected by cookies.

FUTURE OF CUSTOMER ENGAGEMENT

Zero-party data is already popular, and it will become even more prevalent in the future. Consumer demand for a more transparent and secure user experience is rising, while expectations for extremely personalised experiences are growing ever higher. At the same time, an increasingly stringent regulatory environment is forcing companies to change the status quo. Cookies are on their way out, and marketers who want to stay relevant increasingly are investing in a zero-party data approach. According to a recent report from Forrester, one in four chief marketing officers will have adopted zero-party data capabilities by the end of this year.

This may seem like a small technical shift, but it represents a fundamental philosophical change in how businesses think about their customers’ data. While cookies operate in the background, passively collecting information that will be used in often unclear, unscrupulous ways, zero-party data enables greater personalisation and greater control for the end user.

Zero-party data isn’t just a new way to conduct targeted ads or email campaigns; it’s also about transforming how companies engage with, and demonstrate respect for, their customers.

Tim Glomb is vice-president at Cheetah Digital and founder of Audience Sherpa.

Copyright 2021 Harvard Business Review/Distributed by NYTimes Syndicate