Episode 30: Personalise or perish: The high stakes of retail relevance online

In this episode of Retail Untangled, Amie sits down with Michael Dunlop, head of commerce Apac at Rokt, to discuss how personalisation remains a powerful driver for customer loyalty and how retailers can leverage first party data in a meaningful way. 

Transcript

Amie:

Welcome to Retail Untangled, my name is Amie Larter and this is the podcast where we speak to retail industry experts and find out business hacks that help them succeed. You won’t find these gems anywhere else, and we have some superb stories from the coalface as well as helicopter insights from retail industry leaders. 

In an era of eroding margins and intense competition, the most valuable asset in your arsenal might be the one you're most hesitant to use: your first-party data. While every retailer understands its potential, the critical challenge is navigating the high-stakes paradox: customers demand deep personalisation, yet punish brands that violate their privacy.

Getting this wrong isn't just a marketing misstep; it's a direct threat to the bottom line. But for the few who get it right, it's a powerful driver of new revenue and unbreakable loyalty.

To unpack the opportunities this balancing act presents, I'm joined by Michael Dunlop, Head of Commercial APAC at Rokt. We're moving past the theoretical and diving straight into the commercial opportunities that exist when you use first-party data in a privacy-first world. 

Welcome Michael.

Michael:

Thank you so much for having me.

Amie:

So many retailers are sitting on a, let's call it a treasure trove of first party customer data, really struggle to fully leverage its potential in a meaningful way. I'm keen to understand, because we've spoken about first party data for a while now, why are so many retailers finding it challenging to sort of extract the full value from this data?

Michael:

It's a big question and I think it's very different for every retailer. So every brand is at a different stage of their journey. But there's a few constants that we see as we're talking to brands across the globe. And so I'll break it down into kind of three components. One, what are brands good at? Where are the challenges and where do they lie? And then what's the North Star that brands are aiming towards? And so what are all brands good at? It's generally collecting data. 

So they've been collecting data for the last 15 to 20 years, it's sitting in a data warehouse somewhere and it's really, really impactful, valuable data. So it's purchase behavior, it's family makeup, it's how much they're spending and a whole range of other things. The challenge is typically twofold. It's the activation layer and access to that data. And so that activation layer is more how do the go-to-market teams, the marketing teams, the loyalty teams actually have easy access to it, and how they can then use that in their communications with the customer. And so that is in the form of how do they talk to them on the .com, how do they talk to them on Meta and Google how do they talk to them in their email programs, for example. 

And so the more tailored that you can get, the better the consumer experience. And you actually see brands locally in Australia that are winning market share because they're doing this right. And so a brand like Mecca, they've got the Mecca Beauty Loop, personalised skincare routines, they've got gender-specific marketing, and that transpires across all of your experiences with Mecca, and then you're seeing them win market share on the back of that.

You've also got brands like The Iconic that have got a really good activation layer, which they're able to personalise the homepage. They're able to personalise gender on, if you're male and you've bought jeans before, here are other products that are similar in the email marketing program. So they're doing it really well and starting to win. And so that's kind of like where the challenges are and where they can kind of activate on.

Amie:

That makes sense. So I think consumers are demanding this deep, I describe it as almost psychic personalisation at times, and simultaneously intensifying this focus on personal privacy on a real practical level. How do these dueling forces impact retailers' use of this first party data?

Michael:

Yeah, like, I nearly actually disagree that consumers are so privacy-centric because...

You actually see brands win market share pretty commonly when they deliver, and there's actually a clear value exchange. So we talk about this concept of value exchange. If a customer is gonna give you data, you better use it to deliver great experiences. And so the mecha and iconic examples that I just gave are perfect examples of this. You also see this in non-retail categories. Like why is everyone so addicted to Spotify? It's because they provide personalised recommendations through Discover Weekly. It's a really personalised tailored experience. You know what they listen to, you know who you are, what your friends are listening to, et cetera. 

You also see it with amazon. amazon, they win market share because they, one, but they have one of the largest catalogs globally. They have fast and reliable shipping, but they have personalised recommendations that go to you all the time. And so that kind of friction that you see between customer privacy and then personalisation, really the crux of it is make sure that you're actually using the data to drive value. At Rokt we actually think about this a lot in terms of relevancy and delivering personalised experiences to consumers on a one-to-one level. And we've partnered with Harris Poll for, I think it's around the last five years now, and we've asked the same question throughout. And in the most recent study, one of the questions that we asked was, and one of the insights that we got was 74% of customers would prefer to receive no offer than one that isn't relevant to them. And that percentage point has actually been growing over time. And what that's telling you is that, one, customers are wanting personalised experiences, but it's also a detractive from the brand if you're delivering them with offers that are not relevant. 

So if you're sending out marketing communications or pushing out paid media activations or email marketing and it's not relevant to the customer, you may be doing more damage than good. And so on the flip side, 62% of customers prefer to shop with brands that are providing relevant recommendations. And so on that side, you've got customers that are kind of dissatisfied with brands that aren't using the data for recommendations and then you've got this segment of customers that are saying give me recommendations and I'll buy more from the brand.

Amie:

It is just so interesting. I'm going to have to get a link to this report so we can paste it in the show notes. But I feel like what you're saying is there's this friction when retailers are not using data properly, perhaps collecting it, but not activating it. That is where it's almost like a level of distrust or disconnect is being created with brands. So keen to understand from your perspective on the flip side of that, what's the real cost to retailers who find themselves in a position where they have the data but are doing nothing with it?

Michael:

Yeah, there's three elements and some of it is repetitive, reduce customer loyalty. And in essence what we're saying is customers are going to go to brands with better experiences.

Two, there's an opportunity cost. So if you're not using predictive analytics to be able to personalise the, say, the e-commerce checkout flow, to say, this customer should be seeing this upsell, this customer should be seeing this upsell, you're gonna be selling less product. And you're gonna be having lower average order values from the brands that are actually investing in that level of personalisation. And then marketing wastage. And so I can give a couple of examples. So the reduced customer loyalty, the iconic in Mecca and Amazon, all good examples, don't need to repeat that.

From an opportunity cost, I've got a personal example on this. So little dog Fred, we lived in the States for the last six years in New York and we use Chewy.

Chewy would send birthday cards to Fred. Chewy knows he's veterinary and dietitians, so they wouldn't recommend anything that's chicken. They would personalise everything that they sent to us in terms of his toys and X, Y, s. The brand loyalty that I have for Chewy when I was in the States was very high, because they would recommend things that I know they knew that I could buy for Fred. And so I think that brand equity builds over time because and like I wouldn't swap.

Amie:

That completely makes sense. So shifting to the commercial opportunities for retailers, if we focus on their owned assets, their own digital assets to begin with, where's the best opportunity to unlock sort of incremental sales from a growth or impact perspective?

Michael: It depends on the business, but the applications are endless. I think coming back to kind of the first question, which is around like where the challenge is, it's investing in that activation layer and access to data, because what that actually translates to, like you talk about what does it do to the marketing team once they have access to this data, it drives better experiences. And so you can drive better email programs, but let's focus on the dot com. If you're able, and there's brands that are doing this today, they're using predictive analytics to actually upsell the right products to the right customer. And so a lot of brands are actually tapping on rock to be able to do this at the moment, which is how do they attach the right warranty products or insurance? Or if they're a ticketing business, how do they attach parking near the venue, or if they're an electronics retailer attaching a soundbar. 

And so making sure that they're actually able to use the data in a way that's really effective to be able to drive upsells throughout the digital checkout, that's a huge unlock.

So one of the things that brands are commonly working with us on is there's a lot of investment that goes from e-commerce businesses to early funnel optimisation. So PDP or page optimisation, how is the product subplated, et cetera. Once it gets into the checkout, it's typically: get them out as fast as possible and make it as streamlined as possible. Where a lot of e-commerce brands are kind of missing an opportunity is that when you have a customer in a buying mindset, so they've gone from a discovery mindset to a buying mindset, you now have the highest data availability.

So you know the customer, they're generally logged in. And so you can personalise content on a one-to-one basis once they're in that flow. So using that inventory, while attention's highest, data availability is highest, is a really core opportunity to sell more of your own products, monetise through potentially payments, and then also introduce other forms of retail media that can drive CPMs that are 10 times higher than earlier in the funnel. And to put that into numbers, we typically see retail media in early stage of the funnel drive $30 to $40 CPMs. We see retail media on the confirmation page drive $150 to $200 CPMs because the customer engagement is much higher, but you also have the first party data to match offers to them on a one to one basis. So you're not just doing product to product recommendations. You're going, know you as an individual, you're gonna be likely to buy this type of product, whether it's endemic or non endemic.

Amie:

Okay. So you've previously highlighted diversifying away from Meta and Google as another significant opportunity. I'm keen to understand. So for executives looking to build a more resilient and profitable marketing strategy, and we all know that that's not easy right now, what's this tangible opportunity here?

Michael:

So it's helpful to talk about my background before I answer this question. So for the last six years I've been based out of New York and working with some of the largest advertisers globally So I think Disney's the queue largest banks. So the city's Bank of America is etc, etc, etc one of the biggest differences that I've found between coming back to Australia is how the decisions get made based on incrementality. So you see a very concentrated market in Australia of 70% of digital marketing spend goes to Google and Meta. In the US, about 50%. Now, obviously the US has more channels to tap on, Amazon is a bigger piece of the pie, et cetera, et cetera, et cetera. But the conversations I typically have with marketing leaders in the States is we're reducing our CPAs and reducing our customer acquisition costs on less incremental channels. So for branded search, I'm not gonna pay the same as what I pay on XYZ’s channel, and I'm gonna pay even less on affiliate type channels. And so that is kind of more broad strokes.

One of the things that I'm starting to see even more in Australia though, like I've had three conversations in this last week with Australian brands that are now starting to take incrementality optimisation more seriously and starting to actually weight their marketing channels away from say Google and Meta, which may not be 100% incremental all of the time. And so when you kind of tie that to what the opportunity is, with the growing inventory in retail media, that's a treasure trove for any marketer. You've got a customer that's making purchases, they're an online shop or they've got discretionary income. You've got high data availability. There's not many environments, no programmatic network has that level of data availability or targeting. And so you're able to then reach an incremental high value audience and use that for customer acquisition. And to put this into a tangible example:

Let's say David Jones is a client here in Australia, this is for, I'll say, for example, purposes only, but then let's say you're the Woolworths delivery person. You may say, hey, I see a lot of value in reaching a high value David Jones consumer, and you're able to connect those dots. And so more marketers should really be thinking about, ok, how do I diversify away from Google and Meta and actually start to have these one-to-one relationships more at scale? 

Because you're gonna be getting highly incremental customers and potentially higher lifetime value customers and then you're able to kind of mitigate your over reliance on potentially increasing CPMs and CPCs that you're seeing on those other channels.

Amie:

Yeah, and so retail media, I mean, it's been such a big conversation these last couple of years. And I know when I was, think when I went to Shop Talk the first time, maybe two years ago, it was very much coming on the scene as a big conversation. Keen to understand it's very, it's very big in the US and there's a lot of scale there. What have you seen based on what you've seen in the US versus Australia and the uptake in this space?

Michael:

It's definitely a couple years ahead. In terms of the omni-channel approach, so in-store screens, you've got earlier funnel sponsored search, sponsored products. The trend towards measurement is definitely a lot more advanced in the States. If you talk to a lot of brands within the Australian market, a lot of the retail media performance data sits in spreadsheets.

That's not necessarily the case in the States anymore and they're investing a lot more in how to actually drive performance. Outside of that, you're seeing a lot of non-endemic types of activations, especially within post-checkout environments and cross-sell and email type marketing programs. Even our size and scale is a testament to that. We're optimising over seven billion online purchases per year. Five years ago, that was one billion. And so we're growing so significantly and that's primarily driven out of the US and EMEA, which they're really starting to lean into non-endemic type advertising.

Amie:

That's awesome. Okay, so moving on to the payments page. It's often seen as a mere sort of functional necessity. But as you mentioned earlier, it is a high attention touch point. I'm keen to understand what's the opportunity to transform this final interaction into an experience that deepens customer relationships and opens up, I think for most retailers at this point, an entirely new profitable revenue stream.

Michael: 

Yeah, so the payments page is typically seen as a cost center for 99% of retailers. You are paying merchant fees to the Paypal's of the world, the digital wallets, the networks. But what you do see very commonly in which, it's an okay experience, but it's not a great experience, is that you'll see payment providers come in and say, hey, we wanna provide your customers with a special offer, we wanna target absolutely everyone in your audience. you'll see MasterCard do that a lot, you'll Visa do it, PayPal, et cetera. And it's a short-term monetisation for the retailer. But it's not dynamic, it's a static banner run. And so where we've seen a lot of growth on our side is actually turning that into a dynamic customer first placement. So how can you take the data around the past payment behavior, actually their relationship with that particular merchant or that particular payment provider, like are they a Visa card holder? And then determining whether to serve or not serve those placements and creating a competitive marketplace. 

So we call it sponsored payments or Pay Plus, which is really kind of like bringing Google search type capabilities to the payments page for payment merchants. So you can have, as a retailer, you can be talking to all of the big banks, you can be talking to all of the networks as well as all of the digital wallets and having them all compete to be able to be served to your customer. Now that creates a hell of a lot more value for retailers that right now, typically you'll have someone that will buy out your payments page for three weeks and then you'll have to get technology resources to pull that out. Be able to create something that's completely dynamic is better for the customer but it's also better for the bottom line.

Amie:

You've mentioned some really great points here in terms of the commercial opportunities for retailers. And for retailers that are looking to take action now, so they've heard this, they are probably or may be guilty of very much collecting it but not activating data. What's the single most important step to shift their, well, not just theirs, theirs is started, but their organisation's mindset from seeing, you know, privacy as a roadblock in some instances to viewing it as a strategic commercial advantage?

Michael:

Again, it's a big question and it's different for every business investing in that activation layer and getting the data in the hands of your teams is gonna be the biggest step. And so moving it away from having it siloed in the backend to having it accessible in real time, that's the number one. So, making sure that you have a really good strategy.

Yeah, I think one of the things that I added on at the end there was that we've done a lot of studies on this now. So before we purchased M-Particle, we did a review of advertiser CPMs across the seven billion transactions that we're serving across.

And what we found is that brands that had invested in a CDP and not only any CDP, one like M Particle that has the really strong activation layer, that the CPMs were quite literally 50% higher. We saw some brands went from $100 CPMs to 150, so they're getting 50 % more value from every single ad that they're serving on their website overnight from having better identity solutions. And we've replicated that across hundreds and hundreds of brands.

You're not talking mid-tier brands, you're talking the largest brands in their categories in the United States and EMEA are seeing 50% increases, which is pretty phenomenal. And so that really ties down to having the data readily available, having the predictive analytics readily available and the identity so that you can plug it into, a lot of retailers here are using things like Criteo and Citrus. You want Criteo to be learning off your CDP, and a lot of the time they're not. And so even on earlier page retail media activations, you'll be getting better results.