How Data Partnerships in Retail Media Drive Revenue Growth

Retail media networks (RMNs) continue to demonstrate how they can be a powerful revenue driver for retailers, creating a win-win-win for everyone involved. Retailers can monetize their valuable first-party data and online and in-store inventory, while customers benefit from timely, relevant content that enhances their shopping experience. At the same time, advertisers can reach highly targeted audiences at critical moments near the point of purchase. As Michael Scott said in The Office, “With win-win-win, we all win!”

Achieving this type of success requires overcoming challenges related to fragmented and incomplete first-party data, which can limit a retailer's ability to organize and use data. Additionally, many RMNs lack the analytical capacity to generate customer insights, build addressable audiences, and accurately measure success. To realize the full potential of their platforms, RMNs need partners that provide complementary data, strong identity solutions, and the expertise to transform insights into actionable strategies. This allows RMNs to drive winning outcomes for themselves, marketers and customers.

Here are the five steps a RMN should consider when selecting the right partner:

1. Build an identity foundation.

First, the right partner needs to be able to organize and clean customer data. Given the millions of customer records and data points that a retailer has, RMNs need to make sure their data is highly usable. Whether it's a known customer record or an unknown customer with incomplete data, partners should fill in missing information and connect fragmented customer records to a single profile. For example, RMNs need to know that a purchase made in-store is by the same customer who bought online. The best partners will then organize those profiles into households since targeting (and purchasing) is often done at the household level. Without a strong identity foundation, future steps of segmentation, insights, audience creation and activation will not be successful.

2. Segment your customers.

A RMN’s ability to segment its customer base and derive insights depends on the availability and usability of their data assets — not to mention some serious analytical chops. Some RMNs will split their customers into different product segments based on what’s relevant to an advertiser. For example, a home improvement retailer may segment customers by who is buying DIY supplies vs. improvement services. Other RMNs may develop custom segments from its customer data and third-party data sources so that advertisers can personalize their marketing based on life stage, age, income level, geography and other factors. Either approach is effective but requires working with a partner that has high-quality data and deep analytical expertise to develop those segments.

3. Generate actionable insights about these segments.

Once the RMN determines how it will segment its customers, it can utilize demographic, attitudinal, interest and behavioral data from a trusted partner to develop a customer profile that compares its customers against a relevant sample of consumers. Here, the RMN will gain insight that will help it answer questions about its customers. Examples include:

• What age and income groups are more likely to purchase my product?
• What is the current life stage of my customers — do they have children, are they married, are they empty-nesters?
• Is price or quality more important to customers in their decision-making process?
• What sort of activities do my customers enjoy?
• How frequently do my customers shop for similar merchandise?
• What media channels do my customers use to get their information?

4. Create high-quality lookalike audiences.

The RMN now knows what distinguishes its customers from other consumers and can create audiences that enable advertisers to run personalized marketing campaigns at scale. RMNs can do this in several different ways:

• Work with a data provider to target generalized, pre-built audiences of consumers that overindex on certain characteristics (e.g., household income greater than $75,000).
• Work with a data provider that can create custom audiences for the RMN (e.g., ages 40-49 and leisure travelers and past purchase of travel item).

These custom audiences are created by joining multiple first- and third-party data attributes found to be significant in the customer profile or using machine learning techniques to develop a custom audience unique to the advertiser.

5. Expand addressability of audiences and activate on multiple destinations.

Once audiences are created, RMNs will want to increase a marketer’s reach across on-site and off-site channels. With the right identity graph partner, a RMN can add digital identifiers to customer records that enable activation across media channels, including programmatic display, connected television or social. RMNs should work with identity providers that are not reliant on third-party cookies. They should select partners that offer more stable digital IDs in their graph like mobile ad IDs, hashed emails, CTV IDs and universal IDs like Unified I.D. 2.0.

Moving Forward: Selecting the Right Partner

With annual growth in billions of dollars, the revenue potential for RMNs is massive. Organizing customer data, segmenting customers, generating insights, creating addressable audiences, and activating campaigns are all critical steps for a RMN to realize that revenue potential. RMNs should select a partner that provides the data, identity and analytical resources to create the winning formula for marketers, customers and retailers.

Steve Zimmerman, director of analytics, leads analytic consulting and data modeling at Experian Marketing Services, a global data and technology company.