The Winning Formula: First-Party Data, AI, and Customer Loyalty in the Age of Personalization
3 Minute Read
It’s an accepted reality that third-party cookies’ days are numbered. It’s not just being ushered in by GDPR or CCPA or the fact that Google is finally catching up and moving towards eliminating third-party cookies as Firefox and Apple already have. Today’s customers know their value and are no longer willing to offer their data just for the privilege of making an online purchase.
The adoption of ad blockers has increased exponentially in recent years and today’s visitors are more inclined to abandon a website if they aren’t presented with an option to dismiss cookies altogether or allow only essential information to be tracked. It’s sending a clear message to brands that they can no longer take a shotgun approach to marketing and customer engagement, especially on digital channels. A more tailored approach is what consumers desire based on increasingly personalized experiences that have more of an impact.
Aligning with consumer expectations means being able to consistently deliver relevant and meaningful customer experiences (CX) across all channels. Having more accurate first-party data is critical to achieving this in the highly competitive e-commerce space where customers are using their buying power to their advantage.
First-party data is key to understand buying behavior
Meeting the demand for greater levels of personalization starts with learning from how consumers shop and buy. Having accurate and relevant data has to be the foundation for any efforts to improve CX. Yet 43% of companies say that obtaining accurate real-time data is one of the biggest challenges. Perhaps this is because up until recently, third-party cookies were assumed to be a valuable source of customer data and with their demise, brands aren’t sure what the best approach will be going forward.
For too long marketers have relied on demographic data - which is the core of information supplied by third-party cookies - to understand consumer behavior. In reality it’s not a very good indicator at all. We’ve written about this in a previous post Why demographics don’t help with personalization. Today’s consumers desire one on one engagement where they’re shown information relevant to what they’re looking for now - it is about context, relevance, and immediacy. This means that brands need to get smarter about what information they request from visitors and then how they use that data to generate better experiences from that point on and with future interactions.
Leveraging AI to create simpler, more effective CX
One of the main pitfalls of CX is that it is mired in complexity. Most companies have collected volumes of first-party data over the years. This highlights that the problem is not really a lack of data, but rather the ability to define what data is relevant to improving CX and then being able to access it and make it useful.
Consider an example of optimizing CX during the checkout process. This is a high priority for most brands as statistics continue to show high levels of cart abandonment during checkout. It’s generally acknowledged that most customers desire an easy checkout process, but ‘easy’ can be defined in so many different ways. For one visitor it may mean not having to sign in or create an account. For another it may mean that once signed in their shipping information is automatically populated. And for others it may mean having to navigate as few steps as possible to complete the transaction.
Matching the desired experience to the right customer requires having the ability to see how individual visitors are navigating a website in real time and learning from those behaviors. It then becomes possible to serve more relevant experiences which helps companies achieve greater levels of personalization.
Artificial Intelligence (AI) is one of the technologies making this possible because it thrives on complexity and is able to continually learn and generate insights from how visitors navigate websites. It leverages first-party data more effectively to offer greater levels of personalization without being intrusive.
Using the example of trying to create an easy checkout experience, AI-driven experimentation and personalization can serve up different variables to different visitors and then learn from how each responds to the experiences. It makes it possible to scale testing efforts without resorting to broad generalization. Plus AI-driven experimentation and personalization is able to generate insights quickly. This gives brands the opportunity to respond faster to what visitors are finding relevant. Engaging with visitors in this way to understand their personal preferences is far more effective than relying on data from third-party cookies. It enables a more strategic approach to improving CX and increasing conversions.
The future of first party data is not to be ignored
One of the trends driving the demand for greater privacy is that customers desire to take back control of how their data is obtained and used. Delivering more personalized digital experiences is a big part of this because customers derive more value. Even when most consumers don’t fully understand how their data is being used, 35% were willing to share more if it resulted in more personalized or tailored experiences.
The bottom line is that brands need to do better with the customer data they’re trusted with, translating it into real value for customers. Of course individual customers have their own definition of value and their preferences change over time, which means the task of learning is never done. The future of optimizing CX and delivering more personalized experiences requires leveraging first-party data with ongoing experimentation.
Ongoing experience optimization is made most effective when it’s possible to add ideas mid-experiment, or remove ideas that aren’t performing well. This ensures that the AI is always working towards discovering the top performing ideas and finding ways to improve them even more. As customer expectations continue to increase, AI-driven experimentation and personalization gives brands a way to derive more value from first-party data and provide more relevant digital experiences as a result. Leveraging first-party data effectively is the future of CX and companies that demonstrate they value the information customers are willing to share, will gain a distinct competitive advantage.