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12 Ways DTC Founders Can Respond to the Decline of Cookies & Third Party Data

2 August 2022

When Apple released the landmark iOS14 update in 2021, it permanently changed digital marketing. Along with giving iPhone users the option to review and restrict how third parties could track their activity and data, Apple also upped the ante on App Tracking Transparency (ATT) and Privacy Nutrition Labels for app developers.

Firefox and Safari quickly removed cookies. Google then announced its Privacy Sandbox initiative with plans to phase out cookies on Chrome by 2023, and the EU is now working to update its ePrivacy Regulation (EPR).

The effects on marketers have been profound, requiring creativity and revised tactics to address head-on. As a whole, this shift has been highly disruptive for brands that previously relied on this third-party data to develop nuanced customer profiles and target marketing accordingly.

To the DTC founders reading this: We’re aware we’re preaching to the choir.

These shifts have likely already affected how you market to your customers, but we’re here to let you know that there’s light at the end of the tunnel. We’ve outlined a list of solutions you can implement to take full advantage of 1st and 2nd party data, differentiate your brand, and ultimately offset the impact of the iOS privacy updates.

Tackling a Drop in Return on Ad Spend (ROAS) and Increase in Customer Acquisition Cost (CAC)

DTC brands have been loud and clear: two major impacts of privacy updates have been a dip in return on ad spend (ROAS) and a hike in customer acquisition cost (CAC) due to difficulty hyper-targeting through third-party data, previously mainstays for ad platforms like Facebook.

There are a few knock-on effects here. Facebook ads are becoming less valuable as a marketing mechanism because of the drop in ROAS. Many brands have throttled their ad spend. CAC is rising for DTC founders for a few reasons. 

Not all DTC brands abandoned the ad platforms, so there’s increased competition for those using first-party data on Facebook, Google, and the like. And it’s rising due to the inability to hyper-target as effectively as third-party data provided. Without that data, targeting the right customers is more of a “shot in the dark” than ever before.

Given these trends, DTC, eCommerce, and retail founders are diverting resources into other marketing initiatives to iterate and see what works best, so there’s an avenue to double-down as time goes on.

How DTC Founders are Responding to Apple Privacy Updates

  • 1st Party Data Incentives & Optimization
  • Direct Mail & Catalogs
  • Retail Pop-ups & Concepts
  • Influencer & Creator Partnerships
  • Over-the-top (OTT) & Connected TV (CTV) Advertising
  • SMS & Text Messaging
  • Original Social Media Content
  • Podcast ads
  • Email Newsletters & Marketing
  • Paid Search (including Google Ads targeting specific keywords)
  • Out-of-Home (OOH) Advertising

Let’s check each of these out in detail.

1st Party Data Incentives & Optimization

In a world where third-party data flow is hampered, collecting and interpreting your own customer data is more important than ever. It can allow you to continue personalizing experiences for shoppers on your site, in retail stores, and interacting with your other channels.

As you gather first party data, consider this: a PwC survey shows that 63% of consumers are willing to share personal data (e.g., location, age, lifestyle, preferences and purchase history) for a product or service they say they truly valued. This isn’t always a discount code, it could be exclusive access, special service, you name it. Focusing on data collection when the customer initiates the interaction and you’re providing value in return, can deliver the best results.

eCommerce platform Criteo provides a solution to optimize ad placement by bringing together the context of buyer behavior, content consumption behavior, along with first-party commerce signals pulled from publishers and advertisers. Meanwhile, Littledata’s app for Facebook Conversions API (CAPI) helps sync Shopify behavior with Facebook Ads to target, retarget and build audiences more effectively.

Direct Mail & Catalogs

Direct mail and paper catalogs are seeing a resurgence in DTC marketing for two primary reasons: changes COVID made in our time and consumption patterns and a desire by brands to go straight to their customers by putting a tangible resource right in their hands.

Harvard Business Review notes that hybrid work culture and our increased screen time make the power of paper catalogs even more substantial, however, for a select group. That group? People who had previously purchased products more often in physical locations than online.

So the moral of the story: Direct mail and paper catalogs are a great way to differentiate your brand in your niche and an effective way to target people who previously have purchased products from you in physical stores or pop-ups.

Also, focus on your higher-priced products in these catalogs. The study also found catalogs featuring higher-priced products had a 10% higher marketing ROI than products that were cheaper or more utilitarian in nature.

Retail Pop-ups & Concepts

As the pandemic wanes and people generally get more comfortable being back in public, the return to physical brick and mortar retail outlets — and pop-ups in trendy locations — are gaining traction.

According to a survey from the Lion’esque Group, 65% of people still strongly prefer to shop in stores, despite what the global explosion in eCommerce sales may lead you to believe. Emphasizing physical retail provides you with the opportunity to cultivate the power of community and get real-time feedback on new and popular products from your most loyal buyers – in person.

Brands like Dwight portfolio companies Tracksmith and Lalo take full advantage of retail locations as hubs for their customer communities to gather and engage the brand. At Tracksmith’s Trackhouse, avid amateur runners can join training runs, workouts, and social events, as well as ​​test product, store gear and explore their racing library. At Lalo Land, children can interact with the company’s modular play sets in the Play Cafe, while parents can learn more about the products with product experts or book the space for a birthday party.

Think about how to make your retail pop-up a place for community, conversation, and learning, and you’ll be one step ahead of the competition in your niche.

Influencer & Creator Partnerships

Influencer marketing has the potential to be very powerful — but only under the right conditions. Unfortunately, working with the wrong influencers, or those who don’t have the right amount of clout in your niche, can get costly. Finding the right influencer partnerships and the best platforms to partner with at a reasonable cost to drive a solid ROI isn’t easy, but entirely possible with the right approach.

Finding a platform that is easy to use, offers a free trial or demo, and has easy search capabilities to discover well-aligned influencers for your niche is essential. When you’re working with authentically aligned influencers to your brand, the ROI can be massive

That ROI comes not only through traditional social media content like unboxing videos, contests, and branded hashtags but also through testimonials from influencers on how they used and benefitted directly from your products.

Over-the-top (OTT) & Connected TV (CTV) Advertising

Advertising via streaming services and devices are another medium that DTC brands are exploring due to the Apple iOS privacy updates.

As more people start to cut cords and turn away from cable, a rapidly growing audience on connected TV is ready to spend money.  CTV ad spend is expected to grow to one-tenth of DTC marketing budgets in 2022, and according to a study by Hulu and Telaria, 82% of DTC shoppers take action after seeing an ad on CTV.

With the rise in ad-supported versions of your favorite streaming platforms like Netflix and Hulu, there will be an increasing amount of advertising real estate to take advantage of as we move toward 2023. With the latest privacy changes, markets should leverage first party data and location-based data through OTT/CTV advertising. While users now have greater control over location-based tracking, they often opt in so that their location-based apps like food delivery, rideshare, and maps work correctly.

SMS & Text Messaging

Short message service (SMS) and text messaging advertising has generally been seen as more welcome because it’s easy for consumers to opt out. Or, if they’ve already opted in, to check messages at a time that’s convenient for them.

According to Thrive Agency, 41% of consumers prefer receiving brand updates via SMS rather than email, and 45% of people respond to texts from brands they know and love. Shopify apps like Attentive and Yotpo make it easy to integrate this channel with your store.

So if you’re running a health & wellness company, consider a cross-selling or tips & tricks via text message, which are a top generating SMS use case for that industry. For apparel, consider new product announcements, and for food & beverage, consider replenishment reminders. But be warned, SMS is an effective means of building loyalty, but it can cost you customers if you abuse the channel. For best results, test, analyze, and adapt.

Original Social Media Content

DTC brands across niches are having great success with visual platforms like Instagram, especially TikTok, where it’s easy to show your product in action, as well as embody a lifestyle or brand personality.

TikTok, simply put, is exploding. It’s slowly chipping away at Google’s dominance as a search engine and is the search engine of choice for many people in their 20s and 30s. Moreover, with over a billion users worldwide, the platform has made brilliant moves to lock in DTC brands by offering integrations to Shopify and other eCommerce platforms, which make the TikTok shopping experience easy and enjoyable.

The potential of that one viral post on TikTok changing the future of your brand is real. This notion isn’t to say you should chase virality with your content strategy, but it’s a promise that if you’re consistent enough in your messaging, one viral post could change everything. And with consistency on TikTok or Instagram, allocating some of your advertising spend to capitalize on the interest you receive is much easier and data-driven.

Podcast Advertising

With each passing day, new podcasts from DTC brands hit the airwaves. Instead of seeing these podcasts as competition for your brand, consider them a massive advertising opportunity.

According to Nielsen, 62% of people said hearing ads on DTC podcasts for new products or services would make them consider buying.

Consider leveraging platforms like podcast publisher Audioboom match talent with ad agencies and brands, covering read endorsements, dynamically inserted ads, and sponsorships or branded content. Then allocate some advertising spend to trial out different podcast ads to see what resonates and leads to greater attention for your brand.

Email Newsletters & Marketing

Building an email audience is one of the most dependable ways to maintain ownership of your audience and steer them in the right direction. Where traction on social media can be inconsistent, marketing to an email list with an inherent interest in what you have to sell is much more predictable.

Email marketing for DTC brands can be competitive, but brands can do a few things to separate themselves from the pack and ensure their emails are read and acted upon. Brands that treat email marketing more like traditional lifecycle marketing are seeing the greatest success. Blasting out emails with sale offers, in other words, isn’t going to get the job done. 

Proper segmentation of your lists based on people’s interests is essential, as is structuring the flows of the emails they receive based on where they are in your marketing funnel.

Paid Search (including Google Ads targeting specific keywords)

The Apple iOS privacy update impacted several marketing mediums, and paid search wasn’t left unscathed. That said, Google Ads, in particular, still has a place in a DTC brands marketing plan despite the inability to use third-party data to hyper-target as was once possible.

Some audience insights in Google are no longer available, including age, gender, location, and parental status, but search campaigns for specific keywords are still safe. You can lean on search terms people use and spend to capitalize on keywords with low competition that are directly related to your brand and product mix.

Out-of-Home (OOH) Advertising

With the partial or overall return to office in many industries, people are back to a daily commute in their cars, on subways, or trains. So, where OOH advertising such as billboards and signage may have had a slight pause during the pandemic, now it’s back in full force. 

As people return to their commuting habits – and generally spend more time out and about in their communities – OOH advertising can be particularly powerful when tied to physical locations that are meaningful for your brand and the audience you’re looking to attract.

Simply put, OOH advertising intercepts your potential customers where they are and delivers the message you’re looking to share as a DTC brand. 

In Conclusion

The digital marketing world has shifted away from third-party data and cookies. However, with some creativity and an experimental mindset, there are plenty of opportunities to consider as a DTC founder to keep your brand’s message in front of the right people at the right time and turn interest into a purchase, and a purchase into long-term value.

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