A CMO’s Advice on How to Deal with Changes to Consumer Data Privacy by Kady Srinivasan

Classic marketing training will tell you a marketer’s job is to build the top of the funnel. And for the longest time, I was fully bought into this paradigm—the idea that this was the only way to build a successful business.?

Unfortunately, this is a lie—the idea that you can go back to the well repeatedly to build a business. Do you know what else is a lie? The idea is that you can only find new users through top-of-the-funnel marketing investments, meaning you have to advertise on third-party platforms like Facebook, Google, or Amazon.

For eCommerce marketers, it’s not easy to constantly find new users, sell them on the value proposition repeatedly, or build a brand the way you want, especially when acquisition costs are climbing steeply.?

Our work will become exponentially harder with the changes Apple and Google are making to protect consumer privacy.

If you’re like most businesses that rely on third-party platforms to source your traffic, there’s a troubling road ahead. Not only will acquiring new users become much harder, but marketing efficiency will tank and you’ll be forced to evaluate your investments across the entire funnel—not just the top.

So, what should you do?

There’s an elegant solution that’s so simple that most marketers tend to overlook it completely. I call it “flip the funnel.”?

This strategy draws on the idea that you have tremendous leverage at the bottom of your funnel. You have interested, high-intent users you can engage to drive higher lifetime value (LTV), more repeat purchases, deeper loyalty, and even greater word-of-mouth.?

Flip the funnel essentially says, “Throw out your classic marketing training and the playbook of the past. Instead, start building your business from the bottom up.”?

Focusing on the bottom of your funnel as the first part of your growth strategy will ensure you’re collecting first-party data from your users, you’re nurturing relationships with them, you’re being authentic to your brand, and you’re building a sustainable base of business.?

The best part? You’re building your brand the way?you?want—not through tiny pixel ads that do nothing to create a highly personalized, long-lasting customer experience.

The latest data privacy changes marketers need to know

With consumer data privacy, the rules are constantly changing and the landscape is becoming increasingly complex. Here’s what’s happening.?

Google?will eliminate third-party cookie tracking on Chrome browsers?by the end of 2023.?

Cookies are tiny tracking codes that help you learn what users are viewing on the internet so you can figure out how to target the right audience with precisely the right message at the right time.?

With cookies gone, Google’s testing a technology called?Federated Learning of Cohorts (FLoC), which tracks groups of people based on their common interests instead of individual users based on their specific online behaviors.?

FLoCs aren’t a perfect solution and many people don’t know exactly how they’ll work or how scalable this advertising approach will be. But it will be much less efficient than the traditional third-party cookie approach.?

Apple’s iOS 14.5 update?allows people to block the Identifier for Advertisers (IDFA) at the app level.??

An?IDFA?is a unique and random device identifier that Apple generates and assigns to every device.?Advertisers use it to deliver personalized ads and attribute ad interactions so you can effectively retarget people online.

This update means apps will now have to ask users for permission to collect and share their data. Users will need to explicitly?opt-in?to share their data, whereas before they had to opt-out if they didn’t want to be tracked.?

The TL;DR?

Consumers have more control than ever, advertisers are rapidly losing access to third-party data, and that means marketers’ jobs are becoming 10X harder—that is, if we continue to pump money into the same inefficient tactics. Hence, my recommendation is to flip the funnel.

What does it mean to actually flip the funnel?

The most important strategic change every marketer will have to make has to do with how we collect, store, and use first-party data.?

Flip the funnel essentially means you collect enough high fidelity first-party data to be able to personalize your customer’s experience at scale.?

Let’s break this down some more. Building personalized experiences at scale starts with data and having the appropriate “channels” of communication. It’s not enough to have one or the other.?

Collecting, organizing, and leveraging high-quality information means you have to have the customer infrastructure to absorb and organize that data. Tactics like web sign-up forms are amazingly effective for collecting prospect first-party data, and platforms like Klaviyo give you the ability to organize all this data and make it actionable. If done well, progressive profiling will be key to collecting high-fidelity data.

The second part of the flip the funnel means you have set up the right “communication” channels to use the data you’ve collected to create the right experiences.?

Imagine a world where I recognize a customer who’s bought a pair of shorts in the L.A. region in July and I can offer them a pair of jeans in November from a new catalog, using their loyalty points to defray half the cost. This kind of experience will only be possible if you’ve set up your customer infrastructure at the bottom of the funnel.?

Let’s take a look at the kinds of channels marketers have available:

• Customer retention
• Lifecycle marketing
• Re-engagement strategies at various parts of the funnel (i.e., cart and browse abandonment)
• Cross-sell and up-sell recommendations
• Loyalty programs
• Referral and word-of-mouth
• Product reviews
• A personalized web experience that includes responsive merchandising and UX

Leveraging these channels and the right data, you can start to de-risk your reliance on third-party platforms and all the privacy changes that are occurring.

Let’s talk about some examples of companies that are actually getting this right.

Word-of-mouth

One of the most underutilized levers for a business—eCommerce or otherwise—is word-of-mouth. Most successful eCommerce businesses have advocates who would happily spread your message, yet most don’t take advantage of them. But these brands are the ones to watch.?

• Erin Baumgartner, the co-founder of?Family Dinner, a Boston-based provider of farm-fresh groceries, says their referral program fosters a sense of trust among locals, whereas paid ads on channels like Google and Facebook have high customer acquisition costs and don’t create the same sense of community.
• MeUndies, an underwear and apparel line, gets the power of user-generated content. Their ongoing “Model for MeUndies” campaign sends fans products and asks them to photograph themselves in their undies and tag the brand on Instagram. They then use these images for print and digital channels.?
• Naked Harvest, an Australian-based supplement and health brand, incentivizes customers to write reviews of their recent purchases by offering them ten percent off their next order.?

Loyalty programs

When done right, loyalty programs can offer both an unexpected “surprise and delight” experience, as well as a much-needed value experience. These brands are delivering on both fronts.?

• Bombinate, a UK-based curator of artisanal goods, offers customers a cashback loyalty program. They get five percent cash back every time they shop, plus access to additional cashback opportunities. When they log into their accounts, they see how much cash they have available to put toward their next purchase.
• Glow Recipe, a natural fruit-powered skincare line, created a tiered VIP rewards program, which gives customers access to different perks based on how much they spend. They can earn additional points, get coupons, early access to new products or sales and promotions, or invitations to exclusive events.?
• Yon-ka, a Parisian skincare line founded in 1954, also offers a tiered VIP rewards program. When customers earn enough points to make it to the next level, they receive an automated email with their points balance and what they can redeem them for. They also have dedicated days, like Double Points Day, where customers can earn even more points to help them get to the next level.???

Your website

As the first point of contact where you can truly showcase your brand, your website plays a massive role in how you collect first-party data. It’s also your primary point of leverage for your flip the funnel strategy. These brands have all figured out how to effectively leverage the power of their websites.?

• Grind, a London-based coffee brand, uses automated emails to re-engage site visitors. Those who forget to make a purchase send a series of abandoned cart emails, which drives 41 percent of the brand’s revenue from automated emails. And for those customers whose supply of coffee pods is likely soon to run out, they send an automated replenishment email to get customers to make another purchase. This series generates 19 percent of the brand’s revenue from automated emails and converts at 4.4 percent.?
• Remember?Naked Harvest? They also send customers a series of automated emails, but they use theirs to follow up with people who have left reviews. Customers get a personalized email based on whether their review was positive or negative, which allows the brand to either follow up with the promised incentive or create a conversation that helps them troubleshoot any customer issues they uncover.?
• Smart Home Beveiliging, a Netherlands-based maker of smart home products, increases their customer lifetime value with automated cross-sell and up-sell messages. About four hours after someone makes a purchase, they receive an email about a complementary product they might enjoy. The brand has seen an 83 percent open rate and a 1.2 percent placed order rate from these highly relevant messages.?
• Ghostbed, a revolutionary mattress brand, offers site visitors a discount and early access to deals when someone gives them their email address and phone number on their website’s signup form. They’re then immediately added into a multi-channel welcome series, the first message of which instantly provides the discount code by text message and has yielded a 200X return on investment (ROI).

Flip the funnel now to be in control of your growth

You can tell your story, bring your brand to the world, and be the company that creates products that transform consumers’ lives—no matter the size of your business.?

While you’re dealing with changing consumer privacy laws, new technologies, and plummeting marketing spend efficiency, the way you do all of this effectively is by focusing first on building relationships with your customers.?

You do this by collecting their data (the information you get directly from them, not a third party). You set up systems to create personalized experiences at scale. You make smart decisions about how and when you rely on third-party platforms and data.?

Flip the funnel and make your top-of-the-funnel investments a much smaller portion of your marketing strategy. Instead, focus on the areas where you have direct control over the experiences you deliver and the long-lasting connections you create with your customers.??