Building people-based identity in the cookie less world

Authored by Lakshmana Gnanapragasam, SVP – Analytics, Epsilon

In the last leg of this three-part series, let's discuss the need for building a people-based identity and what it means to marketers.

Even prior to the phase-out of third-party cookies, marketers have always faced a significant obstacle in identity resolution. With the cookie deprecation, the need to provide a consistent, coherent, and useful customer view across digital and physical channels is growing. Marketers need to reevaluate their first-party data strategy and unleash the possibilities it presents to succeed and thrive in a cookie-less world.

Rebalancing the three-legged stool of identity resolution

A three-legged stool has long been the foundation for successful identity resolution, requiring the integration of first-party, second-party, and third-party data to produce the highest-resolution customer identity and view.

First-party data is the data a brand collects directly from its customers through its interactions (e.g., retailer’s point-of-sale transactions). Second-party data is the data a brand can collect through its direct partnerships, often within an eco-system (e.g., a CPG brand using data from a retailer’s POS transactions to understand its customers). Third-party data is the data a brand can license from a data provider (e.g., customer demographics, digital behavior data, etc.).

Historically, brands relied on cookie-based data to understand the digital behavior of their customers and prospects. As the importance of this data grew over time, the imminent collapse of third-party cookies made the transition away from it difficult.

The good news is that the cookie deprecation brings the spotlight back to a brand’s own data strategy, with an emphasis on its own first-party data. If done well, businesses may come out of this transition with a more comprehensive understanding of their customers than they ever had before.

Championing first-party data

Establishing a base layer of first-party data can be beneficial for companies that have historically depended on audience segments and third-party data and whose consumer interactions frequently occur behind walled-garden platforms. Because of walled gardens and disjointed mar-tech solutions, it might have been challenging to combine enough first-party data into something meaningful and cohesive.

Although it might be a task to bridge those gaps, having a cohesive consumer view is extremely beneficial. This gap has accelerated the customer data platform (CDP) market's rise to maturity. The CDP industry is expected to reach over USD 10 Billion by 2025. According to Epsilon's third-party identifier deprecation study, two-thirds of marketers are considering investing in CDP to prepare for the upcoming loss of identifiers.

However, CDPs might be misunderstood, just like any other technology. It might be difficult for these data platforms to combine profiles from various touchpoints in a way that makes sense for marketers to utilize and act upon. In the end, identity management and resolution are necessary for CDPs to function for enterprise-level brands. Additionally, a lot of other things, including purchases, registration, online permission, preferences, and more, need to be anchored in that identity.

To create each profile using the most accurate data collection, marketers require solid reference data with enough data hygiene. If marketers or providers of CDP technology do not already own it, they need to devise a plan to get it. 

Internal alignment for cross-channel activation

Customer identity will persist, depending on inputs from several sources that supplement and enhance first-party data associated with a brand. This enables marketers to interact with customers in a post-third-party cookie environment in ways substantially better than those seen in the current marketing ecosystem.

Brands can activate in new ways without third-party cookies by implementing strategies where different data inputs can inform one another—in a context that protects privacy, complies with legal requirements, and follows best practices for consent and opt-out. Examples of these strategies include cookie-proof digital media integrations with publishers and retail media networks and the integration of own and paid media channels. These strategies are becoming increasingly popular as both retailers and brands attempt to succeed in the cookie-less world by investing in their own people-based identify resolution and own data assets.

Many consider this to be an unclear season, given the move away from third-party cookies and device identifiers. However, it presents a chance to improve the marketing ecosystem. Every brand should aim to have the ideal configuration to foster connections and allow them to communicate with customers in a way that suits them. Naturally, companies that are more data-driven will be able to outperform those that depend more heavily on walled gardens in terms of reach and insights.