Harnessing the power of loyalty programs: The intersection of retail media networks and data-driven advertising in Canada

In the ever-evolving landscape of data-driven advertising, the recent rise of Retail Media Networks  (RMNs), backed by some of Canada’s largest rewards and loyalty programs, have emerged as a growing force. eMarketer reporting expects 15.3% growth in Canada retail media this year, which is outpacing global growth at 0.1% and is the fastest growing media channel, even surpassing OTT growth. This progression and evolution of RMNs is reshaping how brands engage with media partners, ad tech and consumers in Canada.

The symbiotic relationship between loyalty programs and RMNs not only fuels the sale of advertising but also drives the advancement of ad tech, unlocking new opportunities for targeted marketing and personalized experiences.

Let’s explore how loyalty programs serve as the driving data points behind the sale of advertising within RMNs and the implications for brands and retailers in Canada.

Leveraging loyalty data

At the heart of RMNs lies the vast pool of shopper data, and loyalty programs serve as the primary source of this data. Every transaction, interaction, and engagement within a loyalty program generates a wealth of data points, providing retailers and brands with important insights into consumer behaviour, preferences, and purchasing patterns. From browsing history to past purchases, demographic information to location data, loyalty programs capture a comprehensive view of the customer journey, empowering advertisers to deliver highly targeted and relevant ads.

Targeted advertising precision

By using loyalty data with RMNs, advertisers gain unprecedented precision in targeting their campaigns. With access to granular insights about consumer buying behaviours, brands can tailor their advertising messages to resonate with specific audience segments, maximizing relevance and engagement. For example, a retailer can leverage loyalty data to identify high-value customers and deliver personalized promotions or recommendations based on their purchase history and preferences. This targeted approach not only enhances the effectiveness of advertising but also fosters stronger connections between brands and consumers.

Navigating data privacy and consent

The utilization of loyalty data within RMNs also raises important considerations around data privacy and consumer consent. Retailers and advertisers must prioritize transparency and compliance with regulations such as the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada. By implementing robust data governance practices and obtaining explicit consent from consumers, retailers can build trust and confidence in their advertising initiatives, fostering long-term relationships with customers.  Ensuring the underlying consent requirements of consumers that are tied to these loyalty programs is fundamental before moving with forward with any application of that data to inform media decisions.

Monetizing first-party data

For retailers, loyalty programs provide meaningful first-party data that can be monetized to help provide consumers with the products and services they want by combining the data with media and creating an RMN. By offering advertising opportunities within their loyalty ecosystems, retailers can capitalize on their deep understanding of customer behaviour to create value for both advertisers and consumers.

Through targeted ads, sponsored content, or exclusive offers, retailers can enhance the overall loyalty program experience while generating incremental revenue streams. This monetization strategy not only drives profitability but also reinforces the retailer's position as a trusted intermediary between brands and consumers. However, it is important for marketers and advertisers to maintain an eye on owned assets versus purchased (offsite media and the cost of inventory vs. data, managed service fees, etc.). IAB in the US has highlighted best practices and allows for focus on RMNs that align with this approach

Driving innovation in adtech

The convergence of loyalty programs and RMNs is driving innovation in ad tech, paving the way for advanced targeting capabilities and measurement solutions. Advertisers can leverage machine learning algorithms and predictive analytics to optimize campaign performance and maximize ROI. In theory, by analyzing loyalty data in real-time, advertisers can identify emerging trends, anticipate consumer preferences, and tailor their privacy safe environments for activation and analysis across several platforms and teams – it’s likely there is a lag in optimization and a lost opportunity within the current state.  Additionally, advancements in attribution modeling and cross-channel tracking enable advertisers to measure the impact of their campaigns across the entire customer journey, from initial impression to final purchase.

Closed-loop measurement

A unique aspect of loyalty programs and RMNs is the implementation of closed-loop measurement strategies within the corresponding retail banner. Closed-loop measurement refers to the ability to track the entire consumer journey, from ad exposure to purchase, within a controlled ecosystem. By integrating loyalty program data with RMNs, retailers and advertisers can achieve unprecedented visibility into the impact of advertising on actual purchase behavior. For instance, a retailer can attribute sales directly to specific ad campaigns, enabling a comprehensive analysis of return on ad spend (ROAS) and marketing effectiveness.

Promoting measurement that spans the consumer journey is a worthwhile, as marketers and advertisers often chase short-term metrics as opposed to adopting a fuller approach to understanding consumer buying behaviour and contributions from upper and lower funnel activities.  This closed-loop approach not only validates the performance of advertising initiatives but also facilitates continuous optimization and refinement of targeting strategies, driving greater efficiency and ROI for brands. By leveraging closed-loop measurement, retailers and advertisers in Canada can unlock valuable insights into the true impact of their marketing efforts, ultimately driving growth and profitability in the competitive retail landscape.

Navigating data transparency and management challenges

Despite the undeniable benefits of leveraging first-party data within RMNs, challenges related to data transparency and sharing persist within the Canadian retail landscape. According to a survey conducted by the Path to Purchase Institute, 28% of marketers highlighted transparency and sharing as significant hurdles in working with RMNs. This underscores the importance of establishing clear guidelines and protocols for data usage and sharing among retailers, brands, and advertising partners.

Additionally, the proliferation of RMNs introduces complexities in platform management, as noted by approximately one-fifth of marketers. With a multitude of platforms—from marketplaces like Amazon to mass merchandisers like Walmart and category specialists like Loblaw Companies—each offering distinct nuances in execution and measurement, retailers and advertisers face the daunting task of navigating diverse ecosystems.

Furthermore, comparing performance across RMNs poses a formidable challenge, as highlighted by 40% of marketing executives in a Q4 2022 Forrester survey cited by Forbes. The varied metrics, attribution models, and reporting structures employed by different RMNs necessitate a nuanced approach to performance analysis and benchmarking, requiring marketers to invest in sophisticated measurement tools and methodologies. Addressing these challenges will be paramount to maximizing the efficacy and efficiency of RMN advertising campaigns in Canada's rapidly evolving retail landscape.

Conclusion

In conclusion, the integration of loyalty programs into RMNs represents a paradigm shift in data-driven advertising in Canada. By harnessing the power of loyalty data, retailers and brands can deliver targeted, personalized experiences that resonate with today's discerning consumers. As RMNs continue to evolve and innovate, fueled by the rich insights derived from loyalty programs, they will undoubtedly remain at the forefront of driving advertising effectiveness and efficiency in the Canadian retail landscape.