Why Your DTC Business Will Fail Without First-party Data — Larry Kim | Why DTC Brands Need First-party Data, How Data Enrichment Boosts Marketing, Importance Of AI For First-party Data, Integrating First-party Data Into Marketing (#311)

In this podcast episode, we discuss why first-party data is the new must-have for DTC marketers. Our featured guest on the show is Larry Kim, CEO of Customers.AI

Topics discussed in this episode: 

• The growing importance of owning and using first-party data. 
• Why DTC brands need to own their first-party data. 
• How data enrichment helps optimize marketing campaigns. 
• The risks involved with handling first-party data, and how can brands mitigate them. 
• Why AI is important for leveraging first-party data. 
• Real-world examples of the impact of first-party data. 
• How to integrate first-party data into marketing workflows. 
• Why is now the right time for brands to invest in first-party data strategies. 

Links & Resources

Website: https://customers.ai/
LinkedIn: https://www.linkedin.com/in/larrykim/
X/Twitter: https://twitter.com/larrykim


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Transcript

Claus Lauter: Welcome to episode 311 of the E commerce Coffee Break podcast. In today's episode, we discuss why first party data is the new must have for D2C marketers. Joining me on the show is Larry Kim, CEO of Customers. ai. So let's dive right into it.

Voice Over: This is the E commerce Coffee Break. A top rated Shopify growth podcast dedicated to Shopify merchants. And business owners looking to grow their online stores. Learn how to survive in the fast changing e commerce world with your host, Claus Lauter, and get marketing advice you can't find on Google.

Welcome to another episode of 

Claus Lauter: the e commerce coffee break podcast. Today we want to find out why first party data is the new must have for DTC marketers and what this has to do with conversion rates, remarketing, segmentation, and email marketing. Joining me on the show today is Larry Kim. He's the CEO of Customers.

ai, a website visitor identification and customer journey platform. Previously, Larry founded WordStream, a PPC marketing company acquired by USA Today in 2018. Larry has shared his insight at numerous conferences, including Call to Action Conference, HubSpot Inbound, and WebSummit. He is a guest lecturer at MIT, Harvard, and Boston University, and a contributor to CNBC and Inc.

Magazine. So let's welcome Larry to the show. Hi, Larry. How are you today? 

Larry Kim: Doing great. Thanks, Claus. Thanks for having me. 

Claus Lauter: Larry, we're talking about first party data, maybe for our listeners who do not really know the differences between first party, second party, third party. Give me an overview of what it actually means.

Larry Kim: Sure. 

Claus Lauter: Thanks, 

Larry Kim: Claus. 

First party data is the data that you yourself are collecting. It's, it's really your business's competitive advantage in terms of like your customer list, your prospects, people filling out forms, people visiting your website, those interactions, third party data. This is data that you're paying for through third parties.

For example, uh, marketers have been very fortunate over the last decade to be able to just punch in a couple. Demographics like single or married or like where you just in Facebook ads, you can just punch in a couple targeting features and through the magic of third party data, you're able to then pay for a service that is giving you direct access to the target market that you care about.

And so the issue, of course, with third party data is that it is becoming more scarce. That's the mechanism of companies like Google and Facebook to, to collect that information, that third party data was, had a lot to do with using third party data pixels, which were kind of tracking your clicks and your movements through the internet, the way that worked was because if you visited a website that had a Google or Facebook pixel installed by using the power of third party data, a third party pixel, They could figure out, Oh, this is Claus because he's logged into Gmail, or this is Larry, because he's logged into Facebook on a different tab or something like this.

Uh, so that was how they were kind of doing all this matching and then they could figure out all the sites that you visited forever. And, you know, that's been eliminated on Firefox and iOS and, and even Chrome a little bit, but they're, they're, they're, they're taking their time there. So. The punchline is that there was a really great run for, for third party data for, for about 10 years, but the golden days are in the rear view mirror.

Claus Lauter: Okay. Yeah, no, obviously Apple and Google, they're going back and forth. Apple started, I think, first was taking things away. Google is a bit of going back and forth with it, but sooner or later will come now. Obviously DTC brands, online merchants are not in this comfortable position anymore that someone else is collecting the data.

What can DTC brands actually do to effectively collect and organize first party data on their side now? 

Larry Kim: The biggest 

thing that these brands, e commerce, DTC brands can do right now to mitigate some of these changes Is to do more with the first party data that they're already collecting. And so specifically, one of the most valuable sources of first party data for a e commerce or DTC brand is your website traffic.

Like think about all the work that goes into your Pinterest campaigns or your, you know, your email marketing campaigns or like all the marketing and radio or television, like the work that goes to putting people into those websites, into your website, that's. That's your first party data and it belongs to you.

And the issue here is that brands are not fully taking advantage of the first party data enrichment options that are available in the market today. So probably by default, if you're using something like Google analytics, it's enriching your website traffic to include some data fields like city, state, country, and maybe, maybe they might even give you like gender or something like this, but it's, it's very, very limited.

And there are products such as customers that AI, we're not the only company in the space, but because we're, we're talking here like customers that AI, we can take that valuable first party website traffic and fully enrich it to include additional enrichment data, including identity, like your first and last name, your email address, your phone numbers.

And this is, this is an append. We're not giving you data of people who are shopping for things at other people's site. It's your data. You're just getting a deeper understanding. Of the people who are already in market and who are in your funnels by doing it this way, you're kind of recovering some significant part of the use cases that are actually going to be lost through the deprecation of first party pixels.

Because once you have this data, then you don't have to lease it from the. Add companies right because because you have an audience to market to and you know who these people are your question was like what what should they be doing you need to think about owning your own data and then deploying that data strategically in various different marketing use 

Claus Lauter: cases.

I guess it's famous saying don't build your house on someone else's land I think that was a lot of people did in the past by. Relying too much on beta Facebook and putting all the data there now you mentioned a I you mentioned data enrichment talk me through that how does that go hand in hand how does somebody who has no idea about it get an idea on how it works 

Larry Kim: when it comes to a I am.

This motion of what we're talking about of, of, of enriching data. There's kind of two components where AI is involved. Firstly, it helps power the identification itself, that there's a lot of data sources like log files and. From ISPs and from like various sources. And it's very hard to make sense of, of everything.

And, um, there's kind of these looser, you know, algorithms that they can be used to kind of connect the dots a little bit better, which have emerged more recently. But the other side of the coin for AI as it pertains to this type of channel has to do with making use of data. So if you think about marketing campaigns and you're, you know, typically they'll segment it into like two or three different subgroups because there's like, maybe it's for moms and for, for dads and for kids or something like this, a couple of different segmentations.

The reason is because it's, it's a lot of work. I mean, it's like every time you run a campaign. You're going to need to triplicate the work because it gets sent out into different campaigns and with generative AI, that's dramatically changing the story because like every postcard that you send could have like different text on it, every email that you send could be customized.

And so it's really unlocking the value of having more first party data because that last mile of acting on the data can be automated away. 

Claus Lauter: Makes perfect sense. I think laser focused targeting personalization is a very important point today in e commerce. Now, a lot of merchants, brands out there might raise the flag and say, yeah, but there is privacy regulations.

There's GDPR, CCPA and whatsoever. Now I'm dealing with all this data on my side. Are there any risks involved or how should they deal with these kinds of concerns? 

Larry Kim: Sure, Claus. If you go to like Le Monde. fr, which is like the French newspaper website in the heart of GDPR country, a pop up shows up and it says, we're using, uh, marketing trackers, cookies, device identifiers, it says everything that they're doing and you have to click the button that says, accept.

And so my point is just to say, The antidote for a lot of these regulations, actually, all of them has to do with sufficient disclosure, and I'm not advocating that you not disclose what you're doing with data in the case of the Google and Facebook ad pixels. What was so untenable and so devious of Google and Facebook was that when you put the Facebook ad pixel on your website and say you were selling like snowboards.

That data that Claus or Larry visited, that snowboard company was not only being used to run your campaigns, but it was being used to power all the other snowboard vendors looking to connect with people, you know, and there's 10 million Google advertisers and 10 million Facebook advertisers, and that was not clearly disclosed.

Okay. And so I think. The marketers need to understand, like, there's a way to do this, that's compliant, like where you're not reselling the data to a network of 10 million people, where you're, you're focused on your, you know, just enriching and using the first party data. I think consumers generally speaking would prefer to get marketing from companies that they know and like and trust rather than getting marketing from companies that they've never heard of before.

I'm absolutely a hundred for privacy and compliance, but like what we're talking about here. Is at a much reduced scope by focusing solely on the use of first party data and then making the requisite disclosures like in your terms of service, you can even call it out on the pop up window that sometimes shows up on various sites and we provide templates on what you should be using, what type of language that you should be using.

But, you know, major corporations that have lots of lawyers, you know, have reviewed like our kind of approach and they've all agree that this is, this is legal. They're like, as long as it's disclosed. 

Claus Lauter: Hey, Claus here. Just a quick one. If you like the content of this episode, subscribe to the weekly newsletter at newsletter.

info. EcommerceCoffeeBreak. com. I score and curate 50 news sources so you don't have to, saving you hours of research. Grow your revenue with ecommerce news, marketing strategies, tools, podcast interviews, and more, all in a quick three minute read. So head over to newsletter. ecommercecoffeebreak. com to subscribe.

As said, 100 percent free. Also, you will find the link in the show notes. And now back to the show. Transparency is the key there. And as I said, it's for the good of the customer. You want to be personalized, addressed by the brands you like and get information for the products that you're interested in.

And that's one way to do that. Now, do you have some case studies, some, um, examples of companies? And you've worked with a lot of companies where you can see the massive difference by using first party data in their business. Now, 

Larry Kim: we work with approximately a thousand brands, meaningful concentration in North America, though.

And we have brands that are doing seven figures of incremental revenue on a monthly basis for one of our use cases, which is email marketing. So you wouldn't want to email everybody who visits your website. Okay. Because like they could have just visited a blog post or something like this, and they might just receive an email and they'll be like, I don't, I don't know why I'm getting this, but like with software, like our first party data stuff, like We're not only IDing the individual who's coming, but we're also scoring the, the intense signals.

Like how much of this did they scroll? Like what did they click on? How many pages did they visit? Is it a repeat journey? Like did they come back from somewhere? You can create very valuable user segmentations of people who have exhibited certain behaviors on your website in a first party context.

That's key. It's first, this is your, you're allowed to do this. If it's your website, okay, you can then route certain segmentations that are like ripe for conversion into email automations. Which have extremely high conversion rates. This is really the lowest hanging fruit here. Like if you have a dollar to spend on email marketing, like these are the people that you should be emailing it to.

It's just that people don't know who those people are because they don't have like a first party website, ID data enrichment capabilities when done correctly and the wrong way to do this is to pixel your entire website and, and email everybody like that's stupid. If done correctly, you can. Have your cake and eat it too.

You're going to get generate all these conversions. It even increases your deliverability scores because like you're not delivering it to everyone. You're getting high engagement because you're targeting people are very excited. So that's one example. I'll just provide one other example, which is. We have brands who have doubled the effectiveness of their meta advertising campaigns.

Ads are garbage in garbage out. Like if you have a strong signal going back to Facebook describing like, you know, this was a good click and this was a bad one, Then your ads will be great. If that connection is broken and it is broken right now because of the signal through degradation, like iOS and Firefox, like they're deleting the signal, we can ID those people in a first party context and then securely encrypt and send that data back to meta to augment the lost signals from your, from your ad pixel.

So that's why I believe like, that's why. Facebook ad performances in the toilet for the last like three, four years. It's just because they have a lot of signal that they were using to, to, to optimize these campaigns that we were relying on that has kind of just evaporated and we're seeing dramatic results by just turning back on that, that signal flow, but through a more compliant first party way.

That you can both have double, like, this is one, one example I'm thinking of the company doubled the number of conversions while simultaneously increasing row as we just, I've never seen this before because normally when you increase quantity, your, your, your row as tanks, but, but this was, this is like a rare phenomenon where you'd like the lost signal returns, everything starts working like it used to work like in 2018, 2019.

So. 

Claus Lauter: I see the advantage that with your good data, with your clean data and rich data, you're helping beta or Google by providing them a way to reach the right customers in their pool. So it makes it much, much easier for them. 

Larry Kim: We increased the match rate. So like people who visit your site, like you don't know what their Facebook login is.

Like maybe it's. They're, they're secondary email. Maybe it's like, maybe they signed up for Facebook like 10 years ago or something. And so they, they have like an old email and now that's their junk email. Like we enrich to secondary IDs, like cell phone, secondary emails and, and casting a wider net here and being able to significantly higher chance of IDing the individual rather than, um, relying on a Facebook pixel that has a broken connection back to Facebook because of all the blocking that's going on.

Claus Lauter: Very most of our listeners are DTC brands are Shopify store owners. Give me an idea on how they can integrate that into their workflow into their day to day life. 

Larry Kim: Typically you just pick one use case like either you're spending a lot of money on ads and you just want to like make it work, you know, 30 40 percent better.

Or they have a, like a Klaviyo email marketing revenue and they want to generate more incremental flow revenue, like some more email coming from automations. You just pick one, you install the pixel. We carve out the different segmentations, like people who are on your website for more than three minutes or people who click on the product listing page, but didn't make it to the shopping cart.

You create the segmentations and then you just. Direct the different segmentations to different actions, like sending an email or to a Facebook meta audience for, for marketing purposes, it's, it's pretty simple. One of the neat approaches that benefits of this approach is that there's quite a lot of different actions that we can, we can power.

It doesn't have to be just emailing or Facebook ads. One would be sending a postcard, like postcards are actually the new ads, by the way. Like it's kind of like all this ad revenue decades ago was kind of eliminating postcard marketing, but now there's so much in ads that people are doing postcards.

Like we can enrich to include your mailing address. And so like we can zap that data to a postcard provider along with other attributes, you know, using AI, they can write something customized based on what. Their knowledge is because we can provide other attributes. Like, are they married? Do they have children?

You can engineer interesting prompts to have a very customized responses. You know, there's a lot of different actions that we can power with this data, which is what I was talking to you about earlier. That AI is unlocking the value of first party data by making it easier to act. 

Claus Lauter: As we're in a podcast, obviously we can't share any kind of screenshots or admin tools.

Walk me through what I would see in my day to day life when I create a campaign. How does that look like? What are the steps involved? 

Larry Kim: Step one is getting the pixel installed. So this is a standard pixel installer and, you know, there's integrations with like Shopify or WordPress or Google Tag Manager, you just click a couple buttons and it'll, it'll integrate itself.

And there's a way to test to see if that's receiving data. Once you're receiving data, you'll be able to start seeing like a table with a flood of like, okay, here's Claus, here's Larry. It's actually pretty funny. You'll, you'll start seeing people that you recognize like, Oh, this, this is the mother of one of my, my kid's friends, or like, you know, all sorts of people are checking you out and you'll, you'll, you'll recognize some of them.

Then what you do is you start looking at this. Torrent of emails coming through and start identifying, like, what are the common signals like, okay, well, just show me the ones who visit the pricing page or just show me the ones who, who, who visited, uh, you know, for, for more than three page views or more than two minutes, like, and you'll be able to just like run a query and it'll, it'll, it'll show you the data.

And once you figure out a segmentation that you think makes sense, you then group and organize that into a segmentation and assign it to an action. 

Claus Lauter: Okay, it becomes very clear to me now why you're called customers. ai because it's customers in AI working hand in hand there. So that's perfect. I like the idea of receiving a postcard.

I hope they will not start sending faxes because I don't know one has a fax machine anymore. Actually, one of my customers is 

Larry Kim: Documo, which is like one of the biggest fax machine, uh, electronic fax companies. But yes, it is an old technology. You're right. 

Claus Lauter: Okay. Is there any kind of homework immersion the brand needs to do before they can get started?

Larry Kim: This is really so horizontal. Like my thinking is like, whatever marketing a DTC brand is doing, all roads eventually lead back to the website. You know, like if you're doing Instagram ads or if you're in Pinterest, you know, organic stuff, like they generally find their way back. And so like, it just strikes me as like, they should have a way to record that information.

It would be like. The issue here is, is, is one of urgency. Okay. Sometimes we have people saying things like, Oh, we've got a big mother's day sale. Let's. Think of this, like you're turning this on afterwards, but then I'm like, no, no, no. Like, what you have to think about is, is like, you have to turn on the, the, the recording device before, before the sale, uh, so that you can kind of, you know, follow through on, on the ones that didn't do the reactions that you were hoping for.

And so, so this is like a mindset of like proactivity rather than a reactive mentality. And that's, That's sort of the key. Now, what's your price structure? How does that work? So again, we have different modalities. One is like an email use case and one is an ad use case. Or you could, you could do both. ID, every kind of ID that it's, it's somewhere around 20 cents to show, show you that information.

And that. Costs then declines over time. Like if, if, uh, uh, if it's like over a thousand or something, you know, it'll, it'll go down to 18 cents or 17 cents. Like it, it just, it just goes down over time. And in fact, we even have like a unlimited plan where you can, you know, if you have a really big website and you have so much data, we'll, we'll just provide it to you at a fixed price so that it's, so it doesn't go up or down.

But my point is just to say that, you know, even if it's like 10, 15, 20 cents a lead, that's a small fraction of what. You're paying for the click, like a Facebook click could be like four or 5 and just for an incremental 17 cents or something to, to know who that was and to be able to remarket to them and email them.

It's, it's, it's actually the most economical go to market like that exists currently, like as far as my, my knowledge. My opinion as a, as a marketer, the ad use case uses a more of a contact management fee, typically the people doing ads, they're not as interested in the phone numbers and the emails of people there, they just want to run campaigns that are working.

And so the pricing is based on like a CPM based off of. Off of, uh, like say, say we have a hundred thousand contacts and we send that to, to, to Facebook, um, it would be like a seven or 8 CPM. So it's less than a penny per contact. So this is a very valuable and affordably priced. It's true that this is in comparison to like meta from like four or five years ago, like.

You didn't need to pay a few pennies to, to run remarketing ads, but they were using that data in all sorts of, you know, pretty crazy ways. So it's kind of renting versus owning. There's a small amount to, to, you know, capture and own this data and manage it yourself. But the benefits now that's your data and you can use this to identify repeat visitors or we empower welcome back sequences or all sorts of other.

Other things, whereas, you know, meta and Google were kind of clandestinely power, taking that data, not, they were kind of keeping you in the dark. They would never show you it, but they would track it for you. Uh, and if you wanted to use it, you'd have to pay. Um, and they were sharing it with like, you know, 10, 10 million other advertisers.

So like, I think this is a great deal cause like, what do you think? 

Claus Lauter: I think so, too. I think, um, you mentioned before the golden times were, I don't know, seven, eight, nine years ago when everything was easy and the data was available for everyone, as you said, and not only for yours. And now things needed to get worse.

And I think a lot of advertisers out there, marketing managers had a couple of rough years behind them now. Until now, tools like yours are coming out that are basically are better than what there was and helping them to get better. Results than before, because as you said, it's owned marketing, you still get, get back to the quality that you might have or the volume that you might have had in the past and for a price that you can afford, because obviously everything got more expensive, but now you can do it more affordable.

Larry Kim: It was, it was an incredible time cause like Facebook and Google were killing each other to try to provide. Like the best data for, for like the least amount of like overhead, like they were just trying to make this accessible. Like you could open an account and three minutes later have access to like 10, 000 different audiences, like for demographics, behaviors, and interests.

Uh, so, so like, like that's unprecedented in the, in human history. Uh, now it's, it's kind of the amount of, of, of data and analytics is, I think what's happening is now that they're trillion dollar businesses, like they're not. And they've gotten in trouble with privacy and all this stuff. Like there's not a lot of upside to sticking their neck out there by, you know, creating even more innovative targeting or something like this.

I think this is good enough. Don't let's, let's just like Google and Facebook has kind of agreed to like, you know, go easy. I think it's, it's, it's, it's kind of my, 

Claus Lauter: my understanding here. Okay, no, I think as a brand is more important than anything else that you own the data and then make the best out of it before our coffee break comes to an end today.

Larry, is there anything that you want to share with our listeners that we haven't covered yet? 

Larry Kim: I just think this is a very exciting time as a marketer. You have to be able to tell the future. Okay. The most successful marketers are the ones who kind of know what's going to happen. Best way to tell the future is to look, look at the past.

If you think about like pre Google and Facebook ads, the companies that were doing the best where the companies that had the most data, like, like big brands, like Walmart, like they had so much information on hand. They were giants over the last decade or so that barrier to entry has come down significantly because of the introduction of things like, you know, third party data and making that so accessible and available that is in the rearview mirror and the barriers are going back up.

The companies that are going to thrive in the next, you know, three, four, five, 10 years are the ones that have first party, their own first party data that they can leverage to, to execute on intelligent marketing campaigns. And now is the time to be investing in and thinking about these strategies. 

Claus Lauter: I absolutely agree with you a hundred percent.

And I think everyone who is building a brand or who has a brand out there and wants to go into the future. They have to own the data and they need to know what to do with the data. What can people find out more about you guys? I'm at 

Larry Kim: a customers. ai. Uh, there's a free offer for evaluating both the email marketing piece, as well as the ad retargeting functionality for, for, uh, seven days and 500, uh, free contacts, enrichments, you know, 500 leads, like 

Claus Lauter: give that a try for free.

Absolutely. I will put the links in the show notes and you just one click away and to our listeners try it out. That sounds like a really good deal to enrich your, your data there. Larry, thanks so much for your time today. I think that was a very good overview of what first party data means and what you need to do as a merchant to stay successful.

Thanks so much for your time today. Claus. Hey, Claus here. Thanks for joining me on another episode of the eCommerce Coffee Break Podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover the podcast.

Simply like, comment, and subscribe in the app you're using to listen to the podcast and even better if you could leave a rating. Thanks again, and I'll catch you in the next episode. Have a good one.