New-Age Data: How E-Commerce Companies Can Predict Consumer Purchases Through Digital Ads Online

Your phone knows more about you than you may think. It knows you so well that they can predict which directions you may need based on location and time, but what else do they know?

Ever feel like your phone is listening to you?

You're walking out to your car after your morning workout routine, telling your friend how unimpressed you are with your current protein and want to bulk up faster. You make a quick stop at GNC on your way home and browse a few options to find on Amazon later. You get back home and forget about it, rushing to get ready for work.

While enjoying your lunch later that day, you open up Instagram and make it past three posts before a bright, animated image of a giant bag of protein appears in your feed, offering you a one-time, exclusive offer for 50% off this 60-serving, 1,200-calorie, 55g protein shake. You freeze, realizing you forgot to search for protein alternatives, and apparently didn't need to.

How did they know?

Voice commands such as Siri, Alexa, and Google are always listening. What happens to the verbal information that they overhear?

Technology like Siri and Alexa enable your phone to listen to you whether you're actively using it or not - but who has access to that data? Can brands target you online based on what your phone hears you say?

“...their targeting was so efficient, the company he was working with began receiving phone calls from competitors complaining that they were stealing their customers.”

In today's digital era, mobile devices have become an integral part of our lives. We use them for communication, entertainment, planning, shopping, and much more. But have you ever wondered how much your phone knows about you or how it can be used to specifically target you online?

Every day, more brands discover the power of using consumer data to increase online sales with highly targeted ads. But just how much do brands truly know about you? How much data is needed to predict and influence your next purchase? Is it just coincidence, or are they mind-readers?

The Rise of Mobile Data

Mobile devices have revolutionized the way we interact with brands and make purchase decisions. Data from users' mobile devices such as browsing history, app usage, location data, and now even voice commands, are collective mobile data. This data provides valuable insight into consumer behavior, preferences, purchase history, and shopping intent.

According to Statista, 58% of U.S. consumers purchase a product after seeing it on social media. This rate has increased virtually nonstop every month since 2020. Knowing this, companies compete to find new, creative ways to capture as much consumer data as possible to leverage for more efficient marketing campaigns. This trend has encouraged companies to invest even more in paid social media ads, making the efficiency of those channels a top priority.

Data like this is what allows companies like Amazon to dominate their market and somehow manage to continually grow month over month. In Q3 of 2023 (July - September) alone, Amazon did $8.7B more in sales than Q2 of 2023, and $15.98B more than Q3 of 2022.

While smaller e-commerce companies struggle to scale efficiently, industry leaders have mastered the collection, use, and optimization of this proprietary data and the digital benefits - proving its ability to drive unwavering growth.

The Struggle Between Efficient Sales and Consumer Privacy

As a result of the major class-action lawsuits brought against companies like Facebook and Google, many restrictions have since been enacted - primarily for selling their users' data. Despite these precedents, companies still have various loopholes in which they acquire that same data.

“Most consumer and even companies don’t fully comprehend or appreciate just how valuable this type of data truly is… [it] determines the difference between growing 5% each quarter or growing 20%.”

In 2020, Apple introduced iOS 14, which disabled tracking from apps and websites. As a result, many companies suffered for months following the launch of Apple's new security measures, while data companies scrambled to find alternative measures to capture content views, engagement actions, and purchases made by Apple users.

Since then, several creative methods have surfaced to bridge that gap of visibility. Social media companies and third parties alike have developed APIs and custom tracking codes to identify users and tag them with categorized action events social media ads for ecommerce. Since consumer privacy is now a top priority, most consider the use of this data ethical and non-invasive, as long as user identity remains anonymous.

This expansion of data tracking has evolved significantly after these initiatives and allows for a more clean-cut, simple alternative to managing cross-integrated tracking and reporting.
 

These simple solutions enable companies to target individuals who have engaged with their brand on any level, but how are companies targeting you for products you've never engaged with before?

The Value of Data: Profiting Off Your Digital Footprint

If you've ever had anyone in the last couple of decades warn you of your activity online and disclosing personal information, the understanding of your seemingly mystical digital footprint will perhaps convince you.

Most consumers and even companies don't fully comprehend or appreciate just how valuable this type of data truly is. Leveraging consumer data will make the difference between growing 5% each quarter or growing 20%. Simply using the data won't guarantee better margins, and the consumer data most brands are aware of is only the tip of the iceberg.

Close your eyes and imagine every single decision or action you've made since using your first computer or mobile device. Can you remember how many different emails, phone numbers, subscriptions, streaming services, applications, or online accounts you've had?

Imagine taking all of those variations of an online presence - think about how many different devices you've used, how many websites visited, how much social media or YouTube content you've engaged with, items left in a shopping cart, virtual payments made, and connecting them.

This is your digital footprint. Every single device, account, membership, or contact channel you've ever been associated with is stored in a virtual profile under your name.

Now, pair that with mobile data. Every physical location you've ever been to, the amount of time you spent there, which credit or debit card you used to pay for transactions, the voice commands prompted by your devices or Smart TVs, everything connected to the internet or Bluetooth has been recording and storing your actions and decisions this entire time.

Data this extensive - data that could allow algorithms to predict your purchases before you even think of them - is the most valuable asset any company could have.

Data like this is what ethical jurisdiction relies on for new regulations - The type of data that multi-billion dollar companies pay hundreds of millions of dollars towards, just so they can turn their $100M marketing budget into $15B gains instead of $1B.

This type of data is what promotes corporations to willingly endure the endless policy changes, lawsuits, and increasing costs the acquisition of this data produces.

Consumer Data in Action: Targeting New Customers

Using your digital footprint as a database for all behavioral, interest, geographic, verbal, consumer, purchase history, and intent, companies used to be able to acquire such information with a simple multi-million dollar purchase transaction.

While over 98% of companies are either unaware or financially incapable of acquiring this data, the efficient use of it has proven to be more than effective. The results of the most basic form of this data can be summarized by a dad who found out his daughter was pregnant from Target coupons he received in the mail.

In 2012, Target's marketing department began personalizing their rewards members' promotional offers by segmenting them into groups based on not just purchase history, but items viewed online. After receiving several coupons in the mail, this father called Target headquarters to request that they stop, as his wife was not pregnant.

To his surprise, Target then communicated not only that his daughter was pregnant (simply based on her online activity, no purchase necessary), but that she was having a baby boy as well.

While this extreme example never fails to drop a few jaws, it's ultimately insignificant in comparison to today's new era of data and technology.

Reading Consumers' Minds: An Unfair Advantage

While basic variations of this data are available to the common advertising company, the depths of accessibility to the data that culminate the very core of who each individual is as a consumer has only been available to corporations ready to pay a cool $50M just to acquire it - until now.

The value of this information cannot be fully understood without a practical application of it. In 2020, the founder of a newly launched marketing agency, Ensemble Collective, which specializes in ethically leveraging this data to eliminate wasted ad spend and accelerate sales growth for D2C brands, shared his initial experiences with highly sensitive variations of this data.

"My introduction to truly powerful, data-driven marketing could be labeled as 'taught by fire'", he began. "We were able to acquire lists of people whose mobile devices had been within a 3-foot distance of several thousand physical store locations. We took a national map and drew outlines around several thousand buildings that our target market was likely to visit. We then narrowed that list by people who entered these geo-fenced areas more than X amount of time for more than Y amount of minutes every two weeks. We were then able to upload this customer list to social media and search channels and restrict our targeting to those people."

"I was torn between efficient marketing and data privacy, especially when we began layering additional targeting factors on top of it. We began targeting people based on their financial stability, what products they visited websites or physical locations to look for, the content they engaged with online, and a string of more technical data I could explain for hours."

He went on to explain that their targeting was so efficient, that the company he was working with began receiving phone calls from competitors complaining that they were stealing their customers. After a few instances of this, the company decided to hold off on using that data to its fullest extent but was still able to slice its acquisition costs in half.

The Power of Predicting Consumer Behavior - Ethically

There are countless ways to leverage consumer data to predict purchase behavior. The most common ways are those used by fundamental agencies and e-commerce brands with the data they already have or are provided to them within an ad campaign management platform.

Basic parameters like demographics, interests, and behaviors are used to narrow campaigns to users that signal active interest in their products within that specific platform. This type of data is imperfect, as it resides only within the network of each chosen platform, can include irrelevant interests from over a decade ago, or relies on the information directly provided by the user.

These limitations result in incorrect age, education, family status, and outdated interests. To further limit the performance of this basic targeting, if your market size is too small - usually a result of layering in too many requirements - the algorithms will never optimize delivery or find the right potential customers, damaging overall return and putting a cap on growth.

To combat this, most ad platforms enable customer list uploads and lookalike audiences, where companies can match users who share up to 99% similarities in behavior, interests, and purchase history with your active customers.

With these basic features being the extent of how well targeted digital ads can perform, it takes a different level of understanding and execution to truly maximize a company's ROI online.

A select few marketing agencies have since sprouted with the primary specialty of making the proprietary form of consumer data available - ethically - to companies without the capital of multi-billion dollar corporations.

While these agencies may charge a premium, their success has spoken for themselves - resulting in a return in sales of 10X, 25X, and even 40X their ad spend. Choosing the right agency

The Data E-Commerce Brands Need to Scale - Finally

E-commerce brands have been trying for years to hack their sales growth by finding and implementing this data - with only a rare few seeing success. This data is hard to come by, especially if quality is a priority, but D2C e-commerce brands have been able to triple their new customer acquisition, slash marketing costs, and establish dominance as a market leader within just a few months.

In this highly controversial space, there will always be a conflict between data privacy and advertisers demanding data accuracy, especially if the information was willingly submitted by the consumer. Nevertheless, cross-sharing data will continue to yield heavy consequences to those who choose to ignore ethics guidelines, and customers will receive more and more opportunities to protect themselves and the use of their data.