Data partnership lessons from Finnish retailer K

Group and media owner Sanoma

Alex Brownsell
Source: Event Reports, Programmatic Pioneers Summit, May 2019
Downloaded from WARC

Finnish conglomerate K Group partnered with local media owner Sanoma to target audiences through
motivational-based segmentation.

K Group, Finland’s largest grocery retailer, collaborated with Sanoma, the country’s biggest media
owner, which reaches an 95% of Finns each week with its portfolio of brands.
Using its first-party data, K Group identified five key motivational-based customer segments:
‘Enthusiastic’, ‘Pleasure-seeking’, ‘Aware’, ‘Convenience-seeking’ and ‘Established’.
With the majority of K Group’s data relating to offline purchases, it harnessed Sanoma’s audience
data to allow it to reach a much broader swathe of the population with targeted digital messaging.
The partnership resulted in a four-fold improvement in the effectiveness of K Group’s
programmatic media campaigns.

Finland is an outlier, and not least due to its location on the north-eastern fringes of Europe. Take its media
market: Helsinki-headquartered Sanoma Media reaches an astonishing 95% of the country’s population each
week via its 50-plus brands spanning TV, radio and print, including Helsingin Sanomat, the largest daily
newspaper in the Nordic region. Even in digital media, Sanoma reaches 86% of Finnish internet users each
month.

“We probably only compete with North Korea in the [percentage] of users we reach in Finland,” joked Jaakko
Kuivalainen, Sanoma’s Director, B2B Digital Business, at the Programmatic Pioneers conference (Twickenham,
May 2019).

For brands demanding mass reach, it provides a unique alternative to the digital ‘duopoly’ of Google and
Facebook. One such advertiser is retail, construction and automotive conglomerate K Group, which operates
several grocery retail brands in Finland, including K-Market. The company’s 1,200 stores receive 1.2 million
daily visits from customers; it also boasts 3.6 million loyalty members.

As described by Caroline Nykter, K Group’s Head of Data-Driven Marketing, the company possesses a “very
detailed level of hard data” on its customers. “We basically know what, when and where they buy,” she said.
In 2016, the company established an in-house programmatic trading desk to target shoppers with tailored
messages and offers. It has been able to combine rich purchase histories with demographics and online
behaviour data to create detailed customer segmentation and inform media-buying choices.

However, even with such a wealth of information, K Group struggled to understand why consumers were
choosing to shop in its stores over those of its rivals. “We know that, in addition to rational reasons [for selecting
a grocery retailer], there are always emotion-based reasons. What are the motivations behind customer
behaviour?”

To address this shortfall in comprehension, K Group began work on motivational modelling of its customer data.
An initial search identified 300 distinct customer “needs”, said Nykter, while subsequent market research –
comprising online discussion groups and ethnographic research – added a further 200 to the list.

These 500 groups were condensed to 60 based on relevancy to the grocery retail segment, and these, in turn,
were validated against a survey of 22,000 customers. It resulted in the identification of five distinct motivation-
based customer segments:

1. Enthusiastic: Active trendsetters, individual and adventurous (21% of the population)

2. Pleasure-seeking: Urban lifestyle, values quality and experiences (19%)
3. Aware: Responsible, values regular, everyday life, and has a DIY attitude (19%)
4. Convenience-seeking: “Homebodies”, value cosiness and convenience (19%)
5. Established: Regular Finns who favour traditions (22%)

Each of K Group’s grocery retail brands settled on the motivation-based segments most likely to correspond with
their customers, based on metrics such as store visits, and adapted their marketing strategies accordingly. The
segments were also used to inform programmatic media buying, in combination with existing consumer insights
and datasets.

However, despite its stranglehold of the Finnish market, K Group’s data was not without flaws. “Even though we
have 3.6 million loyal customers, and about eight million visits a month to our websites and mobile applications,
most of the identified transactions take place in our offline stores. Most of the purchase data that we have is
actually offline data,” said Nykter.

Faced with the prospect of only being able to reach approximately 40% of its audience through targeted digital
marketing, the company decided to explore second-party data opportunities, including among its media owner
partners.

Data partnership
Meanwhile, under increasing pressure from large digital platforms, Sanoma had felt for some time a need to
“rethink” its approach to advertising partnerships, evolving from basic relationships based on media inventory, to
more complex integrations centred on data, Kuivalainen explained.

“We can use our niche in online, [and] insights from our own [audiences] based on their media usage, [to]
provide more insights on top of the first-party data that our advertisers have,” he elaborated.

Two years ago, Sanoma opted to swap its in-house data management platform (DMP) for a third-party product
from Salesforce to connect to its portfolio of media brands, as well as its CRM system. By monitoring user
interactions, the publisher could now provide contextual analysis and keyword targeting, while an in-house data
science team continues to develop models by using machine learning algorithms. Sanoma now enables brands
to target its audiences based on age, subscription data, socio-economic parameters, geo-location, interest and
intent (derived from viewing of its classified ads).

Having developed itself into a leading provider of data across the Finnish market, Sanoma – whose print titles
first carried ads for K Group’s brands in the 1940s – was identified as the “perfect match” to add depth to the
retailer’s understanding of its customers. The advertiser was also able to purchase data from Sanoma to inform
its media buying with other vendors.

The media owner ran a segmentation questionnaire with a panel of 10,000 to understand how best to overlay K
Group’s five motivation-based segments, without gaining access to the firm’s customer data, to ensure the
partnership was permissible in a post-GDPR privacy environment. Those segments were then made available
via K Group’s DSP and through direct sales.

According to Nykter, the cooperation has opened up hitherto inaccessible insights into K Group customers’
media usage, while programmatic reach is up four times on previous levels. “It enables us to combine data
content and media context in a more intelligent way in our campaigns. We’ve also seen a significant uplift in
campaign activation rates compared to other second-party data sources. So it looks really promising,” she said.

Both partners have established a project group to maintain dialogue and increase the “cadence” of
collaboration, while a steering committee assesses potential “long term opportunities” to work together in new
ways, or to scale up existing activity.

K Group is exploring ways to extend the project beyond the confines of its retail division, and is prioritising
improvements to campaign measurement, as well as developing a better understanding of how to tailor
messages to each of its five motivation-based segments.

“This segmentation model is new to us, so we are still learning what kind of content works best for different
segments. I think our next step is to really start testing different creative content,” said Nykter. “That’s why the
increasing of the cadence of our cooperation is important. You have [work] continuously in order to get more
insight on [the effectiveness of] content plus context.”

About the author

Alex Brownsell
Senior Editor – Media, WARC
alex.brownsell@warc.com
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