Marketers are planning for a cookieless world, putting first-party data in the spotlight. But what is it, and how can you use it effectively? We’re breaking down the differences between first-, second-, third-, and zero-party data so you can be the expert for your marketing team.
When it comes to personalization, brands are in a bind. Consumers are more aware of their privacy, and not all of them are comfortable sharing their information without knowing how it will be used. At the same time, their high expectations for personalization haven’t gone away. 66% of consumers expect brands to understand their unique needs and expectations, and personalize experiences to meet them.
In response to this challenge, brands are calibrating their personalization strategies. By shifting their focus more to first-party data, brands give consumers the transparency they’re looking for while still getting the behavioral insights they need to deliver personalized experiences.
The shift to first-party data will help you build trust and more meaningful relationships with customers. But what is it, exactly, and how can you use it effectively?
What is first-party data?
First-party data is information you’ve collected directly from your audience with their permission. Your brand has exclusive ownership of this data, and you get to decide how it’s collected, stored, managed, and parsed through.
It also gives consumers the benefit of controlling what information they’re sharing. When they choose to share their preferences, shoppers are able to receive more personalized experiences from brands.
You collect first-party data through your brand’s owned channels, like your website and email, SMS, and loyalty programs. Types of first-party data include:
- Website activity
- Email engagement
- Purchase history (both online and in-store)
- CRM data
- Social media profile information
What are the differences between third-party, second-party, and zero-party data?
Consumer demand for transparency is greater than ever, and regulators and businesses are following their lead. Regulators have introduced new laws (including the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA)), and Apple already rolled out their own privacy updates to protect consumers. It doesn’t look like these changes are slowing down—Google just announced privacy protection changes similar to Apple’s for their Android users.
With all of these changes, it’s more important than ever to understand the different types of data available to you as a marketer.
Third-party data is collected and owned by a third party that doesn’t have a direct link to your customers. It's usually created by data aggregators, who buy data from other sources (including companies, governmental entities, or academic sources). This type of data doesn’t necessarily include data from your actual customers. Instead, third-party data represents an aggregate collection from a large, anonymized audience.
Traditionally, third-party cookies have been at the core of marketers’ customer acquisition efforts. Now that regulators and industry giants (like Apple and Google) have decided to phase out third-party data in favor of more privacy-friendly options, marketers have a new opportunity to rethink the role of data in their customer acquisition and engagement strategies.
Second-party data is information that’s collected by someone else. Your brand can buy this type of data, or get it from a trusted partner as part of an agreement. Second-party data covers the same information you get with first-party data, including behavioral and transactional information.
Second-party data poses a bit of a challenge when it comes to relevancy. Because another company or organization is collecting it, it’s going to be tailored to their goals and interests (which may not be the same as yours). Second-party data may not give you a full picture of your customers’ preferences in relation to your brands’ unique needs.
Similar to first-party data, zero-party data is information your brand collects and owns with consumers’ permission. The difference between the two types of data comes down to how they’re collected. Brands gather first-party data passively on their website and owned channels (e.g. the products a customer has browsed). On the other hand, consumers actively give you zero-party data (e.g. a customer’s responses to a product finder quiz).
You can collect zero-party data through surveys, forms, quizzes, text messaging responses, and more. And because consumers are directly telling you their preferences and needs, zero-party data gives you the most accurate insight into your customers.
Zero-party data is based on a value exchange. When a consumer shares this type of data with you, they generally expect something in return. Product-finder quizzes (like Olive & June’s nail polish quiz) are great examples of this. When you’re shopping for a new foundation, you may take a quiz on a brand’s website to find your shade. You’re giving that brand information about your skin type and preferences with the expectation that you’ll get something in return—a personalized recommendation that will save you having to order and return several products.
What makes first-party data unique?
First-party data is collected directly from your shoppers, with their consent. Because it’s passively collected, there’s a low barrier to entry. Collecting information based on behaviors shoppers have taken (like browsing a certain product category) helps you infer their needs and preferences.
It also gives you an accurate picture of what your customers need. Because you own this data and decide what information you’re going to collect, you’re able to document each individual shopper’s preferences.
That being said, you shouldn’t rely on just one type of data. Second-party data, first-party data, and zero-party data are all important components of a well-rounded personalization strategy.
Why are marketers using SMS to collect first-party?
Collecting first-party data through direct marketing channels—including SMS, email, and loyalty programs—helps you reach the right shopper at the right time, with the right message. But SMS has emerged as a particularly effective channel for collecting and acting on first-party data. The power lies in how personal it is.
Most of us have only had one phone number, and we’ve probably had it for a very long time. In short: Our phone numbers are excellent identity markers. Having a singular identity marker is invaluable as brands integrate first-party data into their digital channels to build complete consumer profiles.
Because our phones—and especially text messaging—are so closely tied to our identities, consumers are more selective about which brands they share their phone numbers with (compared to email, for example, where they’re accustomed to frequently engaging with multiple brands). When they sign up for text messages, they’re indicating they’re really interested in engaging with that brand.
But SMS marketing also comes with higher expectations for personalization. We use text messaging to communicate with people who know us. When we receive a message that isn’t relevant to us, it feels especially out of place.
How can brands create personalized experiences with SMS using first-party data?
Personalizing your text messages with the first-party data your subscribers share with you makes them feel heard, helping you build loyalty and drive customer retention. You can tailor your SMS marketing campaigns with first-party data, including the products subscribers have browsed and purchased, their location, and more.
What does this look like in action? Think about first-party data personalization like this: if a shopper browsed a white t-shirt on your website but doesn’t make a purchase, you can send them a triggered text message inviting them to take a second look at the product. You’re inferring that they’re interested in this item, and may still be thinking through their purchase.
Swap.com tailors messages based on their subscribers’ location, promoting warm-weather clothing to subscribers in California, and coats to subscribers in Wisconsin. It’s a simple way to show your subscribers that you’re paying attention to their wants and needs.
You can also use segmentation to gather more first-party data by tailoring your SMS marketing campaigns based on how often a subscriber engages with you. Encourage subscribers who haven’t purchased yet to convert by sending them offers and perks. Once they purchase, you’ll have a better understanding of their preferences—helping you personalize future communications.
Personalized post-purchase text messages are another way to keep past shoppers engaged. Use your post-purchase series to share shipping updates, recommend similar products, and cross-promote your other marketing channels (including social media and rewards programs).
Consumers’ and regulators’ focus on privacy isn’t going away anytime soon. In fact, it’s likely to grow in importance. Marketers shouldn’t focus on replacing third-party cookies. Instead, they should think about how they can invest in and diversify their marketing tech stack with first-party data channels.
First-party data should serve as the foundation of your modern marketing strategy. But as your strategy evolves, there’s even more you can do by adding zero-party data into your marketing mix. Stay tuned for our deep dive on what you can do to personalize the customer journey with zero-party data.