Third-Party vs. First-Party vs. Zero-Party Data Explained
You’ve probably heard that Apple, and soon Google, are cracking down on 3rd-party cookies and cross-website tracking scripts. But do you understand the differences between 3rd-party, 1st-party, and zero-party data?
For the last two decades, marketers have primarily leveraged third-party data to understand customer preferences and target paid advertising campaigns. However, this is about to change — with increased emphasis on 1st-party and zero-party data collection and targeting.
In this article, we will clarify the differences between each of these three types of customer data. We will describe how brands can leverage first-party and zero-party data, and we will touch upon how customer data platforms (or CDPs) can be used to make working with first-party and zero-party data easier.
What is Third-Party Data?
Third-party data is information obtained from sources other than the original data collectors. They’re bought from major data collectors that extract it from various platforms and websites where it was generated. Collectors then combine it into a single enormous data collection and offer it as third-party data.
For instance, Facebook Pixel can collect data from customers on your website directly as opposed to first-party pixel data that a company can setup on their website to collect data and then share with Facebook with consent.
Before the Internet, third-party data was scarce. A few organizations provided customer lists, and marketers mainly used them in telephone and mailing campaigns with limited value and attribution capacity.
Today, there is an explosion of data generated from everything connected to the internet. Businesses collect most third-party data via smartphones because people always have their phones with them; they are a valuable source of location data that would otherwise be difficult, if not impossible, to collect.
What is first-party data?
First-party data refers to consumer information acquired and controlled by a company. Customers’ information is compiled using software and systems that the company owns. They may use this information (digital transactions, purchase history, customer behavior, preferences, etc.) to design ads, content, and experiences that appeal to an individual’s interests.
For instance, a company may leverage first-party data such as online or mobile app activity, in-store or contact center interactions, purchase history, and customer loyalty status to generate a tailored advertisement for a particular consumer.
Then again, collecting and managing first-party data is quite simple, mainly if you utilize an audience management platform. Moreover, privacy issues about first-party data are minor since you know precisely where it comes from and owns it outright as a marketer.
Any business that does not gather first-party data leaves money on the table. Taking ownership of first-party data should be a top goal for any business that wants to monetize, learn from, and utilize the asset to grow lucrative audiences, deepen consumer engagement, and increase marketing ROI.
Also, brands that collect first-party data can use it for targeting on platforms like Google Ads and Facebook Ads, that generally rely on 3rd-party data. All they need is a tool for segmentation and pipe audiences to those platforms for ad targeting.
What is zero-party data?
Zero-party data enable businesses to develop close bonds with customers, which improves the personalization of their marketing initiatives, services, offers, and product suggestions.
Zero-party data, a term coined by Forrester Research in 2018, is the most direct data explicitly generated by the consumer.
They described it as information that a consumer voluntarily and proactively provides with a brand. This information may include purchase intents, preference center data, personal context, and how the person wants to be recognized, newsletter signups, product reviews, and, importantly, survey data.
Marketers may leverage zero-party and first-party data to assist companies in developing effective marketing campaigns without using third-party cookies.
Organizations may get this information from various places, including Internet forms, surveys, polls, and membership applications. Even though some clients may voluntarily supply zero-party data for free, most businesses regard it as money and provide a reward in exchange, such as an e-book, webinar, or discount coupon.
Marketers may utilize the data businesses gather via polls, surveys, and form submissions to customize product suggestions, messaging, and offers for each consumer.
In this approach, the use of zero-party data by marketers adopts a conversational style that strengthens relationships between businesses and their clients. Zero-party data is not just for big businesses. Businesses of all sizes can collect reliable, precise, and exciting data by employing interactive funnels at every stage of the customer experience.
Why 3rd-party data is essentially going away
Everyone who uses the internet will experience a significant shift in how they create and share data. Regulations aimed at protecting consumer privacy, such as the California Consumer Privacy Act in America, General Data Protection Regulation (GDPR) in Europe, and other tech giants, would demand users’ consent to share and utilize data obtained from online transactions.
Internet users have been demanding greater transparency in the use of data by organizations that collect it. Since consumers are typically uninformed of how their data is used, the digital advertising industry is poised to shift away from third-party data.
Cookies, particularly third-party cookies, drive many internet ads, but with the onset of explicit privacy policies empowering users, third-party data will significantly reduce in value. Web browsers such as Mozilla Firefox and Apple Safari already restrict them, and according to Google, Chrome will follow suit in 2023.
Everything we do in this connected world creates data. As a result, when collecting third-party data, there are severe issues regarding individual privacy. Recent privacy legislation, such as Europe’s GDPR and California’s CCPA, as well as high-profile court cases, have many asking whether it’s safe to continue using third-party data in marketing campaigns.
To begin, it is critical to recognize that compliant data partners give data with consumer permission, which means that the customer has opted-in to share their data. Second, it is critical to collaborate with a data partner that adheres to tight data governance in terms of who they associate with and follows an ethical code while obtaining and sharing consumer data.
Why eCommerce brands should focus on 1st-party and zero-party data strategies
As consumers, we do not often receive the opportunity to feel understood, unique, and cared for in the enormous international markets that exist in the modern day.
When done correctly, zero-party and first-party marketing allow marketers to make your consumers feel appreciated while gathering the knowledge essential to building your company and enhancing your customers’ overall experiences. Many eCommerce enterprises have already implemented it into their businesses and are beginning to experience its advantages.
Have higher quality data at your disposal
If you ask your consumers well-thought-out questions to collect data directly from them, you will have the data you want rather than the data provided. Your company will access all the specific data you need to improve personal recommendations, plan future brand movements to fit your consumer base, and develop focused promotional efforts that maintain a sense of personalization while reaching the biggest possible audience.
Create individualized marketing campaigns
You will be able to create marketing strategies tailored to your consumer base after you have this information since you will have superior demographic data that is particular to your company and its items.
You will no longer have to make assumptions based on previous purchase history and habits if you fully grasp what your consumers appreciate and what they need and want from your company.
After you have collected sufficient data, you will be able to design a variety of marketing automation campaigns tailored to various demographics. For instance, if you run a bookstore and survey your customers to find out which types of fiction they prefer, you can target marketing campaigns about new audiobook thrillers to people interested in that medium and type of fiction than sending it to everyone.
When you start those personalized marketing efforts, you get individuals enthusiastic and interested to read your emails rather than going over what they perceive as general advice that anybody can use. This prevents them from ignoring your messages altogether.
Accurate management of inventories and projections of demand and supply
You can construct more powerful client profiles using preference datasets, which will let you know what kinds of things customers are searching for and enable you to serve them better.
This trust will build if you employ targeted campaigns to assist novice clients in developing a better understanding of how to use your goods, hence establishing engaging shopping experiences that lead to strong customer loyalty.
How to collect zero-party data
When done correctly, gathering zero-party data may be relatively simple; quizzes and conversational pop-ups in your registration process and marketing efforts are a few crucial approaches.
Zero-party data collection might be an additional step in the subscription or membership onboarding process. Asking for basic details like name, phone number, email address, and demographics like age and gender is essential. Still, you should include inquiries that might help you learn more about how a consumer feels about your goods.
For instance, if you are selling fitness items, you may inquire about their degree of expertise, how often they work out, and any potential health conditions impacting how they utilize the products. Enrolling consumers in loyalty programs is a fantastic approach to getting zero-party data.
You may learn much more about your customer’s interests, preferences, and the goods to display on your owned channels by paying them with loyalty points for reviews, participating in preference centers, and participating in surveys and polls.
Collecting zero-party information on your website
To provide a consumer with a list of suggestions based on their requirements and interests, display a pop-up to them once they arrive on your website. Alternatively, you may pose a query that directs the consumer to a particular email flow. It is a more organic method of gathering zero-party data, and it will make a consumer feel more at ease before they may provide their email and subscribe (or make a purchase).
Utilizing social media to get zero-party data
Social networking is a fantastic tool for connecting with and soliciting many individuals, including new prospective clients. Generating and publishing polls may get important information on trends, community demographics, and brand and product directions.
Collecting zero-party information from email campaigns
The process may be more attractive by including introductory quizzes in your welcome email flow. This will encourage clients to read your emails since they provide valuable information. Additionally, periodically poll your clients to find out their opinions of your company and its offerings.
Run a survey or poll asking your existing members for their opinions if you want to test a new product or brand direction. Zero-party data is more about having a dialogue with consumers than speaking “at” them since customers prefer to be heard.
Applications of zero-party data
Online tests to speed up and customize product research. According to studies, individuals often appreciate sharing personal information with companies they trust. By asking the appropriate questions, you may design unique interactions with new clients that come off as friendly and engaging.
Customers feel valued and heard when you provide a more condensed selection of products that match their unique preferences or address their unique demands. It demonstrates your sincere interest in their purchasing experience when you can update them about new items and marketing that cater to their preferences.
Campaigns for personalized emails and SMS
Creating customized email and SMS campaigns is one excellent approach to leveraging zero-party data to make customers feel mainly catered to. You may design email flows tailored to various client groups using information from the introduction quizzes and further surveys.
Companies may also tailor communications with a particular promotion to the client’s preferences. Therefore, you might send emails to folks showcasing this as a chance to visit hiking trails in California if you provide a reasonable price for treks there. Additionally, you are receiving emails telling other hikers to visit California’s warm beaches simultaneously.
Sharing Individualized content (blogs, ebooks, other information of interest)
Beyond only individualized product suggestions, you may customize the customer’s website experience with zero-party data.
How brands can then leverage zero-party data for personalization and marketing automation
Marketers have a chance to enhance the customer experience by utilizing their zero-party and first-party data in this day and age when consumer trust is declining, and restrictions on the collecting of data are becoming more stringent. Attribution tools such as Fueled, and Heap Analytics can be used to collect 1st-party data
Marketers can implement first-party attribution tools and then send that data to GA for studying customer behavior. If a company employs Google Analytics, the Nine-tailed Platform can analyze user activity and offer content based on browsing intent signals. This allows the platform to enhance the customer experience via customization based on behavior data.
Additionally, personalization may be achieved using first-party data from sources other than the website. Using first-party data from other applications, such as mobile banking or call center logs, businesses that provide customer-centric products and services could use their customer data platform (CDP) to personalize the user experience.
On the other hand, zero-party data may be considered “personalization on steroids,” since it can use first-party data and tailor marketing efforts depending on consumer preferences. This makes zero-party data comparable to “personalization on steroids.” The fact that the user is the source of their personal information, which is likely to be more accurate than information obtained from other sources, is the primary reason zero-party data is so successful.
Also, suppose you are not employed in the field of data science. In that case, you may be unaware of the significant part data from third parties plays in feeding artificial intelligence (AI). When training machine learning algorithms, data sets of greater significance both in breadth and depth are preferable.
Regardless of the level of sophistication of your algorithm, AI predictions will be more accurate if they are based on greater breadth and depth of data. If the original data collection does not have the breadth, depth, or features to meet the end objective, then enriching it with data from third parties is the key to attaining superior AI outputs. This is because first-party data seldom possesses these characteristics.
Suppose you want to extend your machine learning projects. In that case, you can jump-start your exploratory data analysis (EDA) and make feature engineering more efficient and effective by using pre-packaged, predictive features and characteristics acquired from third-party data vendors.