For years, businesses and marketers have relied on third-party data for their marketing campaigns, but things are changing. Third-party cookies are being phased out, and many companies are seeing the value of first-party data. When you collect first-party data, you get more accurate, high-quality information that meets privacy guidelines.
Using first-party data is no longer a “nice to have”, it’s a must. Even though they are on their way out, research shows that 81% of businesses still rely on third-party cookies. If you aren’t prioritizing first-party data, you’re leaving your business at risk.
According to the same study, 85% of consumers want companies to use only first-party data. Another study reveals that 75% of people don’t trust how data is shared.
Research also shows that first-party data impacts revenue. In a study by Google and Boston Consulting Group, brands that used first-party data in their marketing campaigns earned 2.9 times higher revenue than those that didn’t. The brands also increased their cost savings by 1.5 times more than those that didn’t use first-party data.
First-party data is the future and standard for effective marketing. In this guide, we’ll go over the basics of customer data collection first. Then, we’ll provide a framework for how you can collect and implement first-party data in your business.
Table of contents
- First-Party Data
- Second-Party Data
- Third-Party Data
- Zero-Party Data
- First-Party vs Third-Party
- How To Collect First-Party Data
- How to Leverage First-Party Data in Your Marketing
First-party data is information a business collects directly from its prospects and customers. This data is unique to your company because you collect and own it. Examples of information that you can collect include:
- Customer demographics – marital status, gender, occupation, education level, or age
- Time spent on site
- Audience location
- A customer’s purchase history and interests
- Number of unique visitors
Because it is collected directly by the organization, first-party data is typically more accurate and relevant.
Example of First-Party Data
Any information that you collect directly from your customers can be considered first-party. For example, many businesses collect first-party data when they use Google Analytics to track their site analytics. You can view your organic traffic, demographics, bounce rate, time on site, conversions, and other metrics.
First-party data collection can happen through any channel you interact with your customers. It can be through your mobile app, website, social media, or something else. It also can happen offline as well as online.
While first-party data is crucial in result-driven marketing campaigns, it can be difficult to scale because the information comes from your company’s in-house efforts. Therefore, some businesses turn to second-party data to supplement it.
Second-party data is your audience’s information from a known, trusted source. In other words, second-party data is someone else’s first-party data. It involves another organization gathering information from its audience and sharing the details with your company.
Example of Second-Party Data
Second-party is commonly used when you book an ad with a publisher. For example, a whiskey company may inquire about banner ad space on a popular food blog or site. The food blog would likely provide second-party data about their audience to the whiskey company.
In addition, second-party is common in brand partnerships. For example, a retailer might share data with a brand that they sell in their stores.
To collect second-party data, you usually partner with another organization that has similar goals and objectives. Second-party data can help you widen your audience data and scale new initiatives.
For instance, second-party data can reveal customer trends and patterns you hadn’t considered before. As a result, you can use it to create more personalized marketing campaigns, nurture leads, and eliminate friction in the sales process.
Third-party data is information that is collected about consumers, without them knowing or giving explicit consent.
A third party, usually some type of data broker, puts together data from multiple sources and sells it to buyers through marketplaces. These sources can range from surveys to credit reports and publicly available government records like voter lists. You can see how third-party data violates privacy.
Example of third-party data
You may have noticed while searching around the Internet that you’d see ads for similar products or services to the ones you were researching. For instance, let’s say you were considering a trip to Costa Rica.
You look up flights and hotels and visit several sites but don’t book anything yet. A few days later, you start seeing ads everywhere for Costa Rica trips and hotels—some from sites you never visited. The browser you’re using was likely tracking you through third-party cookies and advertisers targeted you because of it.
We’ve talked about data brokers, but did you know that some browsers also collect third-party cookies? (Although, they are going away.)
Some advertisers and publishers claim third-party cookies help to target audiences with more relevant advertisements. However, they soon won’t meet privacy standards. Plus, third-party data is not always reliable. You don’t know if the provider collected the data with consent, and the accuracy is questionable.
Forrester first coined the term “zero-party data” in 2020. Zero-party data is similar to first-party. It is the information that customers proactively and intentionally share with your business.
Zero-party and first-party data are almost identical, except for one major difference. With zero-party data, customers intentionally and proactively give you information about themselves.
Examples of Zero-Party Data
Examples of zero-party data include purchase intentions, personal context, and how customers want your business to recognize them.
You collect zero-party data when people share information you can’t infer, collect, or buy elsewhere. It’s information that a person must explicitly provide for you to know, and it can include:
- Communication preferences
- The type of content a prospect or customer would like to receive from your business
- A customer’s genuine interests
Similar to first-party data, you must have a direct relationship with customers and get explicit consent to collect zero-party data. Businesses can collect zero-party data using quizzes, forms, and surveys. To collect zero-party data, a business typically asks for information in exchange for something the customer considers valuable.
First-Party Data vs. Third-Party Data
Third-party data has been the king of data hill for years, but it is becoming outdated. First-party data is taking over.
Advantages of First-Party Data
First-party has higher quality than third-party data because you fully control the collection process. As a result, you ensure the information is accurate and reliable.
Since you control first-party data collection in your business, you can make sure it complies with privacy laws and avoid legal issues. With third-party data, it’s a risk. The provider may not have collected the information with consent, paving the way for costly legal issues in your business.
How to Collect First-Party Data
Since first-party data is collected directly from your own customers, with no middleman, it can technically come from any channel that you interact with your customers. However, here are some of the most common ways to collect it.
1. Google Analytics
You can use surveys to collect your customers’ opinions, feedback, and interests including:
- What they think about your products and customer service
- Why they didn’t complete a specific action
- Whether they are satisfied with your products, services, or company interactions
This data will help you introduce compelling product features, streamline customer service and support, or optimize your website.
You can conduct online surveys in-app, on your website (exit-intent survey popups), on social media, and on other digital platforms where you interact with customers. Dozens of survey tools are available to make the whole process seamless.
- Google Forms
Here are the best practices when conducting surveys:
- Identify why you are conducting the survey. What’s the purpose or goal?
- Offer a small gift to encourage customers to submit responses.
- Don’t ask too many questions. More questions mean participants spend less time on each question. If respondents “speed” through the survey, the data quality, and reliability will suffer. Five to ten questions is a good number.
- Have a good mix of multiple-choice and open-ended questions. Open-ended questions can provide specific customer feedback that you may not have thought of in your multiple-choice options.
Running email campaigns provides insights into open rates, click-through rates, purchase activity, and bounce rates. You can use this information to segment your audience and create targeted campaigns based on engagement levels.
For example, you can identify your most engaged customers by looking at how many emails they open and which CTA links they’ve clicked. You can also target them with personalized product recommendations based on their past purchase history and clicks.
On the other hand, recipients who open your emails occasionally but don’t click through the links may not be ready to buy. Instead, you’d send them campaigns that are more geared toward nurturing them through the funnel so they get closer to making a purchase.
You can collect first-party data through your email service provider. The most common include Mailchimp, Klaviyo, ActiveCampaign, and GetResponse.
Prospects who allow your business to engage with them through text messaging or SMS are high-intent, meaning they are engaged with your business. They likely have made many purchases in the past and will convert again. In addition, there is a high level of trust if a customer gives you their phone number. Most people keep the same number for years and years.
With SMS, you can gather information about how customers interact with text links. You can also learn more about their shopping behavior and engagement. Most email marketing campaign tools integrate with SMS marketing automation software, so you can use them together to gather first-party data.
5. Messenger Widgets
Live customer chat widgets or messenger widgets are chat boxes that can be added to your website. They allow your website visitors to chat with you at any time, which makes them useful for data collection and customer service. Research shows that 41% of consumers prefer live chat support over other options.
Facebook Chat Plugin is one option for adding a messenger widget to your site. When website visitors send messages, you can easily find more information about their social profiles.
If you don’t want to share that data with Facebook, you can use one of these popular chat widgets.
- Hubspot Live Chat
Intercom is used by many businesses and it is easy to connect it with Google Analytics. You can see how the widget impacts your site analytics and conversions too.
6. Mobile Apps
A dedicated mobile app is one the best ways to blend online and offline marketing efforts, which is one pain point that we’ve seen with businesses that work with Goodway Group. It is also a rich source of first-party data collection. How do mobile apps do this?
Mobile apps collect location data, which enables a business to take use geotargeting and geofencing marketing.
Businesses with physical stores create mobile apps with store locators. When customers download the app, they may choose how they share location data. If they share it with the app, you can tell when they are nearby a physical store. In other words, when they are most likely to visit and buy. You can entice them to visit and increase your foot traffic by sending push notifications in your mobile app.
In addition to location data, other types of first-party data that mobile apps may collect include:
- Favorite menu items
- Past purchases and in-app browsing history
- Time of day users order
The information you collect can vary by app and user settings, so this is not an exhaustive list. Typically, it may include information about customer demographics, behaviors, and interests.
7. Point of Sale (POS) Data
Your POS system is one of the richest sources of first-party data. For example, you can see your gross and net sales over a particular period and past purchase information. POS data also reveals store information like average items per order, order value, and daily net sales.
This information is useful in running a profitable physical business. You’ll know the peak sales periods during the day or year when your physical store is busiest. As a result, you can better quantify how effectively you convert foot traffic into sales.
The sales data also feeds into your business’s inventory reports, enabling you to reorder your best-selling products before running out of stock. Since the POS data shows your bestsellers, you’ll know what products are collecting dust on the shelves to promote them or avoid restocking them (if they historically don’t sell well).
POS customer data can also show how often someone has bought from you, how long they’ve been customers, the products they bought, and how much they’ve spent. You can use this data to tailor your campaigns, whether they are offline or online.
For example, Target matches in-store purchases to emails and combines online order history. The retailer uses this combined customer data to inform its entire digital marketing strategy.
Your customer relationship management software (CRM) is a gold mine of first-party data information as well. It gives you insight into customer-facing details like telephone, email, social media profiles, and communication preferences.
Since CRMs track these details into a complete record for each customer, it provides an in-depth understanding of your relationship with customers over time. As a result, the data gives you a complete view of individual customers and their interactions with your business.
However, tracking and collecting all these details is a fraction of the story. Businesses need to bring this data to a single place. Most companies leverage a customer data platform (CDP) to achieve this.
A CRM organizes and manages customer-facing data while a CDP unifies the information and breaks down the silos of your first-party data sources. As a result, you get a complete view of each customer on one platform.
How to Leverage First-Party Data in Your Marketing
After collecting first-party data, how do you use it in your marketing? Here are some strategies that you can implement.
1. Personalize your campaigns
You get insights into customers’ preferences, behaviors, pain points, and interests when you use first-party data.
Use this information to tap into customers’ deepest felt needs. For example, segment your audience and send product offers based on how people interact with CTA links in your promotional emails or SMS.
2. Retargeting campaigns
Use the first-party data to A/B test ads to reveal what your audience responds to. Depending on the test results, dispel what doesn’t work and retarget the right prospects with ads that resonate with their needs.
In other words, use first-party data to test, tweak, and retest campaigns until you find out what works best for your business.
3. Combine online and offline for best results
For example, implement “buy online and pick up in-store” campaigns in your business. You can achieve that in four simple steps:
Combine customer data, offline transaction data, and store directory data from your POS software with second-party data from your ad partners. Then, use this information to target an offline audience that hasn’t bought in your store for the last two months.
After that, use recent behavioral data from your partners to optimize your campaign.
The campaign should target offline prospects near your physical store. Lastly, use persuasive creatives showcasing the bestsellers in your store to encourage in-store traffic.
First-party data can help you optimize your marketing strategy. However, it requires sufficient time to correctly analyze and use the data to test and retest campaigns.
At Goodway Group, we can help you leverage your first-party data to optimize campaigns. Get in touch to see how we help with all your marketing needs.