Topic: Customer Experience
Those working in the world of marketing are becoming increasingly aware of the term zero-party data and its implications. Many experts consider a zero-party data strategy to be crucial in driving personalization efforts and understanding purchase intentions in the future of marketing. If you’re wondering what zero-party data is, how it compares to other types of customer data, and why collecting zero-party data is crucial, you have come to the right place.
To properly understand what zero-party data is, it is important to understand what first and third-party data are beforehand.
First-party data is a type of customer data that is directly collected from customers of a business or audiences of a platform. This customer data comes in many forms. Some examples of first-party data would be customer purchases (including the amount or frequency of purchases), demographics, and more. This consumer data is collected through customer behavior on websites, purchases, and interactions the customer may have with support or marketing programs.
Regarding the quality of collected data, first-party data is often valued highly. As it is collected directly from consumers of a business, it is higher in quality, typically accurate, and always relevant concerning the company.
First-party data collection is a fairly straightforward process. A business’s customer-related systems often collect this necessary information. This issue that comes with first-party data collection comes when looking at the different ways that companies store, analyze, and interpret this consumer data. Depending on which processes are used, inconsistency issues can arise, potentially putting the company at risk of violating data privacy regulations.
Third-party data refers to consumer data that is acquired from a data aggregator. Data aggregators gather consumer data from other companies and compile it into one massive database rather than collecting it directly from targeted demographics. Because this data is often collected from many different sources, issues of inconsistency are probable as these consumer data sources can have a wide range in size and audience.
Typically, third-party data is purchased through a DSP (also known as a demand-side platform) or a DMP (a data management platform) for advertising purposes. Some examples of third-party data marketplaces include Google, Nielsen, and Acxiom.
An organization may want to purchase third-party data for several different reasons:
The main issue with purchasing third-party data is that a business usually does not know where the consumer data comes from, meaning that accuracy and reliability are much harder to ensure than with first-party data.
Zero-party data is a term coined by Forrester Research and specifically refers to explicit data. Their definition of zero-party data is:
“Zero-party data is that which a customer intentionally and proactively shares with a brand. It can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize [them].” ¹
In more simple terms, customers supply the data to the business without being asked.
Very quickly, zero-party data has become the new buzzword in the world of marketing and digital advertising. In contrast to third-party data that aggregators collect, sometimes with third-party cookies and other ethically ambiguous techniques, zero-party data is collected directly from consumers of a business. When you collect data directly, not only is it more ethical, but it is also often less expensive.
Zero-party data marketing found its footing at the same point in time that other issues in the data collection world commonly associated with third-party data (such as cookies and browsing history) became more widespread and known to the public.
As general data protection regulations continue to become more stringent and more companies like Apple and Google offer users data privacy protections, companies have a need for a new alternative.
As consumers of today often expect more personalized experiences from the businesses they shop at, both online and in-person, behavioral data collection has adapted to meet their needs better. When properly implemented, a zero-party data strategy and marketing creates a way for businesses to treat each customer individually and personalize their experience with each company, further developing a better sense of customer loyalty and an enhanced experience.
With first-party data, the information collected is associated with a customer and how they interact with a business through its own channels. For example, how often the customer visits a website and makes purchases, the dollar amount of those purchases, etc. A few channels that a business may use to collect first-party data could be:
First-party data is data inferred about the customer, while zero-party data is data the customer explicitly tells the company.
Examples of zero-party data include communication preferences, purchase intentions, products or topics of interest, and so on. The best way for a business to collect zero-party data is to ask a customer for specific information in exchange for a service or something else that would be of value to the customer. An example could be asking a person to complete customer surveys, where they provide feedback in exchange for the chance to win gift cards, discounts, prizes, etc.
Third-party data is typically purchased from organizations and sources that are unrelated to the company. For example, a consumer’s demographics or their online behaviors that are unrelated or only partially related to the business’s website. A few ways that a company may collect third-party data could be:
For example, a third-party data provider might pay publishers to let it collect information about their visitors and use it to piece together detailed profiles about users’ tastes and behaviors as they move across various websites. This information can then be sold to advertisers to help them target their ad buys.
Examples of zero-party data include communication preference center data, purchase intentions, products or topics of interest, and so on. The best way for a business to collect zero-party data is to ask a customer for specific information in exchange for a service or something else that would be of value to the customer. An example could be asking a customer to complete a feedback survey in exchange for the chance to win a gift card.
The critical difference with third-party data is that the consumer data is collected and consolidated by other parties, unrelated to the customer or the company. Zero-party data is collected through direct interaction with the customer instead.
In most scenarios, zero-party data is collected by the company looking to use it. It is collected using specific content, surveys, and other questionnaires. Zero-party data often consists of data points like information from customer preference centers, purchase intent, and more.
Use zero-party data to create a more enhanced experience for your customers during ad campaigns. When zero-party data is used in an ad campaign, the company can more easily distinguish between a customer and a potential customer, allowing for different campaigns for each. Considering that customers and potential customers have different levels of loyalty to any particular brand, having different campaigns for each can be a great way to convert prospective consumers into current consumers.
When communicating with customers for marketing, sales, or support efforts, the company can use zero-party data to make the customer’s experience tailored to them. For example, If you have data that shows a certain group of consumers are more likely to make purchases quickly, they can receive promotional material that caters to those traits.
As the company provides more curated content and experiences to the customer, the customer is more likely to continue to share zero-party data. An ongoing mutually beneficial exchange occurs, where both company and customer receive value throughout their interactions.
Zero-party data is shared directly from a customer to a brand. Examples of zero-party data include quizzes, surveys, social media polls, etc.
First-party data is collected by a brand based on customer interactions. Examples of first-party data include browning history, purchase history, length of the customer-brand relationship, etc.
Second-party data is a term for first-party data collected by one brand and then used by another. Typically with a second-party data value exchange, brands sign contractual agreements before any data is shared.
Third-party data is data that has been collected from sources outside of the brand, like data aggregators. Examples of third-party data include location, age, address, income, etc.
Zero-party data collection is something in the marketing world that can be extremely beneficial. With zero-party data, a company gains insights about their current customers and potential future customers. Unlike older methods of data collection like cookies and trackers, zero-party data is collected entirely ethically as consumers willingly share the information themselves.
As rules and legislation seem to change frequently around data collection, having a source of data that is willingly shared by customers is imperative for businesses looking to place themselves in the best possible position to run effective and efficient advertising campaigns and customer outreach strategies. As the need for data by companies only continues to grow, the uses that can come from collecting zero-party data will continue to expand as well.