Customer data comes in all shapes and sizes. All of it is relevant to what drives a successful marketing campaign in today’s digital world.
More importantly, marketers and business owners alike should have a firm grasp of the different types of customer data. This would include first-party, second-party, third-party, and zero-party data, all of which serve a specific purpose that benefits specific situations.
Having said that, let’s uncover each type of customer data and see how you can use it to your advantage.
What is first-party data?
First-party data is characterized by the type of data that’s collected directly from your audience and customers. It’s the most valuable type of customer data for several reasons.
The first reason is that the privacy surrounding first party-data is minimal since you know exactly where it’s coming from — i.e., your website and data management platform. Secondly, it’s very easy and cost-effective to collect. This is again due to the fact that you know exactly where the data is coming from.
Lastly, first-party data includes the following information:
- Behavioral data, as in the actions or interests demonstrated throughout your website or app
- The data collected by your customer relationship management (CRM) platform
- Subscription data
- Social data
- Offline data such as customer reviews and feedback, completed surveys, and any other customer information stored in your CRM database
And so on.
All of this data can help you strategize, monetize, and scale your audiences. Additionally, it can strengthen your customer engagement, simply because it gives you a first-hand look at your customers’ decision-making and purchase behavior.
How is first-party data collected?
As mentioned above, first-party data is collected directly from your audience and customers via websites, apps, and social media channels. There are several tools and data management software out there that allow you to collect this data. One of the most popular is Google Analytics. These centralized platforms allow you to collect the data directly from your audience. It also enables you to store it for your records to generate reports and more.
It is also collected by a pixel that is added to your website, product, social media profiles, etc. This pixel collects information regarding your audience and customer behaviors and records it within your CRM (customer relationship management) software or CDP (customer data platform).
Whenever a visitor lands on your website, clicks through other pages, views your products, engages with a social media post, completes a survey, or writes a review, that data is automatically collected.
How is it used?
Put simply, first-party data is mainly used for retargeting, which can be leveraged in a couple of ways.
Predicting future customer patterns
The quality of first-party data is what generates more accurate patterns from your audiences’ behavior.
For example, let’s say a particular user has been visiting certain product pages and buying said products. You can predict that they’ll return for more in the future. The same goes for what they engage with on your social media and website.
This allows you to tailor your content to what your audience engages with for a better overall user experience.
Gaining audience insights
Collecting first-party data allows you to analyze every last piece of your audiences’ data to see which traits or demographics they all have in common. This is what allows you to expand your audience by once again tailoring your content and marketing strategies to fit a certain profile and retarget your existing customers to ensure they continue to return to your website, app, or social media pages.
You can also use first-party data to provide personalized content to individuals within your audience based on what they’ve viewed or actions they’ve made in the past.
What is second-party data?
Second-party data is someone else’s first-party data that has been purchased directly from the company that collected and now owns it. Because second-party data is essentially first-party data that has been passed down, its accuracy remains intact.
This means that it’s also similar to first-party data in regards to insights and function, as it includes data from mostly the same sources like website activity, mobile app engagement, social media channels, and customer reviews and surveys.
How is second-party data collected?
To obtain second-party data, you would purchase it directly from the company that already owns it. There are no trade-offs or middlemen in the transaction, which means you’ll have to form a relationship with the company you need data from and come to an agreement on the price.
How is it used?
Second-party data shares the same characteristics as first-party data since it’s basically the same data. However, it gives you access to the insights and information you weren’t getting from the first-party data you collected on your own. It also offers the same use-cases as listed above for first-party data.
Second-party data is also used for the following:
- Scaling up your first-party data: Second-party data allows companies to increase their insights and audience when their first-party source pool is small. Since second-party data is also of high quality, it also grants assurance that you’ll be able to target more people in your next marketing campaign.
- Building your audience: Your first-party data may only revolve around one demographic if you only have a few products to offer. When it comes time to expand into new demographics, you’re going to need valuable insights on said demographics to build your audience to find prospective customers. First-party data from a similar company with a bigger following can help with that.
- Building business relationships: To get second-party data, you need to create a relationship with a business in your industry targeting the same audience. Forming positive business relationships is one thing that helps small businesses grow, and they also serve as a high-quality data source if you ever come up short on data in the future.
What is third-party data?
Third-party data is obtained from different external sources. It does not come directly from a neighboring company nor is it considered the same as high-quality first-party data — although that doesn’t mean it isn’t valuable.
Third-party data is bought and sold programmatically. It happens on a large scale which provides for a large volume and broad scope of customer data. However, the disadvantage of third-party data is that the original source of the data is never revealed. As a result of the lack of exclusivity, your competitors will have access to the same information.
How is third-party data collected?
Third-party data is obtained from external sources that are essentially large data aggregators that get their data from various websites and platforms. These aggregators get this data by paying publishers and other data owners for their first-party data.
Once the data is aggregated, it gets organized into specific categories based on various factors such as audience behavior, demographics, interactions, age, gender, and so on. These categories are then broken down into specific segments and the company looking to purchase this data can choose among the segments that reflect their interests.
How is it used?
Third-party data is generally used to enhance first- and second-party data, as well as expand your audience and gain insights for more precision targeting.
Since third-party data is broken down into specific segments within specific categories, it offers companies more data points to work with compared to its first- and second-party data cousins. This is the type of data a company would use to really narrow down the specifics of their audience to gain an even further reach with their next marketing campaign.
What is zero-party data?
Zero-party data is the data that a user chooses to share intentionally with a business. Unlike the other types of customer data, this information isn’t collected via pixels observing user behaviors and actions.
It essentially tells you the same information as first-party data, the primary difference is that it’s collected in a different manner. Additionally, it provides crystal-clear data in regards to your audience and customers’ intentions, interests, motivations, preferences, and more as it’s coming directly from the customer themself.
Also, this data type differs from first-party data as it calls for a direct exchange from your website visitors.
How is zero-party data collected?
Zero-party data is typically offered up in exchange for something else. For example, a free gift for a customer creating an account or entering their birthday on a company’s website.
It can also be collected via surveys or quizzes used to create personalized shopping experiences. Sephora, a popular makeup brand, employs quizzes like the one below to learn about its users’ skincare routine. By doing so, it can offer certain products to address each individual’s needs.
Essentially, zero-party data can be collected during any touchpoint of a visitor or customers’ “lifecycle.”
How is it used?
Zero-party data is mostly used to create individually-tailored experiences for all visitors and customers using a company’s website. It can also be used in the same way as all of the other types of data. For instance, to enhance your marketing campaigns, build a bigger audience, and more.
However, you must have the proper user consent to use and share this data. Otherwise, you’ll violate the data privacy laws and your visitors’ and customers’ trust.
Offering a more personalized experience for your website visitors can improve their UX, but collecting zero-party data has another benefit. Given that third-party cookies will be phased out soon, publishers need to find alternative ways to collect first-party data.
By creating a fair value exchange, you can start to build out your customer data in a scalable manner.
Historically, this type of data has often been collected by eCommerce brands through quizzes or surveys, for instance. But publishers are able to benefit from them as well. Not everyone can offer a hard paywall like the Financial Times.
However, if you know what your most popular content looks like, you can repurpose it as a lead magnet such as a guide, an assessment, a checklist, a quiz, etc., in order to obtain valuable information like an email address.
There are multiple ways to collect user data.
- First-party data: Data that’s collected directly from your audience and customers to extract insights as to their interests and intent.
- Second-party data: First-party data purchased from another company with a similar audience to who you are looking for.
- Third-party data: Audience-related data obtained from various external sources (outside of owned assets like your website).
- Zero-party data: Data willfully shared with a company by their website visitors and customers.
Relying on third-party data comes with an expiry date given that Google is phasing out its use of third-party cookies. Leaving first-party data as the only viable option for publishers to use to monetize their content. However, it’s not always simple to ask for someone’s email address.
That’s why zero-party data is important. Publishers can collect their user data without infringing on any privacy laws while providing custom user experiences.
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