Customer experience, Personalization

The Raise of First-Party Data and Zero-Party Data

Andy Kaiser

Andy Kaiser 7 min read

Photo by Jr Korpa on Unsplash

A growing number of consumers are concerned about the security and privacy of their personal data. They're also becoming increasingly wary of third-party data, as they don't have control over how it's used or who has access to it. These factors are creating a perfect storm for marketers to use first-party and zero-party data in order to better serve customers and grow their business.

So what is the difference between first-party and third-party data?

First-party data

First-party data is information about a customer collected directly by a company through its own channels and sources

There are two types of first-party data: customer data and user data.

  1. Customer data is information an organization has about its customers, such as demographic details or purchase history.

  2. User data is gathered from a person's interaction with the company's website, app, etc., which can include browsing habits, events or content preferences.

First-party data is valuable and compelling because it is data that a company has directly collected in their own channels and sources. It is a company's own data that they do not have to purchase or trade with third-parties, as the customer has already given it freely through their interactions with the business.

However, first-party data also carries privacy concerns when collected without explicit permission of the user. Companies are legally required to get customer consent before collecting their personal information, but those limitations depend on country regulations like GDPR and CCPA.

Third-party data

Third-party data is information that has been collected from multiple sources, aggregated into a single dataset, packaged, and sold. Companies that sell third-party data are not always the same companies that gathered the data in the first place. Instead, they acquire first-party data from a variety of other companies and package it for sale. This type of data allows marketers the ability to create more targeted ads at their audience because they are able to use specific details about them.

Third-party data has come under criticism in the last years, and as a result Apple and Google have both taken steps against third-party data, with Apple blocking third-party cookies and Google removing the support of third-party cookies from Chrome. On the other hand the usage of Ad Blockers has increased in the last years, making it more difficult for marketers to collect data and aggregate third-party data.

This is a significant challenge for marketers because they cannot rely on this type of data, which results in less targeted ads and potentially lower conversion rates. Marketers will have to rely on first-party data, which may include user browsing habits or content preferences, in the absence of third-party data.

Zero-party data and why it is so important

The information that a customer freely provides to a company is referred to as zero-party data. It is not inferred from a customer's behavior on your website. It is explicitly provided by a customer, usually with the expectation that providing their data will result in a better experience.

Zero-party data is obtained from a user with their consent and is not from any inference. It is privacy first, as collecting this data does not violate the user's privacy and it doesn't have the creep factor of third-party data or information that is inferred from what they do.

This type of data is so valuable because it's not biased. It can be used to accurately target a customer segment with content that they will enjoy and want more of, without guessing or using other types of first-party and third-party data which may have biases.

How to use first-party and zero-party data for personalization?

In the age of decreased consumer trust and increased regulations on data collection, marketers have an opportunity to improve the customer experience by leveraging their own zero-party and first-party data.

First-party data from analytics tools such as Google Analytics can be used to analyze customer behavior, but it can also be used for other optimization strategies such as personalization. The Ninetailed Platform, for example, can improve the customer experience through personalization based on first-party behavior data with no additional implementations, as the platform analyzes user behavior and serves relevant content based on browsing intent signals.

Personalizations can also be enabled using first-party data obtained from sources other than the website. Companies with customer-centric products and services, such as banks or telecoms, could use their CRM or CDP to personalize the user experience by using first-party data from other applications, such as mobile banking or call center logs.

Zero-party data, on the other hand, may be thought of as personalization on steroids, as it has the potential to leverage first-party data and personalize marketing activities based on customer preferences. Zero-party data is so effective because the user itself  is the source of personal information, which is likely to be more accurate than other sources.

How to collect zero-party data

The lack of established tools or out-of-the-box solutions for gathering and utilizing zero-party data is one of the challenges that marketers face. The good news is that Ninetailed Personalization API provides a robust solution for tracking and utilizing zero-party data for personalization experiences.

The following are some examples of zero-party data sources that our customers use for personalization:

Forms

Forms are an excellent starting point for zero-party data because they enable marketers to capture user traits and personalize the experience based on that information, for example, displaying relevant content based on the form that was completed.

Chatbots

Chatbots are a smart evolution of forms that are extremely powerful in capturing the visitor's intent and personalizing the content based on the intent. Natural interaction with chatbots makes it much easier to ask for different intents and narrow down the customer profile.

Intent surveys

Intent surveys are another popular means of capturing the customer intent while personalizing. For example, if the visitor is looking for information on a new product and they answer "yes" to certain questions such as whether or not they want more information about that product, then their experience can be tailored with personalized content related to what they are interested in.

Self-segmentation

As the name implies, self-segmentation involves asking your customers to tell you which audience segment they belong to. This is a very effective strategy for personalizing the buying experience for personas. Self-segmentation can be as simple as asking visitors whether they are home owners, renters or looking for a new property so that they receive relevant information.

Quizzes

Quizzes are a great way to boost engagement and capture first-party data. Quizzing customers about their preference and then tailoring content or offers to match specific needs boosts conversion rates significantly. Also the ability to use gamification strategies makes quizzes so interesting.

Future-proof data for personalization

Capturing consumer motivations, intentions, interests, and preferences at scale enables organizations to personalize each customer's experience, removing guesswork and providing the data required to make the right connections with customers.

Third-party data has been a critical component of marketing data strategy in recent years, but as consumers become more aware of the privacy concerns associated with third-party data, marketers will be forced to rely on first-party and zero-party data. So, the rise of first-party data and zero-party data is the new frontier for personalization. Some companies are already positioning themselves to take advantage of this new opportunity. For example, a large US retailer recently announced its intention to become the ultimate first-party data company.

Finally, our personalization API simplifies the collection and use of first-party and zero-party data. Contact us to learn more about implementing a zero-party data strategy and personalizing your customer experience with the Ninetailed Personalization Platform.