What to consider with zero party data vs. first party data
By Megan Angell, 84.51° Senior Data Scientist
Zero-party data vs. first-party data
With third-party cookies on the way out, zero-party data is becoming increasingly important. The term “zero-party data” originated with Forrester, a research and advisory company, which defines it as “data that a customer intentionally and proactively shares with a brand, which can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize her.” For example, you may want to collect information on customers’ ages to help you choose products to recommend, or about their preferred method and frequency of communication to help your marketing reach them without causing annoyance.
First-party data, on the other hand, is collected directly from consumers through their interactions with an organization as part of doing business. While consumers see direct and clear benefits from participating, they can also choose to opt out at any time.
While it may be tempting simply collect as much zero-party data from the customer as possible, creating a framework that weighs the benefits and costs of different types of data and then carefully selecting attributes will yield far greater benefit to your organization in the long term. We break down some of these key tradeoffs below.
When customers explicitly provide you with their information, they will likely expect something in return, whether that is more personalized communications, tailored deals or added convenience. This expectation continues to grow as consumers become increasingly wary of sharing their data. Before choosing to collect a piece of data, you should have a clear use case of how it will help drive value for your customer and your organization.
Zero-party data can be especially useful for new customers who may not have purchase or clickstream data in your system yet. As you build a trusted relationship with consumers that’s based on value, they will be more likely to opt in to sharing their data.
How accurate is the data provided by customers themselves versus 1st, 2nd or 3rd party data? While some data points are straightforward, such as birthday, asking customers if they are interested in healthy products may be less accurate — customers may say yes as a form of “wishful thinking” or because they don’t want to admit otherwise, but their actual purchase data may indicate the opposite.
Other attributes may change over time, and while customers may be willing to give explicit feedback once if prompted, they may be unlikely to respond to future requests or adjust their data in their settings/account options. Are there ways you can design the experience so that customers are more likely to update you when their data changes?
It is also important to consider whether you are collecting data at an individual or a household level. Some preferences may apply to some household members but not others, and incorrectly applying this information to the whole household may even have a negative impact.
In some cases, there may be negative impacts to collecting some attributes. For instance, they may consider their diet/allergen information to be personal. Too many questions may increase customer fatigue and reduce the likelihood that they will fill out your questionnaire. Transparency and data protection are key components to building trust.
Additionally, you should ensure that you are prepared to comply with privacy regulations like CCPA and GDPR, depending on where your customers are located. Privacy-related legislation is evolving quickly, and as new laws emerge, it’s important to leverage data that is both complete and can remain compliant.
Ranking What is Important
To help avoid any potential negative impacts, you may want to create a formal scoring system, deciding on specific criteria and then rating each attribute you’re considering collecting according to these criteria.
Well-chosen zero-party data can drive significant value for both your customer and your organization. And, in a post-cookie world, it may be increasingly difficult to do without to ensure your messaging is relevant and reaches the right people at the right time.