The Ultimate Guide to First-Party Data
First-party data (1P data), marketing professionals everywhere are talking about it now that privacy changes are impacting other forms of consumer data. But what is it? And how do you use it to positively impact your marketing? In this guide, we’ll discuss the what, why, and how of first-party data or data that you directly collect from your customers.
The Different Types of Customer or Consumer Data
Businesses use different types of customer data in their marketing. First, let’s dive into what each is.
First-party data (1P data) is data that a business collects directly from their customers. The business owns the data. First-party data consists of all data you have from a consumer’s interactions (both online and offline) with your business, including personal, behavioral, and demographic data. It is the richest and most accurate form of customer data you can use because you know exactly where the data comes from and how it relates to your business.
Example: Contact information, purchases, customer support notes, website clicks, website page views, social media accounts and interactions, email engagement, or any other data that your business collects and owns about your customers.
Second-party data (2P data) is another business’s first-party data that they have collected from their customers. When a business chooses to share this data with you, whether through a partnership, a mutual exchange of audience data, or sell the data to you – it becomes second-party data. This data is still extremely valuable and can help you easily reach similar audiences to your own. The integrity of the data is somewhat diminished because you don’t know where the data came from, how it was collected, or how old it is.
Example: Your business sells tents, and you exchange customer data with a business that sells cookware for camping but not competing products. You are targeting the same audiences, and the data exchange allows both parties to grow their audiences.
Third-party data is data compiled, processed, and prepared for use by a data aggregator. It’s extremely valuable and what marketers have historically used to target customers. This data does not come from someone who has a direct relationship or interaction with the customer, though, so there can be issues with integrity. Privacy changes are making it more difficult to target and track people with this data.
Example: A local dentist wants to reach new local residents. The dentist buys a list of people that just moved to the area in the last 6 months and targets them with advertising and new patient offers.
Zero-Party Data – Is That a Thing?
It is! The term zero-party data is popping up as first-party data use accelerates. It is described as information that a customer chooses to directly share with you, such as providing an email address, filling out a quiz or survey, or purchase information.
Why is Everyone Talking About First-Party Data?
The Depreciation of Third-Party Cookies
For years, brands and advertisers have leveraged the power of third party cookies to track consumers behavior and actions across the web and target them with advertising based on that information. It was highly effective. But consumers are demanding more privacy online, and tech companies are complying with that desire. Safari, Firefox, and Brave have all blocked third party cookies from their web browsers, and Google Chrome is set to completely phase them out by 2024.
The Value of First-Party Data
According to Boston Consulting Group (BCG) brands that activate and utilize their first party data achieve 1.5x to 2.9x revenue uplift over brands who don’t or are unable to. First-party data also drives better campaign efficiency, with brands that customize advertising campaigns using first-party data noting that the campaigns are 5-6x more efficient than generic advertising.
The value is born out of the deeply personalized customer journeys that first-party data enables you to create. Brands use first-party data to segment and define audiences and create personalized messaging that creates “You get me!” moments for customers. Personalization is no longer the exception, customers now have an expectation that their journey will be personalized and bounce immediately if that expectation isn’t met.
On top of improved campaign performance, first-party data also allows companies to significantly lower their acquisition costs. Identity resolution allows you to build first-party data contact profiles on the traffic you’re driving to your website through paid ads, you can then retarget them through owned marketing channels. Meaning, you pay to acquire them one time, you aren’t having to hit the same people over and over with paid ads to bring them back to your website. You can retarget through email or SMS messaging.
The problem with customer data sourced from other parties is you don’t know how, why, or when it was collected. It could be completely irrelevant for your use and result in wasted ad spend. Or it could be old and decayed, leading again to wasted ad spend and missing the mark on personalization. First-party data, on the other hand, is collected by you. You know the data is fresh, accurate, and relevant to your purpose because it’s sourced directly from your customers and the interactions they have with your brand. You can trust it.
How Do You Collect First-Party Data?
First-party data can be collected from many online and offline sources. More than half of brands state that first-party cookies are one of the best places to source effective data. Ecommerce sales also top the list of effective data sources. Other places where brands collect first-party data to embed in their marketing are:
CRM or Customer Relationship Management platforms: CRMs hold significant amounts of first party data, including customer contact information, email engagement, orders, website interactions, sales and support calls, and social media interactions.
Websites: Website activity is a great source of data. Clicks, time on page, popular pages and products, website visitors, and bounce rate are all data that can be used to target your messaging and advertising towards your target audience.
Identity Resolution: Software that identifies and builds first-party data contact profiles on your unknown website visitors. Profiles are integrated with your marketing applications (email or CRM) to be used across your marketing channels.
In-store sales: In store sales data can help you effectively retarget store visitors online. Connecting an in-store buyer to their online persona allows you to personalize their online experience based on what they were interested in while shopping in your store.
Loyalty Programs: Loyalty programs are an excellent source of first-party data (1P data) because the quality is so high. Customers are onboarded with the value exchange that is taking place. They are aware that they are providing you with their personal information and preferences for rewards, points, early access to products, and discounts.
How Do You Use First-Party Data in Your Marketing?
First-party data becomes valuable when you can integrate the data into your marketing campaigns and use it to personalize the experience the customer has with your brand in real time. Brands have varying levels of success, with big brands being able to fully integrate their data from multiple sources directly into their marketing and small brands struggling to keep up. Here we look at the ways that brands activate and utilize their first-party data to convert more customers, more often.
Marketers use first-party data to generate insights that help them understand their customer, drive engagement, and measure effectiveness. The most common activation methods are:
First-party data allows marketers to deeply understand who their customers are. The number one use case of first-party data is audience definition. Marketers use the data to create custom audiences, develop lookalike audiences, and for remarketing campaigns. Targeting the right audience increases the efficiency of your marketing. Remarketing can be done through both traditional and digital advertising, email, and SMS messaging.
Marketers know that people at different stages of the customer journey have different needs and wants when it comes to communication with brands. First-party data allows brands to know where a potential buyer is at in the customer journey and tailor their communications to match. The first-party data tells the story of whether the business is meeting the objective at each stage of the customer journey, or if they are falling short and need to readjust.
Data arms marketers and brands with the information they need to know their customers at a level in which they can move away from mass campaign blasts to tailoring their messaging to small, targeted groups of consumers. The more personalized you can make your marketing communications, the more likely people are to respond positively to it. At its base, personalization allows you to send the right message, to the right person, at the right time. And the results are promising, pairing 1st party data and personalization brands have seen a 50% increase in revenue from triggered email campaigns.
Brands use first-party data to have a more complete picture of their leads and the actions and journey they take to becoming customers. Brands with fully integrated first-party data strategies automatically customize websites and landing pages to the website visitors, while brands with lower levels of data integration use Identity Resolution to identify leads earlier in the buying journey and pass those leads onto their sales teams.
What does this look like in real life?
First-party data makes your marketing more effective, because you truly know your customers at a level 3rd-party data can’t touch. But what does utilizing the data look like in real life?
Email Marketing and SMS Messaging:
First-party data allows you to tailor your email communications. No more mass marketing blasts. Spend the time to segment users and speak to each segment separately. You can also trigger email communications or SMS messages in real-time based on onsite activity. Identity resolution, where we recommend most businesses begin with first-party data building, allows you to dramatically scale the number of emails you are sending.
As an example, let’s say that Ann visits your website for the first time. She looks at spring dresses for a few minutes and then bounces. Without identity resolution, you could potentially retarget her through paid advertising if you had a pixel on your website but you wouldn’t know who she was or be able to reach her outside paid channels. With Identity Resolution, you could identify who she was, send her a browse abandonment email or text message within minutes of her landing on your site, and add her contact information to your email marketing or CRM instantly. Instant value.
With third-party data, you can build audiences of people that may be interested in your product based on someone else’s data. First-party data allows you to build the most effective audiences because you can base them on your most engaged, the highest value customers. The way we digitally advertise will drastically change with the phase out of third-party cookies. First-party data will allow you to build custom ad audiences and lookalike audiences.
What are the Challenges of Using First-Party Data?
As valuable as first-party data is, there are challenges to using it. Overwhelm, organization, activation are challenges for most companies.
It can quickly overwhelm you if you don’t have a strategy.
Your business already possesses substantial amounts of first-party data. The issue is the sheer amount of first-party data available can quickly overwhelm any business. If you don’t have a clear strategy for the data you need and how you’re going to utilize it, you’ll end up with a mountain of messy data you have no idea how to activate and utilize throughout your marketing. Many businesses get caught up in collecting data with the idea that they will sort it out later. This isn’t inherently the wrong approach, but it will be challenging to dig through the chaos to find the data that will help you grow your business. It’s best to have a plan, know what data you actually require, and only collect that data.
It’s difficult to utilize and scale without technology.
Raw data isn’t an asset. Marketers see the immense value in utilizing first-party data in their marketing; however, many lack the technology to organize and activate the data for use throughout their marketing channels. Raw data can’t be activated. It needs to be organized and aggregated, so it can be used to personalize messaging, experiences, and advertising to the right people at the right time. There are many factors to consider when choosing the right technology, specifically budget, the size of your team, the ability to scale, ease of use, etc. There are options for all size budgets, teams, and companies.
Building a First-Party Data Strategy.
Make a plan.
The biggest mistake people make when it comes to first-party data is not having a plan before they start. They end up with piles of data they have no idea how to activate or utilize. Start with an outline and ask yourself what your end goal is when it comes to using first-party data. Do you want to build a relationship with customers off of social media channels? Do you want to retarget customers through channels other than paid advertising? Increase personalization? Trigger real-time emails and communications? Remarket to website visitors. Start with an end goal and work your way backwards. What information do you need about your audience and website visitors to achieve your goal? Clearly defining your goals, data collection methods and sources, as well as how you will manage the outreach and utilization will ensure that the data you collect is the highest quality for the use case. If down the road you want to expand your use of first-party data, it’s best to collect it then – fresh data is always the best data to use.
At a basic level, a good framework is to look at the customer journey and set an objective for each stage, decide the action needed to achieve that objective, and the data you’ll need to execute the action.
What makes sense for your business size?
Another thing to consider is what makes sense for the size of your business and team. We truly believe that any size business can collect and utilize first-party data and that it will be an engine of significant growth. But one of the things to consider when working on a first-party data strategy is what is realistic for the size of your business. Big brands have large teams with data scientists, analysts, and developers to organize, analyze, automate the use of first party data. Teams that can torture data into submission and respond quickly to broken integrations. The other 99% of brands need to choose a software that can fill the gaps in their team, fit their budget, scale as they grow, and meet their automation needs.
The best place to start for all brands though is resolving the identity of your website visitors. The tech can be inexpensive and ties directly into your email marketing or CRM platform for instant utilization. These plug and play options are good for small to midsize businesses that have smaller marketing teams and don’t have data teams.
How and where will you collect the data?
How and where you collect data depends on what data you require for the objectives you set in step one. Collection sources are:
- Customer Identity Resolution Software
- Purchase History
- Social Media Profiles
- Website Clicks and Views
- Gamified Quizzes
- Post Purchase Surveys
- CRM Data
- Customer Support Interactions
How will you organize it?
As touched on several times above, unorganized data won’t do you any good and isn’t an asset. Part of your strategy should be to consider how you will organize the data, so you can derive value from it. Tech solutions often organize the data for you, creating customer profiles for each of your users. These profiles are then easily integrated into your CRM, AD Audiences, Email Marketing Platform, and other marketing channels.
How will you automate the process?
First-party data has value because it’s fresh and can be used in real-time with the proper software and integrations. If you wait to implement it, you lose some of the value it has. Look for solutions that allows you to automate the integration of your first party data into your marketing channels.
Making Moments Matter
First-party data allows you to make the most out of every interaction your customer has with your brand. Create moments that convert more of your website visitors to buyers by collecting, organizing and utilizing first-party data throughout your marketing channels. If you need help getting started or devising a first-party data strategy, contact us, and we’ll help you get started.
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