Why First-Party Data is Essential for Online Businesses
The digital advertising and marketing landscape is shifting to become more privacy-centric. Consumers want privacy, and governments are agreeing they should have it. In response, the entire industry is rolling out first-party data solutions which will allow you to use your owned first-party data to each people online instead of the data collected by third party cookies, which are being phased out by all web browsers. If you want to continue to advertise to customers and customers-to-be online, first-party data is essential for the future of marketing and the success of online business.
Below we’re covering what first-party data is, how to use it for business success, and the challenges business face while creating a strategy to collect and use their data.
What is First-Party Data?
First-party data is data gathered directly from the interactions you have with customers or website visitors. It can be contact information, email address, phone number, physical address, device ID, IP address, product preferences, purchase information, social media profiles, etc. It can also be behavioral information such as website clicks, pages viewed, time spent on-site, social media likes, video views, etc.
First-party data can be collected through forms, pop-ups, surveys, quizzes, purchases, customer support requests, chatbots, website data, and with first-party data software which collects, organizes, and allows you to easily utilize your data.
The data can be stored in multiple places across departments. Your Email Service Provider (ESP), Customer Relationship Management platform (CRM), Ecommerce Platform, etc. The key is to share data across departments, making valuable business data available to all decision makers.
Using First-Party Data for Business Success
Use Cases for First-Party Data
Third-party cookies are how businesses have reached the right customers online for years. It worked extremely well, but provided limited privacy for consumers using the internet. Now that third-party cookies are being phased out, the only option is quickly becoming to use your own data.
You can use first-party data to retarget website visitors through advertising platforms, email, SMS messaging, and direct mail. Because you own the data, and it came directly from the customer, you can use it to retarget website visitors in the new environment.
First-party data can be used to create top of funnel audiences for your prospecting ads as well. Through the use of ad platforms’ customer match tools and lookalike audiences, you can create effective audiences to expand your net and bring in new customers.
Segmentation is the key to creating powerful advertising audiences. First-party data provides you with the data you need to segment your customers into audiences. When you segment, you increase the relevance of your campaign messaging to the viewer. In marketing, relevancy always wins.
Segmentation also makes it apparent who you should spend your advertising dollars on and who you should not. If a customer consistently purchases through email, it’s probably not necessary to hit them with paid ads. If a customer only purchases when items are marked down, paying to advertise newly launched, full priced items is not a good use of ad spend. You can easily segment these people into audiences with your data.
Businesses Driving Growth with First-Party Data
Tanner’s Alaskan Seafood
The changes in the digital advertising environment hit Tanner’s pretty hard. Their Facebook retargeting and prospecting ads were struggling to break even. Once they infused their advertising audiences with data from customers and website visitors, their ads became profitable again, with a 310% increase in ROAS on prospecting ads and a 600% increase in ROAS on retargeting ads.
JM4 Tactical wanted to focus on building a strong email list as they realized the risk of only connecting with customers on social platforms. They began using a first-party data software to help them build their email list. When the holiday shopping season rolled around, the company added the additional customer profiles they gained to their advertising audiences and increased their ROAS on their prospecting ads by 75%.
Benefits for Businesses Utilizing First-Party Data
As you saw above, first-party data can increase the ROI on your advertising campaigns, but there are several other benefits for businesses choosing to use first-party data.
Improved Customer Relationships
First-party data does two things for customer relationships. First, it builds trust. When you collect data and use it only for the purpose you said you were going to use it, customers trust you and will come back, likely leaving behind more data. Second, first-party data greatly increases the relevance of your marketing campaigns. You know what the customer is interested in, and you provide them with relevant content, thus increasing engagement, loyalty, and often lifetime value.
Current economic conditions mean many businesses have smaller marketing budgets. Even if the ROAS on your paid ad campaigns is good, there is likely still waste. Using first-party data to build your advertising audiences can decrease waste and increase your ROAS significantly. Testing can also help you decide if you need to use paid ads to market new products to current customers, or if you can use email. Our clients find they achieve the same or better results with email, allowing you to not spend ad dollars on those people.
First-party data allows you to continue to have high performing digital advertising campaigns while remaining privacy compliant. The panic over the loss of third-party cookies has been driven by concern over how advertising campaigns will perform without the data they provide. First-party data is not less effective, you can build powerful ad audiences with it while remaining compliant, but you will need to learn how to do things differently.
Challenges for businesses using first-party data
First-party is new territory for most businesses. Third-party cookies were effective, and businesses chose to focus on other things. New challenges often come with new territory. These are the most common challenges businesses face when it comes to first-party data.
Having enough data to effectively use it and achieve the desired results is a challenge for some companies. Many of the companies exclusively using first-party data are enterprise level companies with massive amounts of first-party data. If you’re starting at zero, it can be tough to see it as a viable marketing asset. First, very few businesses are indeed starting from zero, your email list and CRM both hold significant amounts of first-party data.
Second, the switch away from third-party cookies is happening, but you have runway to prepare for it and build data right now. Right now, you should be collecting data from all the traffic you are driving to your website with the help of third-party cookies. Focus on collection and testing the amount of data you do have against your current audiences, so you can find what works.
Collecting enough data to make a first-party data strategy effective can be a challenge. Make sure your website, forms, popups, and checkout is optimized to collect as much data as possible. Beyond optimizing those items, most businesses are using a first-party data software to help them identify website visitors for retargeting. Whether you’re a small business or an enterprise, there is a solution to fit your budget and needs.
Surface Level Data
Let’s be clear on surface level data, it is extremely valuable. Identity (knowing who is visiting your website) is surface level, but if you don’t have it, you’re not going to be able to target those people with ads. If identifying people to retarget is where you start with your first-party data strategy, you will see a positive result. If, however, you plan to use the data from segmentation and personalized marketing, you’re going to need to go deeper. You can increase the depth of your data by asking your customers for more data as they continue to interact with your brand, or by segmenting your data with third-party data.
Getting the Data From Point A to Point B
The biggest challenge mentioned by marketers is how to get their data from Point A (collecting first-party data) to Point B (using your first-party data). This is especially challenging in larger organizations, where data may be siloed. Technology is almost always the answer here. You need software which collects and organizes your data into customer profiles for use. Otherwise, you will have mountains of data with little value because it’s unusable.
The challenge of budget and having the team to run a first-party data strategy is the basis of most of the above challenges. As we stated before, though, there is a solution for businesses of all sizes and budgets. Whether you’re a one-person marketing team or you have a large team, you can use first-party data to make your marketing more effective.
First-party data was once a nice to have, but it’s now become a marketing essential as third-party cookies are on their way out. While making the switch does come with challenges, it also comes with better marketing efficiency and results, which is something we can all get behind.
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