The face of marketing is about to change forever. Several events have been building towards this possibility for years, but 2023 seems to be the year when all the changes take effect. In light of increasing data breaches – approximately 19 billion records were exposed in the first half of 2021 – customers have become more aware of who has access to their data. In response, agencies such as GDPR and CCPA have taken action to tackle indiscreet data collection and use. Additionally, Google is leading the march toward third-party depreciation this year. Marketers have seen their world plunge into chaos. Fortunately, we offer zero-party dates the best chance to restore balance.
According to TechRepublic, 97% of marketers recognize the importance of personalization for successful marketing campaigns. However, personalization is impossible without data. Third-party data has been the cornerstone of advertising for years. In fact, a 2022 IAB report found that third-party data is still the most preferred data source for 63% of the ads. But the recent shifts in the data privacy landscape dictate the need to turn data sources into one that complies with regulations and gives customers control over their personal information. Currently, only zero-party data meets these criteria.
WHAT ARE THE DIFFERENT TYPES OF DATA?
As experienced marketers know, there are four different types of data. Although essentially used in the same way, these data sources differ in source and method of collection. They contain:
FIRST PARTY DATA
This type of data is collected directly by a brand/company through its marketing and communication channels. The company owns the channel and therefore has direct access to customer information. First-party data is generated during interactions between a company and its (potential) customers, usually through some form of tracking technology integrated into the channels. For example, a company can track the pages viewed and time spent per page by tracking website activity. Transaction data, customer service feedback, and email marketing are other first-hand data sources. This data type is easy and cheap to collect, accurate and very useful.
SECOND PARTY DATA
When a company gains access to another company's first-party data, it can be said to own second-party data. Often the data exchange is based on a contractual agreement and is mutually beneficial. For example, both parties may have similar audiences and decide to exchange first-party to improve their marketing campaigns. Alternatively, data from second parties can be purchased for a fee instead of shared.
THIRD PARTY DATA
This consists of packaged datasets organized and sold by organizations. Usually, the selling party has no direct contact with the customers whose data they sell. The dataset they have is an aggregation of information collected from various sources. For example, first-hand data can be purchased from numerous companies and aggregated into a single dataset. Data from third parties can also be collected via cookies that map the activity of a user during a browser session.
While there is the benefit of giving marketers a broader view, third-party data sometimes lacks the accuracy of direct sources. Also, the buyer cannot be sure that the privacy rules have been complied with during the collection process. This shortcoming in particular has led to significant criticism of this data source. With Google, Microsoft and Apple accelerating their plans to ban third-party cookies, the demise of this kind of data is imminent.
ZERO PARTY DATA
Forrester Research coined the term zero-party data and defined it as data voluntarily provided by the customers to the brands. In other words, there is no risk of privacy infringement, as the customer has complete control over which company they share their information with. Zero-party data is highly accurate because it comes from a direct source. However, customers will often voluntarily provide their information for one of two reasons. They either have a high level of trust in the brand or expect something of equivalent value for their information.
WHAT ARE THE BENEFITS OF ZERO PARTY DATA?
Collecting and using zero-party data in marketing operations has numerous benefits. They can be summarized in five points, including:
IMPROVED PERSONALIZATION
Zero-party data comes with the guarantee of accuracy your brand can rely on. Therefore, more actionable insights can be generated from this data source. Consequently, on the basis of this direct information, more personalized services – content and product recommendations, personalized emails, etc. – are delivered to customers.
REDUCED COSTS
Data from second and third parties often comes with high costs. However, because companies don't have to buy zero-party data, the cost of collecting is significantly lower. As a result, companies can save more and benefit from higher profit margins from marketing with this type of data.
IMPROVED COMPLIANCE
GDPR laws now stipulate that organizations must obtain explicit and informed consent before collecting personal information from individuals. The agency also claims that individuals reserve the right to request access, modification and deletion of their personal information. These and many other laws show why zero-party data collection is a must.
MORE EFFICIENT MARKETING CAMPAIGNS
Companies often burn human and financial resources during marketing campaigns. Zero-party data can reduce these inefficiencies in many ways. For example, customers can be segmented based on demographics or purchase history. The brand can then target individuals with ad campaigns that best match their preferences.
RICHER CUSTOMER EXPERIENCE
As a culmination of the above benefits, customers are guaranteed a richer experience. More personalized services are available to them and, over time, a deeper brand-customer relationship develops. In addition, customers develop a stronger sense of loyalty and trust in the brand.
WHAT ARE ZERO-PARTY DATA COLLECTION METHODS?
Now that we've learned the benefits, let's look at suitable collection methods. Brands ready to incorporate zero-party data into their data strategy can use one of these five methods:
RESEARCH AND QUIZ
Sometimes asking is the easiest way to get information. Quizzes and surveys are increasingly becoming part of many brands' data collection strategies because they are excellent sources of zero-party data. Brands can collect demographic information such as age, gender, location and income range by designing surveys and quizzes to capture this data. More importantly, companies can ask customers about their preferences through these methods. For example, a clothing brand can ask for favorite colors, materials, clothing styles and accessories. They can also be used to generate post-purchase feedback.
CUSTOMER ACCOUNTS
Zero-party data can easily be collected by encouraging customers to create an account. Customers will provide basic information such as names, email addresses and geographic locations during account creation. Once they start deriving value from the companies, they will update the information in their accounts. So there is enough room for the brand's database to expand with customer accounts. In addition, in this setting, customers have more control over their data. They can easily update, edit or delete data they upload to their accounts. So customer accounts are great ways to stay compliant.
SOCIAL MEDIA
Brands can collect valuable zero-party data through their social media accounts. Companies with highly active accounts can set up polls to understand customer preferences. Brands can also post questions on their pages asking for product reviews or preferences. Customer responses in the comments section qualify as zero-party information that can be used for personalization or marketing.
PREFERRED CENTERS
Many people want to control the level of communication they have with brands. Preference centers give them the opportunity to do that. A preference center is a section of a website where customers can manage their communication preferences. They can choose the channels on which they want to receive a message and specify the frequency and duration of the communication. Some preference centers may also include options to manage account and privacy settings, making them excellent sources of zero-party data.
MATCHES
Earlier we mentioned that customers often expect value in exchange for personal information. Well, hosting contests is a way to attract customers to volunteer their data. In exchange for the chance to win mouth-watering rewards, your brand can convince people to create an account, sign up for newsletters, or join loyalty programs. Many individuals will sign up and provide zero-party data if the reward is attractive enough.
In short, there's no better time than now for brands to transition to zero-party data. It is doable, readily available and doable. Brands looking to overcome reliance on second or third party data can use the collection methods above to review their data strategy in this fiscal year.
