Zero, First, Second, Third-Party Data: Navigating Data Types In The Age Of Data Privacy

“Without Big Data Analytics, companies are blind and deaf, wandering out onto the web like deer on a freeway.” Geoffrey Moore, organizational theorist.

Imagine the retail world without customer data – shopping aisles would be filled with irrelevant products, and customers could be forever unhappy with their purchases. Just imagining this imperfect world seems like a nightmare to us! In this blog, we’ll fill you in about the various types of data and how we can use the right set of data with respect to privacy.

In recent news, we heard about Google’s plans to phase out third-party cookies by 2023. Google is planning to implement better privacy technology, where internet users’ data would be protected. While tech giants like Google are making this major privacy move, retail brands too must be aware of how to safeguard their customer data and identify appropriate ways to collect information for marketing strategies.

Zero-party, first-party, second-party… What does it all mean?

Understanding the various types of data will help marketers in picking and utilizing the right kind for their brands. Let’s start from the basics and take a look at the data types:

1) Zero-party data or self-reported data: This data is given directly and is proactively shared by the customer for personalization. Coined by Forrester, the term zero-party data refers to a richer and more specific data set strategically collected. For example, websites can share a survey with the users to procure more personalized information about their products on a particular webpage. Consumers are typically willing to share this information as they too can benefit from this personalization.

2) First-party data: First-party data may be inferred customer data or self-reported. This could typically come from Point of Sales in offline stores, where customers share their name, address, mobile number, etc. Most data that gets collected in the brand’s CRM are classified as first-party data. This information can also be sourced from surveys and regular customer feedback. Of late, first-party data is also being collected from social media accounts through the privacy settings of the platform.

3) Second-party data: Second-party data is another company’s first-party data that can be directly purchased from the source. Typically, it is collected from trusted partners who have agreed to share the data, which might mutually benefit both businesses.

4) Third-party data: This data is any information collected about users that may not be directly related to customers or their transactions. It usually helps to understand the behavior and demographic of customers. But a major disadvantage of third-party data is its statistical and aggregated nature and the fact that it has not been directly received from the user.

Harnessing the data the right way

Now that we know what each terminology means, we can see that first-party data is information that directly comes from the source. The information is more accurate and gives marketers a unique view of their customers. While the Point of Sales is a primary source of first-party data, brands can also get this from, SMS, email, surveys, beacons (location-based), customer service interactions and loyalty programs. But with so many sources how can a company use the data accurately?

This is where a powerful tool like Customer Data Platform (CDP) comes in. CDP helps retailers unify first-party data across every source. The single-point solution gives a 360-degree view of the customer by standardizing data. Through the power of AI, the platform is able to identify and remove duplicate entries and help understand and segment customers based on their behavior and preferences. Through this tool, every single data point is used responsibly, remaining compliant with emerging data protection laws. If your brand is looking for a CDP, you can contact our experts to find out more about it!

Prioritizing consumer privacy through zero-party data

First-party data is certainly readily available to brands. But consumers may not know the extent of how their information is being used, or they may not have fully consented to it. A large gamut of data privacy laws must be considered while collecting customer data, and consent plays an important role in using this type of data. In fact, in a Hubspot survey, 91% of the respondents agreed that ads are more intrusive today than a few years ago, and would prefer brands that were more transparent with their data usage.

While second-party data may come in from trusted sources, once again the consumer is unaware of it being utilized and in what capacity. The information procured through this may not be relevant to the retailer, resulting in the purchased data not being used and adding unnecessary spending. With respect to third-party data, the information is all the more inaccurate and untrustworthy.

This is why we could call zero-party data as the data of the future. As we saw before, zero-party data is information that consumers give willingly to the brand, knowing that it would improve their shopping experience. This data is collected from all interactions done with the customer. Brands must also remember to have an easy opt-out process so that consumers have the freedom to withdraw their consent at any time.

By increasingly relying on zero-party data, not only do retailers achieve the most accurate data but also improve their brand value thanks to their transparent data usage practices.

Loyalty: a gateway to zero-party data

It is a well-known fact that loyalty programs help brands widen their customer base, but it may not be widely known that they also act as a hotbed for zero-party data. Data privacy laws tightening across the world, and it may seem that the scope for acquiring and using customer data is reducing. However, the strongest feature of loyalty programs is their ability to collect specific and consent-driven data from the customers themselves. By creating multiple touchpoints and more opportunities to interact with consumers, loyalty programs become a fitting method of collecting zero-party data, as customers are clearly aware that the information is being used to create better shopping experiences.

One way of acquiring this data is through incentivized quizzes. Customers can willingly share data about themselves and collect rewards and discounts. For example, an apparel retailer could collect details about the customer’s size, height, age and other preferences by offering points. While sharing these details, customers know that the upcoming product suggestions will be customized as per their preferences. Customers are, no doubt, the king. And in an era where data privacy is most important to them, brands must listen to these emerging concerns and find ways to tweak their practices accordingly. There are several strategies that brands can implement to build solid trust with customers in terms of data privacy. Get in touch with our experts today to know more.

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Keerthana is a business journalist and is adept at catching market and retail trends. She enjoys analyzing facts and figures and often shares those insights through her writing. Before becoming a writer, Keerthana also had a stint in Biotechnology research.