Why First-Party Data is the Most Valuable to Marketers

Published: November 28, 2016 Updated: October 23, 2018 Author , Category Data Management, Data Privacy & Security

Marketers these days have a lot of data to choose from: 1st-party data, 3rd-party data, online data, offline data, transactional data, operational data.

It’s almost as bad as being at an all-you-can-eat buffet – where do you start?

Every kind of data mentioned above has its uses, advantages and disadvantages, but one stands out for its value (in more ways than one).

First-party data.

So if you’re going to start with one dish on the data buffet, start with first-party data.

Defining 1st-party data

To be clear – first-party data by definition is the information that a brand or company collects itself and owns. In today’s world this most often means online data about customer interactions on a website or app (form submissions, product views, in-site search queries).

But it doesn’t have to be.

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First-party data can also be taken from offline sources:

  • In-person events (store visits, trade shows, etc)
  • Sales calls
  • Physical coupon redemption

and can include different information:

  • Customer purchase history
  • Account information (in the case of a loyalty program, etc.)
  • Demographic (sex, age, city, zip code)

Offline data can be just as valuable as online data and in some cases more so. To use it for digital marketing campaigns, however, a brand will need to “onboard it” – a process that requires some work, but is extremely beneficial in the long run.

You can learn more about the data onboarding and how to take advantage of it by following our post: Three Ways to Supercharge Sales With First-Party Data Onboarding.

What’s more, with the technological advancements, like a customer data platform (CDP) you can merge all those kinds of data dispersed across all digital channels. So you have well-rounded data at your fingertips ready to use.

In order to further understand why first-party data holds such value for marketers, we should also lay out what it is NOT.

First-party data is not the data that an advertiser or publisher obtains from another party – this is known as second- or third-party data.

Publishers especially (and some advertisers too) have an interest in bundling up their first-party data and monetizing it by sharing it with other parties who want to target their site visitors.

Data that stays in-house exclusively remains “first-party” and as we will see that significantly affects how it can be used – and its value.

Privacy: the big differentiator

So now that we’ve established that first-party data stays in the hands of those who collect it, we can understand the biggest reason behind its value.

Simply put – a brand’s customers or potential customers can give it explicit permission to use their data in a whole variety of ways. Data privacy regulations like the GDPR or ePrivacy require this, in fact.

Moreover, under the GDPR each purpose of processing data requires a separate consent, one for personalization, next for retargeting, and a different one if you decide to share it with some third party.

In the case of data that a brand passes to external parties this permission must be explicit – and there are specific limitations on what kind of data may be passed.

The combination of strict requirements for data sharing consent and the limited scope of data that can be included makes 3rd-party data less than optimum.

Let’s be honest – spending money for data that isn’t very specific – aggregated into segments instead of offering more detailed insights into individual customers – isn’t ideal.

With first-party data, the connection between data subject (customer) and data processor (brand) is more direct – thus the trust between the two sides is greater.

In addition, customers who are familiar with brands are less likely to treat marketing messages like spam – as opposed to their attitude towards ads from companies they haven’t interacted with personally before.

First party data
Using first-party data allows the data processor to stay in full control throughout the process of data usage.

And with trust comes more opportunities – both for marketing and eventually for sales.

Beyond privacy

But there are other reasons that marketers should really get on the first-party data bandwagon.

First of all, it’s much cheaper than buying data from a 3rd-party vendor. It may require more time and effort to collect and process and eventually put to use, but it is well worth it.

And besides, most of it (such as transactional data) would be collected anyway, so why not go to the trouble of getting permission and using it?

Sure, in the results-now-or-die world of modern marketing the temptation is huge to shell out a few hundred dollars, get a neatly bundled package of audience information and wait for sales to roll in.

But that’s just as bad as stuffing yourself with dessert and skipping the meat and potatoes – and ignoring some of the greater benefits of first-party data.

Personalization

The whole idea behind using data for digital marketing is, of course, to make it more effective.

That means better targeting – and that means more personalization for marketing campaigns of all kinds – AdWords campaigns based on search queries, restaurant ads on Facebook based on geolocation, display ads for used cars based on pageviews of a car comparison site.

But first-party data takes personalization to another level – in part by helping create a single customer view, also called a ‘360’ or ‘unified’ customer view.

To find out what benefits you can get with applying a single customer view, check out our blog post: What is Single Customer View and How Does it Work?

This can help:

  • Calculate customer lifetime value: by understanding the touchpoints that led to a conversion/sale in order to understand how much you spent to acquire that person
  • Gauge customer intent and position in the buying cycle: to suggest products/content customers may need or want (a white paper for more information or a discount to make a purchase).
    The wide variety of first-party data available for collection (social media interactions, comments and customer reviews and recommendations, etc.) make customer sentiment more apparent and easier to build on.
  • Reduce campaign waste: by eliminating low-value customers based on the more detailed information (average customer order value, demographics, etc.) it has access to.

While third-party data can provide some opportunities for personalization, there will always be an element of guesswork and imperfection.

With first-party data, content recommendations and advertising messages can be targeted at a more granular level. (Think “recommended products” from Amazon or songs from Spotify.)

For instance you may know that someone read an article about Morocco on a news site, but if you used third-party data from that publisher’s site to target them as a potential customer for a cruise around the Mediterranean, you might end up wasting ad impressions on someone who just happened to like one picture in the article.

Whereas targeting a visitor to your travel agency site who had viewed three different offers for trips to North Africa and then booked a trip with your agency last year would almost certainly yield better results.

Optimization

First-party data also holds value beyond a brand’s bottom line. The direct relationships built with site visitors and previous customers also hold many opportunities for customer experience optimization.

By gathering data on customer engagement with various parts of their site, with different digital assets or materials, a brand can gain invaluable insights into what they need to do better.

This is the approach that IAG has taken to its insurance business. Instead of focusing solely on driving sales, they combined the data collected from a range of sources to optimize, among other things, their claims processing workflow.

Obviously this allows them to optimize many areas of their business – communications, staffing, IT infrastructure and more.

And all of it is based on first-party data points that IAG has full and free access to.

Optimization also applies, of course, to marketing and advertising campaigns.

A constant influx of first-party data keeps the optimization ball rolling.
A constant influx of first-party data keeps the optimization ball rolling.

Brands are always in need of new information – at all levels – to help make their marketing efforts more effective. Otherwise they will be left with a “one-shot” campaign that may or may not achieve its goals.

Here first-party data takes precedence as well.

Most often 3rd-party data is exchanged (bought or sold) in fixed segments.

A fixed segment is defined by a certain period of time in the past and has a fixed number of audience members
A fixed segment is defined by a certain period of time in the past and has a fixed number of audience members

So for instance a popular news site might gather data about its visitors:

  • Articles, sections, categories viewed/keywords queried
  • Average time on page
  • Videos viewed

It might then set a recency and frequency for a set of that data (last 30 days, more than 5 articles viewed in a specific travel category and minimum one minute time spent on page), create an audience segment “Interested in travel” and sell that to a 3rd party.

Now – that might be valuable information, but the the brand who buys this segment may or may not know exactly how the segment was created. Nor will they necessarily know which sites the data was collected from, since it may be taken from across a range of different sites.

So “Interested in travel” actually doesn’t tell the whole story.

When a brand uses first-party data for its targeting, it can create own segments which can be constantly updated or optimized. This provides a much clearer picture of the customer and the brand will know exactly what each audience segment means.

In a 'live' segment, the size of the audience 'package' can grow or diminish depending on the settings used.
In a 'live' segment, the size of the audience 'package' can grow or diminish depending on the settings used.

Instead of having a vague or incomplete picture of a potential customer , a brand can base its campaign targeting on current information.

Eager to find more details on practical approach to first-party data? Read out post: First-Party Data Marketing: 3 Powerful Use Cases

Summary

Some marketers may complain that with so many devices being used these days, there is too much data to deal with.

Customer now have the luxury of jumping from smartphone to desktop to tablet and back again – which can make marketing attribution a real headache.

But the flip-side is that with so many digital touchpoints there are many more opportunities for companies of all sizes to get their hands on first-party data. And more and more, marketers are realizing how valuable it is, especially for its accuracy and relevancy.

This accuracy and relevancy can make for more meaningful and engaging customer experiences to attract visitors. Now all marketers need are adequate tools to fully take advantage of this data.

When they get them, they will be able to stuff themselves with data to their heart’s content.

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Author:

Ian Simpson, Digital marketing storyteller

Focused on developing strategies to build brand trust and drive lead generation through customer-centered content.

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Author:

Karolina Matuszewska, Content Marketer

Content Marketer at Piwik PRO. Specializing in issues of on-site and off-site personalization. Transforming technical jargon into engaging and informative articles dedicated for digital marketers and web analytics specialists. LinkedIn Profile

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