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Why first-party data is the most valuable to marketers [Updated]

Data privacy & security Product best practices

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Published May 14, 2021 · Updated May 17, 2021

Why first-party data is the most valuable to marketers [Updated]

Marketers these days have a lot of data to choose from: online, offline, customer, transactional, operational. Each kind has its uses, advantages and disadvantages, but one stands out for its value, in many ways. That is first-party data.

Third-party cookies are on their way out, and third-party data in general is becoming a harder sell. In its place, first-party data has become a source of more and better marketing insights. It’s more accurate and easier to control while still offering possibilities for personalization and campaign optimization.

Marketers are also turning to first-party data as it lets businesses operate in a privacy-complaint and cost-effective way. On top of that, first-party data helps build trust and durable relationships with consumers. 

In today’s article, we’ll show you why first-party data beats third-party data and the benefits it brings for your marketing efforts.

What is first-party data?

First-party data is the information that a brand or company collects directly from its customers and users: online data about customer interactions on a website or app, like form submissions, product views, in-site search queries.

But first-party data also comes from offline sources:

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

It also includes 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. However, if a company wants to use it for digital marketing campaigns, it will need to “onboard” the data. The onboarding process brings offline information into the digital realm. It requires some work, but is extremely beneficial in the long run.

What’s more, technological innovations, such as a customer data platform (CDP), allow you to merge those kinds of data dispersed across various digital channels. They put comprehensive data sets at your fingertips.

To better understand why first-party data holds such value for marketers, it’s important to keep in mind a few things. 

First-party data is gathered directly from an organization’s customers and users. This means that, unlike second- or third-party data obtained from another party, it’s more accurate and the organization has more control over it. This translates into less precise data and poor transparency of how it was obtained. We’ll talk more about it later in the article.

Of note!

Before we dive into the advantages of first-party data, it’s important to understand its little sibling, that is third-party data. 

Third-party data is data that comes from many sources and is sold by third parties. It’s the least valuable type of data and raises many privacy concerns. However, marketers who don’t have access to first- or second-party data use it to target their desired audience in online campaigns. 

Read more about second-party data in: What is second-party data and how can it improve your marketing tactics?

Privacy compliance

Operating on first-party data helps you comply with global data protection laws. First, first-party data stays in the hands of those who collect it, and that gives more control and transparency over what happens with that data. 

A brand’s customers or potential customers can give explicit permission to use their data in a whole variety of ways. For instance, privacy laws such as Europe’s General Data Protection Regulation (GDPR), ePrivacy, and Brazil’s General Personal Data Protection Law (LGPD) require obtaining individuals’ consent if an organization wants to process their data. Under the GDPR, each purpose of processing requires a separate consent for personalization, retargeting, and a different one if you decide to share it with third parties.

It’s easier to obtain consent for first-party data. This is because you ask your customers directly to share this kind of information, and they know whether you’ll use it for personalization, retargeting, or if you’ll share it with a third party. As you know where the data comes from and where it’s stored, you stay in full control throughout the process of data usage.

Accuracy

But there are other reasons that marketers should get on the first-party-data bandwagon.First-party data is more accurate because you obtain it directly from your customers and prospects, unlike the third-party data that is often aggregated from various data sets. Also, this data comes from your audience, making it more relevant to your business. 

As your relationships with customers grow, you’ll be able to add new details and refine your data sets, keeping the data up-to-date and precise.

Price

First-party data is cheaper than buying data from a third party. It may require more time and effort to collect, process and eventually apply it, but it is well worth it. Also, often you get it for free. As prospects become customers, you collect contact and purchase information – to use that data, you only need their consent. 

That’s a significant difference compared to third-party data where you spend money on data that is imprecise and aggregated into segments instead of offering detailed insights into individual customers. 

Trust and engagement

As you gather data first-hand from your customers and inform them about all processing purposes, you build trust and solid relationships with them. In turn, this trust brings many opportunities, both for marketing and sales.Customers familiar with brands, share data with them, and more likely engage with those brands.

In addition, obtaining information directly from your customers allows you to speak the same language, better adjust your offers to their preferences, and help solve their problems. 

Personalization

The idea behind using data for digital marketing is to make it more effective. That means better targeting and applying personalization for marketing campaigns of all kinds. It could be:

  • Google Ads campaigns based on search queries
  • Restaurant ads on Facebook based on geolocation 
  • Display ads for used cars based on page views 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.

Read more about applying a single customer view in this article: Single customer view (SCV): what is it and how does it work?

Single customer view helps you:

  • Calculate customer lifetime value. This comes from understanding the touchpoints that led to a conversion, whether it’s a purchase or ebook download, to understand how much you spent to acquire that client.
  • Gauge customer intent and position in the buying cycle. That allows you to suggest products and content consumers may want, e.g. a whitepaper for detailed information or a discount to make a purchase. The wide variety of first-party data available, i.e. social media interactions, comments and product reviews and recommendations, makes customer sentiment more apparent and easier to build on.
  • Optimize campaign costs by focusing on profitable customers based on the in-depth information it has access to, i.e. average customer order value, demographics. 

While with third-party data it’s possible to provide some opportunities to personalize offers, there will always be an element of guesswork and inaccuracy.

First-party data enables targeting content recommendations and advertising messages 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. Let’s say you’ve used third-party data from that publisher’s site to target them for a cruise around the Mediterranean. In such a case, you might end up wasting ad impressions on someone who just liked one picture in the article.

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

Read more about applying first-party data in: First-party data marketing: 3 powerful use cases

Customer experience optimization

First-party data holds value beyond a brand’s bottom line. The direct relationships built with site visitors and previous customers create many opportunities for customer experience optimization.
As a brand gathers data on customer engagement with its site and different digital assets, it gains key insights into what it needs to do better. 

This is the approach Australian insurance group IAG took to boost their business and optimize customer engagement. Instead of focusing solely on driving sales, they combined the data from many sources to improve things like their claims processing workflow.

This allows them to improve many areas of their business such as communications, staffing, and IT infrastructure.
All that was possible thanks to first-party data points that IAG has full and free access to.

However, optimization proves itself most useful in marketing and advertising campaigns. A constant influx of first-party information keeps the optimization ball rolling.

Brands continually need 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.

Third-party data issues in optimization

The problem with third-party data is that most often it’s exchanged, bought or sold, in fixed segments.

fixed-segment
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 and use the following criteria:

  • Last 30 days
  • More than 5 articles viewed in a travel category 
  • Minimum one minute time spent on page

Then, it’s possible to apply that information to create an audience segment “Interested in travel” and sell that to a third party.

That might be valuable information, but the brand who buys this segment may or may not know exactly how the segment was created. It might be unclear which sites the data comes from, since it could be taken from a range of different sites.
So “Interested in travel” doesn’t tell the whole story.

When a brand uses first-party data for targeting, it can create segments and constantly update and optimize them. This provides a 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.

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

First-party data – a competitive advantage

The technological changes caused by killing third-party cookies and the growing number of new tighter privacy regulations are making companies rethink their data collection strategies. The shift of priority from third- to first-party data will take time and might be challenging at the start.   

But the effort will allow companies to adapt to a new reality and bring them many advantages. 

First-party data gives marketers often unique information about their customers. That leads to a better understanding of customers, as well as a relevant and accurate way to reach out to them with a personalized offer. Accuracy and relevancy help marketers provide more meaningful and engaging customer experiences across multiple channels. Finally, when a business obtains unique information from its prospects and customers, that puts it one step ahead of the competition. 

Now what all marketers need are adequate tools to take full advantage of first-party data. 

Make good use of your first-party data with a customer data platform (comparison of 7 CDPs)→

Find the right analytics platform to collect first-party data (Google Analytics vs. Piwik PRO →

Author

Karolina Matuszewska

Writer and content marketer. Transforms technical jargon into engaging and informative articles. | LinkedIn profile

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Ian Simpson

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