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 to focus on is first-party data, which stands out for its numerous valuable characteristics.
First-party data has become a source of quality marketing insights, especially given that 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 is more accurate and easier to control while still offering possibilities for personalization and campaign optimization.
Marketers are also turning to first-party analytics as it lets businesses operate in a privacy-compliant and cost-effective way. On top of that, first-party data helps build durable relationships and trust with consumers.
In today’s article, we’ll show you why first-party data beats third-party data and the benefits it brings to your marketing efforts.
First-party data is the information that a brand or company collects directly from its customers and users. Because of that, the organization has more control over it and how it was obtained, and it’s more accurate than second- or third-party data that are collected by another player.
First-party data comes from the organization’s own online and offline sources. For instance, online sources consist of data about customer interactions on a website or app, like form submissions, product views and in-site search queries.
Offline sources of first-party data can include:
- In-person events (store visits, trade shows, etc.)
- Sales calls
- Physical coupon redemption
First-party data consists of various types of information:
- Customer purchase history
- Account information (in the case of a loyalty program, etc.)
- Site or mobile app interactions
- Interests and preferences
- Social media information
- 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.
Read more about data onboarding and how to take advantage of it in these articles:
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.
Before we dive into the advantages of first-party data, it’s important to understand its siblings, that is, second-party and third-party data.
Second-party data is data collected by your business partner directly from visitors and clients and then exchanged or sold to you. You don’t gather the data yourself, but do know its source.
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.
Operating on first-party data helps you comply with global data protection laws.
Crucially, first-party data stays in the hands of those who collect it, and that gives more control and transparency concerning what happens with that data.
A brand’s customers or prospects 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, such as personalization, retargeting, or sharing the data with third parties, requires separate consent.
It’s easier to obtain consent for first-party data because you ask your customers directly to share this kind of information and they know what purposes you will use it for. As you know where the data comes from and where it’s stored, you stay in full control throughout the process of data usage.
Privacy is not the only reason why marketers should get on the first-party-data bandwagon. Since you obtain first-party data directly from customers or prospects, it is more accurate than third-party data, which tends to be aggregated from various data sets.
Also, first-party data is the foundation for understanding your clients because it’s based on actual interactions with your brand across the vast array of consumer touchpoints, both historical and in real-time. The insights you gain are more relevant to your business and give you comprehensive information about the consumers’ interests, the problems they are facing, and their needs and preferences.
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.
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. In some cases, you may offer incentives, such as discount codes or access to premium content, to encourage people to make a purchase or sign up for a service.
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.
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 that are familiar with brands, share data with them, and more likely to 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.
The idea behind using data for digital marketing is to make it more effective. That means better targeting and applying personalization to 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, 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 you have access to, i.e., average customer order value, and demographics.
Though providing personalized offers is also possible with third-party data, it will always have 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 there is a better approach. Say a visitor to your site viewed three offers for trips to North Africa and subsequently booked a trip to Morocco. Targeting that visitor will yield better results.
Read more about applying first-party data in: First-party data marketing: 3 powerful use cases
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 optimizing customer experiences.
As a brand gathers data on customer engagement through 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 improve customer engagement. Instead of focusing solely on driving sales, they combined the data from many sources to enhance things like their claims processing workflow.
This allowed 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.
The main problem with third-party data is that most often, it’s exchanged, bought or sold in fixed segments.
So, for instance, a popular news site might gather the following data about its visitors:
- Articles, sections, categories viewed/keywords queried
- Average time on page
- Videos viewed
It might then set 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 1 minute time spent on page
Then, it’s possible to apply that information to create an audience segment of “Interested in travel” and sell that to a third party.
That might be valuable information, but the brand that buys this segment may or may not know exactly how the segment was created. It might be unclear what sources 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.
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 analytics will take time and might be challenging at first.
But the effort will allow companies to adapt to a new reality and bring them many advantages. First-party data gives marketers 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.