According to a study conducted by Accenture, customer data has emerged as a crucial asset for businesses in the digital age, driving decision-making and innovation to create competitive advantage.
Among the various types of customer data, first-party data might hold the most potential for businesses. In this article, we’ll discuss the benefits it offers, the challenges involved, and provide actionable tips for effectively collecting and using first-party data.
Understanding first-party data
To begin, let's define first-party data and highlight its significance in the business environment. First-party data refers to information collected directly from your audience or customers. This data is obtained through interactions at the point of sale, on your website, through email campaigns, and other touchpoints. It is unique to your business and is an invaluable resource for gaining insights into customer behavior, preferences, and needs.
They key attributes of first-party data are:
It’s collected directly from the customer – this means it’s much more accurate, since it hasn’t been passed around vendors which risks introducing mistakes and loss of fidelity
It’s collected with customer consent - this means that you’re better positioned to stay on the right side of privacy regulations and can build trust with your customers by honoring what data they do and don’t consent to your using
Your company owns the data asset you build from it – this means you don’t need to pay any additional fees to use this data, as you would if you were renting it from a third-party vendor
Some also characterize a subset of first-party data as “zero-party data,” focusing on a different method of collection. Rather than datapoints like transaction history and brand interactions that you keep track of through consented observation and measurement, this is data voluntarily shared by customers through surveys or experiences that let them input information to customize. Regardless of differences in how it’s collected, it operates in the same way as all first-party data, in that it is collected directly from the customer, collected with consent, and is owned by your company.
Understanding the other types of data: second- and third-party data
To fully grasp the significance of first-party data, it's essential to understand how it differs from second-party and third-party data. Let's explore each type:
Second-party data
Data obtained through a partnership or sharing agreement between two businesses is considered second-party. In this scenario, one company's first-party data becomes the second-party data for the other. It involves a trusted exchange of data between businesses that share a common target audience or complementary interests. For example, a clothing retailer might share its first-party data with a shoe manufacturer to enhance their joint marketing efforts. Typically these types of sharing arrangements will involve a data clean room or other process to redact the personally identifiable information and keep the data sharing privacy-compliant.
Third-party data
Data collected by external entities that are not directly associated with a business. It’s aggregated from various sources, such as data brokers, social media platforms, or third-party websites. Third-party data is often used to augment first-party data by providing additional demographic, behavioral, or interest-based insights. However, it is important to note that the reliability and accuracy of third-party data can vary, and it may not always align perfectly with a business's specific needs. It can also be a gray area when it comes to consent.
The difference between the different types of customer data
The key distinction between these data types lies in their source and ownership. First-party data is directly obtained by a business from its own audience, providing a reliable view of customer behavior. Second-party data involves a trustworthy data exchange between two businesses, allowing access to another company's audience insights. Third-party data, on the other hand, is acquired from external sources, making it potentially less accurate and potentially less compliant with regulations.
While all these types of data have their uses, first-party data remains the most valuable for businesses. The direct nature and close connection to the customer base enable businesses to develop stronger customer relationships, make informed decisions, and provide personalized experiences. It is also worth noting that many top brands augment their first-party data with data from second and third-party sources, creating a fuller picture of their customers.
Benefits of using first-party data
Enhanced customer insights - First-party data provides deep insights into your customers' behaviors, allowing you to understand their motivations and preferences. This knowledge empowers businesses to make data-driven decisions.
Improved segmentation and targeting - Using first-party data allows businesses to precisely target their marketing efforts. By segmenting your audience based on behaviors and interests, you can create more relevant and effective campaigns, resulting in higher engagement, improved conversion rates, and better return on investment.
Increased personalization - First-party data helps businesses create highly personalized experiences for their customers. By understanding preferences, browsing habits, and purchase history, you can tailor your marketing messages, product recommendations, and offers to match their specific needs, fostering stronger customer relationships.
Collecting first-party data
The first step to unlocking the potential of your data is to collect the data from the relevant touchpoints. Let's explore how first-party data can be collected from some common sources:
Physical Stores
For businesses with brick-and-mortar locations, there is a trove of first-party data available. Transaction information from point-of-sale systems, loyalty programs, and coupons all provide valuable information on purchase behavior, preferences, and patterns. Additionally, in recent years there have been several innovative technologies that have emerged, like implementing in-store QR codes, beacons or even Amazon’s Just Walk Out technology, which can all offer insights into foot traffic patterns and customer behavior within the store.
Websites
Websites are another key area that provides businesses with first-party data. A common method to do this is through the use of analytics tools such as Google Analytics. These tools provide valuable insights into user behavior, including page views, session duration, and referral sources. By tracking user interactions, businesses can understand how visitors navigate their website, which pages generate the most engagement, and identify areas for improvement. Form fills are also an area where businesses can later identify their users and map their interests.
Additionally, e-commerce platforms also allow businesses to keep track of purchases, providing essential transaction data, as well as potentially other personally identifiable information.
Emails
Email marketing campaigns offer another direct channel for collecting customer data. By tracking email open rates, click-through rates, and user engagement, businesses can gain insights into audience interests and preferences. Additionally, incorporating personalized email content and interactive elements like surveys or feedback forms can provide direct feedback from customers and further enrich the collected data. Most email marketing providers like Campaign Monitor or Braze have data collection by default.
Mobile apps
Mobile apps offer an interesting source of customer data. Similar to websites, analytics packages such as Firebase Analytics provide in-depth data on screen views, conversions and integrations. Additionally, since user accounts and logins are so common on mobile devices, businesses can encourage them to do so to record PII like email addresses, names and demographics. This becomes even more valuable as privacy initiatives like Apple’s App Tracking Transparency prevent this data from being available through third-parties.
Creating unified customer profiles
Once businesses have collected first-party data through various channels, there is a crucial next step— unifying and integrating all the data. Unifying data allows for a holistic view of customer interactions and enables businesses to make informed decisions based on a complete understanding of their audience, and not just a partial view limited by siloed channels. Here are key considerations for unifying collected data:
Data integration
Businesses should implement robust data integration strategies to consolidate data from different sources. This involves bringing together data from website analytics, CRM systems, email marketing platforms, and other data repositories into a centralized database. That way, all the collected data is represented in a single place to be cleaned, and unified. For the most comprehensive profiles, this should include full historical information as well as recent information, and be able to incorporate both online and offline / in-person data.
Data cleansing
Before unifying data, it's essential to conduct data cleansing processes to eliminate duplicates, standardize formats, and rectify any inaccuracies and inconsistencies. Data cleansing ensures that the unified dataset is reliable and provides a shared understanding that both “f_name” and “first_name” refer to the same thing.
Identity resolution
Establishing a reliable method for identity resolution is critical for unifying data collected from various touchpoints. With the proliferation of devices and channels, businesses need to accurately identify and link customer interactions to create a unified customer profile. Techniques such as deterministic matching (e.g., using unique identifiers) and probabilistic matching (e.g., using machine learning algorithms) can help businesses achieve accurate identity resolution.
After all, a business’ best customers are often the ones with multiple email addresses making purchases on multiple platforms. Their longest-standing customers also are most likely to have had life changes such as phone number or address changes. And these are the customers who are most important to have the best understanding of.
Data governance and compliance
When unifying data, businesses must adhere to data governance practices and comply with applicable privacy regulations. Implementing proper data governance ensures data security, protection of PII, and compliance with relevant data privacy laws such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).
While the considerations above may seem laborious and involved, all of these needs are well-served by a good customer data platform (CDP). The results are worth it: having a truly unified customer improves the accuracy and completeness of the data inputs that will power everything downstream, leading to much stronger results.
Activating first-party data
Using unified customer profiles to drive downstream business activities is like starting a race with a big head start — it gives businesses a huge advantage. While we can only scratch the surface in this article, here are three areas that businesses often fuel with a unified first-party data asset:
Marketing Optimization
First-party data lets businesses refine their marketing efforts. By analyzing customer behaviors and preferences, you can create personalized campaigns, develop targeted content, and optimize ad placements, resulting in higher engagement and conversions.
Watch our webinar on activating first-party data.
Sales Enablement
First-party data can empower sales teams with valuable insights. Understanding customer purchase history, preferences, and engagement patterns helps sales representatives tailor their approach, identify upselling opportunities, and provide personalized recommendations, ultimately boosting sales effectiveness.
Customer Service Enhancements
Utilizing first-party data allows businesses to improve their customer service. By understanding customer preferences and past interactions, you can provide more personalized support, anticipate their needs, and enhance overall satisfaction.
First-party data in a privacy-first world
Lastly, with increasing privacy concerns and regulations, the value of first-party data becomes even more prominent. As third-party cookies are phased out and privacy regulations evolve, businesses that prioritize first-party data will maintain a competitive edge. Building direct relationships with customers, obtaining their consent, and ensuring transparent data practices will be vital in this privacy-focused landscape.
First-party data has become the cornerstone of successful business strategies. While it used to be less common as an area of focus due both to the former ease of using third-party data and the former lack of tools and methods to make the most of it, in the new digital ecosystem the ability of first-party data to drive personalization, targeting, and customer insights is indispensable.
For more about first-party data, listen to this episode of the Pipeline Visionaries podcast, where our CMO Megan McDonagh talks through harnessing the power of first-party data.