Data is one of the biggest drivers of any successful marketing campaign today.
From building accurate customer profiles to understanding customer behaviour, data allows us to deliver personalisation at scale. Helping us improve customer experiences and increase customer retention like never before.
https://marketoonist.com/2021/07/zeropartydata.html
But what kind of data do you actually need to improve customer engagement and loyalty? More importantly, what constitutes valuable data?
In this article, we’ll discuss the four types of customer data, how they are obtained and how they can affect your customer retention strategies.
Zero-party - Proactively and intentionally shared data
1st-party - Data collected directly from your audience by their actions
2nd-party - Data collected from another source
3rd-party - Data collected by an entity that does not have a direct relationship with the user
Zero-party data is data that your customers proactively and intentionally share with you. It includes their purchase intentions, personal context, product preference information, and the ways they prefer your brand to recognise and communicate with them.
Unlike other types of customer data, zero-party data can only be obtained if the customer has enough trust in your brand. It’s a byproduct of active and informed customer participation where your customers grant you the right to use their data for a particular intent or value exchange.
Zero-party data is not about tracking a customer’s activity (that’s 1st party) and basing your next best action on that behaviour. It’s directly asking customers WHO they are, WHAT they want and WHY they are interacting with your brand.
Because zero-party data is openly shared, you get deeper insights into where your customers are in their buying journey. You also get a more accurate understanding of their needs, wants and buying motivations. Thus taking the guesswork out of your customer retention strategy.
How zero-party data affects your customer retention strategy
Zero-party data brings several benefits to both your customers and your brand. It allows you to:
Zero-party data also includes most benefits of 1st, 2nd and 3rd-party data (all of which we will further discuss below). When collecting zero-party data, remember to gather them progressively. You can collect data during transactions or interactions where the information makes sense to share with the brand, so you can avoid overwhelming customers with too many irrelevant questions at inappropriate times.
1st-party data is data collected indirectly from known customers interacting with your technology. It usually includes purchase history and behaviours, such as clicking on a link in an email. Because it comes straight from your audience and customers via their explicit interactions with your brand experiences, it’s also more relevant and accurate than external sources.
1st-party data is owned by your brand, making it cost-effective and easy to collect and manage, especially if you use a data management platform. Because it is your data, and you know the source and how it was gathered, privacy concerns are also minimal. However, customers may not always be aware that they are sharing 1st-party data with you. So it’s important to understand your customers’ personal boundaries and use the data they share respectfully to add convenience without being creepy. As a brand, consider sharing as much of your 1st-party data directly with the customer that generates it, as it is a shared data asset delivered in a way that’s relevant to them as much as it is valuable to you.
How 1st-Party Data Affects Your Customer Retention Strategy
With 1st-party data, you minimise the distance between your brand and the source of your customer data. Although it’s limited in scope and requires you to infer or assume the meaning of the collected data, it also enables you to:
2nd-party data comes from a source other than your own audience. It’s data you are borrowing from someone else’s 1-party data in order to enhance your own offering to your customers. 2nd-party data is sometimes collected by working with a trusted partner or an organisation that shares the same goals as you do.
Another way to obtain 2nd-party data is by purchasing it. It’s faster than finding a partner organisation that aligns with your interest. However, it can be riskier, and you can end up spending a significant amount of money for information that’s not helpful for your business. So make sure you get a preview of the information first before purchasing 2nd-party data.
How 2nd-Party Data Affects Your Customer Retention Strategy
2nd-party data can be used in a similar way as 1st-party data, such as predicting customer behaviours. But because it comes from another organisation, you may also uncover patterns that may have been missed in your 1st-party research. Allowing you to find new opportunities to engage with your existing customers and reach new audiences as well.
While 2nd-party data has its benefits, it’s important to remember that it also comes with its own constraints. For instance, you can have migration or integration issues when you combine data from outside organisations that have different data standards and definitions than your own. There may also be limitations on what you're allowed to use it for, especially in light of the increasing number of data privacy regulations.
3rd-party data is information collected by an entity that does not have a direct relationship with the customer it’s gathering data from. It often comes from multiple sources and is then aggregated together by a 3rd-party data provider such as a Digital Marketing Platform (DMP), Facebook or GoogleAds. Customers are also often completely unaware of how much data they are sharing via these platforms, what it is being used for and who is using it downstream.
3rd-party, data can come in a larger volume and broader scope than the other types of data mentioned above. However, because it does not come from a direct relationship with the user, it’s hard to trace whether it comes from a reliable data source or not. 3rd-party data is also not exclusive. This means it can be made available to other parties, including your competitors. Many brands don’t consider how much of their own customer data they are feeding into this network to arm competitors with a relevant audience.
How 3rd-party data affects your customer retention strategy
3rd-party data can help enhance your 1st-party data. However, you have to use it with a grain of salt. Just because it has more information, doesn’t necessarily mean it’s also relevant for your business.
Using 3rd-party data can also help increase the precision of your targeting and allow you to go beyond your existing audience. You can use this to compare the trends and patterns from your 1st-party data and identify behaviours that may align with your buyer personas.
While 3rd-party data can be useful in expanding your audience, it doesn’t give you the insights you need to create one-to-one experiences many consumers love. Your brand may also be contributing to 3rd-party data sources without getting any value in return. Do you know all of the trackers you (or your digital marketing agency) have installed on your website?
Data is central to how brands operate. However, not all data is created equal, especially when we look at the value it gives to your customers and your business.
When identifying which type of customer data to collect and use, always ask these questions:
We may continue to see widespread use of 1st, 2nd and 3rd-party data in the next few years. However, consumers are becoming warier of the type of data that’s being collected about them and how that data is being used.
As brands, it is our responsibility to handle our customers’ data with respect. Every data decision made should be geared towards transparency and customer-centricity - the very focus of zero-party data.
By doing so, you’ll be able to truly hear the voice of your customers and develop retention strategies that go beyond your customer expectations.
Want to learn more about how you can leverage zero-party data for your brand? Connect with our team today.
