How Zero-Party Data Improves on the Promise of First-Party Data

This piece originally appeared as a TotalRetail post.

Privacy changes have forced marketers to consider how they can consensually obtain consumer data, inspiring debate over whether zero-party data exists and how it differs from first-party data.

While first-party data refers to information brands collect directly from consumers, zero-party data, as defined by Forrester, refers to information that consumers proactively and knowingly give organizations. In other words, first-party data might mean observing which items a consumer clicks on a website and then using that data to inform targeted ads. Zero-party data would include a consumer answering a taste preferences quiz or filling out an in-store form telling the brand what products she’s interested in.

Zero-party data improves on the promise of first-party data because it empowers organizations to give customers exactly what they want, earn audience trust through transparency, and get ahead of privacy regulations.

Give Customers Exactly What They Say They Want

Marketers often describe the advantage of first-party data over third-party data as the power to target customers based on verified information. Third-party data is infamously inaccurate because it’s generally probabilistic and aggregated from many sources, and continues to deteriorate as technology vendors disable tracking and cookies. By contrast, first-party data directly captures what the consumer does.

Zero-party data further boosts and complements the advantage of first-party data. It’s valuable to observe what a consumer does and deduce their preferences. For example, a clothing retailer might observe that a consumer hovers over a black sweater and assume she’s interested in similar apparel. But what if you also know more about their identity and context?

Zero-party data builds on the precision of first-party data by going directly to customers for information about what they want. Don’t always assume what a customer wants; ask them. This way, organizations can avoid assuming that a behavior observed one time should inform long-term efforts to convert a browser into a customer. Combining observed data with consumer-provided data can lead to better experience and increased conversions.

Earn Audience Trust Through Transparency

We all know that first-party data is generally superior to third-party data. But in many cases, brands use first-party data in ways that cause concern for the consumer as they had not explicitly consented to use the data.

For example, let’s say a furniture retailer sees a shopper browsing couches on its site and then retargets them on third-party platforms with ads promoting couches. Some consumers have infamously regarded these ads as creepy because they didn’t knowingly consent for the brand to collect their data and use it to send them ads across the internet. This is a case where first-party data has been collected and used without transparency, a suboptimal scenario from a privacy and customer experience standpoint.

Zero-party data neutralizes the creepy factor of data-driven targeting through transparency. If the brand asks the consumer explicitly what type of product category they’re in the market for and requests permission to provide promotions for those items, the shopper is much less likely to perceive targeted advertisements as invasive.

In fact, zero-party data flips the potentially creepy equation of first-party data-driven targeting on its head. When businesses ask consumers what they want and design marketing strategies to comply with those preferences, they don’t just avoid annoying the customer, they make the customer feel like their voice has been heard by providing them exactly what they’ve asked for. This approach creates long-term value rather than a one-time sale.

Get Ahead of Future Privacy Regulations

In addition to providing long-term business value, focusing customer data strategy on zero-party data is a way to get ahead of future privacy regulations. Again, collecting first-party data is better than relying on third-party data purchased from brokers with no direct link to the consumer. However, first-party data can still be collected without proactive customer buy-in, which is a major liability because all global regulations on data privacy emphasize consumer control and consent.

Therefore, to avoid building a data-driven marketing strategy that will need to be readjusted in a few years to comply with the next privacy regulations at home or abroad, organizations should focus on collecting information that consumers proactively and knowingly provide.

Digital marketing is full of jargon, and it’s understandable that many marketers’ impulse is to question whether the industry really needs another term for consumer data. But zero-party data isn’t a fad. It describes a way of collecting consumer information that will power more precise, effective and sustainable marketing strategies. Forward-thinking marketers, what are you waiting for?