Zero-Party Data vs First-Party Data: Pros and Cons
As public concerns and governmental restrictions on traditional data collection rise, marketers have sought other methods for gathering data. One approach, dubbed “zero-party data,” has gained traction amongst businesses and advertisers. But how does zero-party data compare to traditional first-party data collection methods, and how can businesses take advantage of this method?
What Are the Pros and Cons of Zero- And First-Party Data?
Both the zero-party and first-party data collection methods have their own advantages and disadvantages. Because of the marked differences in how data is collected, zero-party data collection may not yet be accurate enough to replace first-party data outright. However, it can still be an important component of your business strategy and can help supplement first-party data. Read on for explanations of both methods and their individual pros and cons.
What Is Zero-Party Data Collection?
Zero-party data is information willingly supplied by your audience or customer base. The term zero-party data was coined in 2018 by the research company Forrester. By definition, zero-party data collection encompasses all collection methods where the customer willingly and consciously provides their information. Examples of zero-party data include customer surveys, polls, and membership application forms.
Because data is collected with the customer’s knowledge, zero-party data is often considered more ethical than traditional methods and may thus prove more enduring. As regulations on data collection such as GDPR and CCPA limit the ways businesses can gather and transfer data without user permission, zero-party data will become more and more integral to a successful advertising strategy.
Builds Trust With Customer Base
Nowadays, customers know and expect their every move online to be tracked and recorded. While most resign themselves to the fact that a lack of total privacy is the tradeoff they make in return for the convenience of the internet, public attitudes toward data collection tend to be negative.
Being upfront and honest about your data collection and asking your customers to willingly provide information so you can serve their needs better can be a great way to build a relationship of trust. Surveys have shown that when asked, 52% of users say they expect businesses to provide them with a personalized experience. Therefore, it appears that it is not data collection itself that irritates users — it’s the fact that they often have no choice in the matter.
By actively seeking your customer’s consent and involvement in the data collection process, you show respect for their privacy and demonstrate that you value their input. This approach can foster a sense of partnership between your customers and your business.
One way to engage your customers in data collection would be to offer them exclusive benefits or rewards for sharing that information. For instance, providing users with personalized offers, early access to new products or services, or membership in a loyalty program can encourage them to willingly share their data. An effective zero-party data collection strategy creates a positive customer experience and establishes a foundation for long-term loyalty and trust.
Gets the Information Directly From Your Consumers
Zero-party data comes, as the saying goes, directly from the horse’s mouth. When handling other types of data, businesses need to analyze and connect various data points to infer what their customers would think about a business decision or how they would react to a different advertising strategy. In the case of zero-party data collection, all you need to do is ask. Through collection methods like incentivized surveys and polls, businesses can get valuable and clear answers to important questions without needing to interpret tangentially connected data.
Collecting zero-party data reduces the need for guesswork when you are personalizing the individual customer’s experience. People tend to appreciate things more if they created them on their own — customers may be more likely to appreciate service or product personalization if they feel like they had a hand in it.
The direct nature of zero-party data enables businesses to stay agile and responsive to their customers’ evolving needs and preferences. As long as you regularly request feedback, it may be possible to quickly identify shifts in sentiment or emerging trends. This agility allows companies that fully take advantage of zero-party data to stay ahead of the competition and proactively address customer concerns, creating a more satisfying and engaging customer experience.
It May Not Build an Accurate Picture of Correct Data
Unfortunately, even when they are trying to be honest, people are not always objective. Studies have shown that respondents are often not completely truthful when answering survey questions.
People have many reasons to misrepresent the truth during data collection, from willful maliciousness to subconscious self-deception. Perhaps answering in a certain way may improve their feelings of self-worth, or they may shy away from answers they deem less socially acceptable.
In either case, these inaccuracies can introduce an element of uncertainty to zero-party data collection. While this does not diminish the importance and usefulness of zero-party data for businesses, it is something they need to be aware of when strategizing. Combining larger data sets collected through different methods can help mitigate risk.
By comparing and contrasting the information obtained from zero-party data with insights derived from first-party data, you can identify inconsistencies and develop a more accurate understanding of customer preferences and behaviors.
For instance, if you find that customers’ self-reported preferences from a survey (zero-party data) do not align with their actual browsing or purchase history on your website (first-party data), you may need to reevaluate the questions you ask or the way you frame them to elicit more accurate responses.
The Information Is Owned by the Customer, Not You
One limitation of zero-party data is that the information belongs to the customer, rather than the business. As a result, customers have the power to retract their consent or request the deletion of their data at any time, thanks to data protection regulations such as GDPR and CCPA. This dynamic can impact the continuity and completeness of your data sets, making it essential to maintain ongoing communication with your customers to ensure their continued consent and participation.
What Is First-Party Data Collection?
Until recently, first-party data has been the standard in data collection. First-party data is gathered directly from your customers through their interactions with your website, social media, and other digital touchpoints. This type of data includes behavioral, transactional, and demographic information, which helps you build detailed customer profiles and tailor your marketing campaigns.
Allows You to Track Analytics and Customer Behavior
First-party data collection enables you to monitor key performance indicators and track customer behavior, providing valuable insights into their preferences and online habits. By analyzing this data, you can identify trends, optimize your website, and develop targeted marketing campaigns that resonate with your audience.
Through first-party data, you gain access to a wealth of information about how customers interact with your brand across various channels. By using first-party data, you can identify patterns in customer behavior, such as purchase intentions and history, that can inform your marketing and customer engagement strategies.
For example, by analyzing website analytics, you can identify which pages have the highest bounce rates and determine whether you need to improve content, design, or user experience on those pages to better engage visitors. Similarly, by tracking interactions, you can identify which types of content generate the most engagement and tailor your content strategy accordingly.
Highly Accurate Information Is Provided
First-party data is collected directly from customer interactions, which means that it is usually considered highly accurate and reliable. Through first-party data, you are measuring how your users actually act, not how they say they act. Even if your customers believe they are completely honest when submitting zero-party data, the information may not be completely accurate.
First-party data tells you the cold hard facts about how your customers really behave when interacting with your web pages and content. By analyzing the various touchpoints at which customers interact with your brand, you can identify potential bottlenecks or areas where customers may be experiencing friction, allowing you to optimize your processes and improve conversions and overall customer satisfaction.
Doesn’t Help Build Customer Loyalty or Trust
The collection of first-party data, particularly when done without the customer’s explicit knowledge or consent, can harm customer loyalty and trust. Increasingly, customers expect transparency and control over their data, and businesses that fail to provide these options risk alienating sections of their customer base.
While your business may only be collecting data to improve its own services and products, many consumers conflate all data collection with the data vendor business model, where companies gather and sell customer data to other companies. Since not every data vendor is ethical in their business practices, this may often end with customer data in the hands of people willing to exploit and misuse it.
Make sure your customers know why and how you are collecting their data, disclosing steps you are taking to safeguard it. Give them the option to opt out of data collection without obfuscating or complicating the settings. If customers feel that your company honestly cares about the safety of their data, that may improve brand affinity and trust.
Consumers May Have Concerns About Their Privacy
With growing concerns about privacy and the misuse of personal information, consumers are becoming more wary about first-party data collection methods. This sentiment can lead to a negative perception of your brand and may prompt customers to seek out competitors who are more transparent about their data collection practices.
One way to address these concerns is by implementing privacy-enhancing technologies, such as cookie consent banners and data-collection preference centers, that inform users about the data being collected and give them the option to opt out if they choose to. If you give customers control over the information they share, they may feel more comfortable and reassured that their privacy is being respected.
Additionally, businesses should ensure that their privacy policies are always clear, concise, and easily accessible, so customers can easily see how their data is being collected, stored, and used.
Best Practices for Integrating Zero-Party Data Vs First-Party Data
Here are some strategies to help you gain better insights for your business:
Implement a Hybrid Data Collection Approach
Use a mix of zero- and first-party data collection methods to gather a broader range of information and build a more complete customer profile. Include second-party data and third-party data from other organizations in your data sets wherever doing so is logical. This approach ensures that you have access to both self-reported preferences and observed behaviors, allowing you to develop more effective marketing campaigns and improve customer service and product recommendations.
Employ Data Analysis Tools and Techniques
Utilize advanced data analysis tools and marketing technology to identify patterns and trends in your data sets. By applying data-driven methodologies such as predictive analytics and machine learning, you can extract valuable insights from your data and use them to inform your marketing strategy, providing relevant experiences to your audience. AI-driven data science technologies, like those used by AUDIENCEX in our AXi suite of solutions, can help you efficiently gain deeper insights from your own data set regardless of its size, supplementing it securely with fully consented, opted-in data sets to enable invaluable analysis with a significantly lowered threshold.
Prioritize Data Quality and Integrity
Ensure that the data you collect is accurate, complete, and up-to-date. Implement data cleansing and validation processes to identify and correct errors, establishing data governance policies to maintain the integrity of your data over time.
Foster a Data-Driven Culture
Encourage a data-driven mindset within your organization by promoting data literacy, providing training opportunities, and involving team members in data-driven decision-making processes. By fostering a culture of data-driven decision-making, you can ensure that your marketing efforts consistently leverage the full potential of your data to drive growth and success.
Gain Better Insights and Reporting for Your Business
As browsers and websites phase out third-party cookies, businesses need to find other ways to gather data. Luckily, AUDIENCEX provides your business with detailed and actionable insights and analytics on user behavior and interests.
Our suite of AI-enabled solutions, AXi, provide in-depth analysis of your own data, access to the industry’s largest opted-in data sets, custom bidding algorithms, and predictive audience modeling, fully integrated and leveraged across digital channels through our seamless media access. Our machine learning solutions and analytics team provide an unbiased, ideal channel mix and a holistic view of your entire user journey, gathering invaluable data while helping to identify friction points and optimize your strategies.
Real-time analytics enable your campaigns to respond fluidly to changes in customer behavior patterns, with seamless omnichannel performance data and continuous, AI-powered optimization, helping your campaigns to constantly adapt and maximize every spend.If you’d like to learn more about our technology-enabled, data-driven approach to advertising, please contact us today. We’d love to connect and discuss how our expert strategic teams, tech-enabled creative, AI-driven analytics and innovative solutions can help you achieve any marketing goal.