What is First Party Data?
First-party data is information your business collects directly from consumers. First-party data is the most valuable data your business can gather. Without it, it’s impossible to build and scale authentic customer experiences. Later in this post, we’ll talk about why first-party data is becoming more important than any other kind of customer data.
A modern enterprise collects first-party data both offline and online, across many customer touchpoints including:
- Mobile apps
- Point of sale
- Digital commerce
- Call centers
Enterprises then store this and manage this data across a variety of systems including:
- Order management
- Data warehouses
- Data lakes
- Other systems that retain data about customer interactions
First-party data can be explicitly shared with your brand by a customer—for instance when providing their personally identifiable information (PII) such as name, email, and address to complete an order.
Other first-party data is digital engagement data collected as part of observing customer behavior. Such as the campaigns they received, interactions with any of your marketing, sales, and support channels, or the log of content they consumed on your website prior to completing a transaction.
First-party data can also include customer satisfaction (CSAT) data obtained via survey or through your customer service department. Sometimes, first-party data is collected while the customer is still anonymous but later tied to the customer profile once they’ve chosen to identify themselves.
(Learn more about the types of valuable first-party data you can gather about customers.)
What is Second Party Data
The simplest explanation of second-party data is that it’s another company’s first-party data. The brand collecting the data (the first party) shares that data with you (the second party) directly, based on a business arrangement between your two companies.
One of the oldest forms of second-party data sharing was when direct marketers would purchase a list of magazine subscribers from a publisher and then send promotional mailers out to the subscriber base.
Today, that model lives on in digital form and is leveraged in a variety of new ways. For example, insurance companies embed their products within the purchase workflows of other companies—think of cancellation insurance while booking a trip, or an extended warranty while buying an appliance online. The insurer collects second party information they might use to promote an extension or other products. As another example, CPG manufacturers work with retailers to acquire second party point-of-sale and loyalty data that help design targeted product promotions and offers.
Second-party data is valuable because it’s data you wouldn’t otherwise be able to collect. In the past, many insurers and CPGs, for instance, didn’t sell directly to customers. So without second-party data, it’d be impossible for the insurer to service the policy, and difficult for the CPG to understand customer preferences. (This is changing, with more and more insurers and CPGs launching direct-to-consumer operations that collect and rely on first-party data.)
Shortcomings of second-party data are that it’s typically limited in scope and limited in how you’re permitted to use it. And it usually takes a lot of one-of partnership work each time you want to onboard a new data source. Additionally, it can be difficult to understand the full context in which the data is collected—resulting in uncertainty as to how receptive the consumer will be to messages from the second party.
What is Third-Party Data
Third-party data is data you acquire from an intermediary who is not the direct collector of the data. Third-party data is sold by aggregators who purchase it from publishers, websites, and other platforms where it was originally generated. Marketers have traditionally used 3rd party data for expanding their audiences and for customer acquisition.
Using technology such as tracking cookies, aggregators can gather data about millions and millions of anonymized individuals across multiple digital properties and devices. The data can include attributes in the categories of demographics, interests, behaviors, and more. Marketers can select among the various audience attributes to programmatically target new audiences with messages and campaigns.
The benefit of third party data and the programmatic approach is that marketers can rapidly target very large audiences for acquisition campaigns. The downsides of third party data are:
- There’s no transparency into the original source of the data, so quality and relevance can be highly variable
- The data is available as part of an exchange or marketplace, so you are competing with others to access and message to similar audiences
- Third-party data is the subject of growing privacy concerns and regulation
The Shift From Third Party to First-Party Data
About 10 years ago, third party data—and the data management platforms (DMPs) that allowed marketers to utilize it—was one of the most important customer acquisition tools in the digital marketers’ arsenal. But things have changed drastically. Today, the importance and utility of third party data and DMPs have greatly diminished. At the same time, first-party data has become more important than ever before. Here’s why:
- Brands are now competing on customer experience. In the past, the competitive battle between brands was all about digital acquisition. But with rapidly rising acquisition costs, and consumers valuing experiences more than even product or price, strategic imperatives have changed. To thrive, brands must now set themselves apart from the competition based on superior customer experiences. To craft and deliver those experiences successfully, you need to intelligently utilize all the (first-party) data customers share with you, as well as the customer behavior information captured at every point of interaction. That’s why first-party data (and to the extent it’s relevant and available second-party data) is at the heart of great customer experiences.
- Death of the cookie. Data management platforms (DMPs) were created specifically to reach new audiences based on 3rd party data. But DMP technology relies on 3rd party tracking cookies—and due to privacy and regulatory challenges, the viability of tracking cookies is now greatly diminished. Popular web browsers and add-on tools—through standards such as Apple’s Intelligent Tracking Prevention (ITP)— completely block these cookies as consumer privacy protection. Regulations such as GDPR and CCPA place tight restrictions on the use of all types of tracking cookies.
- Convergence of ad spending on a few channels. Another value point of the DMP/third party data duo was the programmatic access to a broad network of web properties on which marketers could place advertising. But with the emergence of Facebook, Google, and a handful of walled-garden platforms—and their next-gen targeting capabilities—as the true powerhouses of digital advertising, the value of those broad, DMP-powered networks has also greatly diminished. Ad spend has primarily converged on these few modern channels, and for many acquisition use cases, the DMP-driven ad networks are approaching obsolescence.
- Need to increase return on ad spend (ROAS). Another result of the ad spend convergence on just a handful of platforms is that acquisition costs have continued to rise—that is if you don’t take advantage of the ability to do more fine-grained targeting than ever before. Targeting more accurately increases yield and therefore lowers the cost per acquisition. Increasingly, brands are turning to first-party data to model best customers, and pass rich attributes about best customers directly into ad platforms like Google and Facebook to target lookalikes among the prospect base. The result is a significant drop in acquisition costs. (Watch how Pandora Media modernized their martech to reduce ad spend and increase ROAS).
Modern Tech for Harnessing the Power of First-Party Data: The CDP
It’s never been more important for brands to have a well-considered strategy for their first-party data. As a result, new technology has come to the fore, and it’s centered around managing, using, and governing first-party data for purposes of deploying outstanding customer experiences.
It’s called a customer data platform (CDP). CDPs are all about putting the customer at the center of everything you do by making the most of the first-party data that lies at the center of your customer relationships. CDPs help brands achieve this by:
- Empowering all your teams with the analytics and tools they need to understand customer and craft differentiated experiences
- Orchestrating every experience across all your customer touchpoints, so you can deliver what your customer needs, where they need it
- Bringing together all your customer data, and providing your CX professionals (including marketing, service, and sales) with governed access to everything you know about your customer
Beyond first-party data, CDPs also have the ability to leverage second and third-party data sources to enrich your all-important first-party data assets.
Building a Modern First-Party Data Strategy
ActionIQ’s technology and experienced team can help you empower your organization with the intelligence and agility you need to deliver memorable customer experiences that drive loyalty and growth. If you’d like to enact a first-party data strategy that puts the customer at the center of everything you do, contact ActionIQ today.