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First-party data: A reason to celebrate
Fri, 8th Apr 2022
FYI, this story is more than a year old

For years, brands have been utilising the benefits of third-party data to acquire customers. However, what happens when the tools needed for building that database get taken away?

The answer is first-party data.

The key to understanding first-party data is to start with zero-party data.
Zero-party data is information customers give to a business, like name, address, phone number, or other contact details. First-party data then naturally emerges from that information.

First-party data is learned data. For example, an eCommerce store would have data on customer purchase history. While this isn't information that the customers directly give, like with zero-party data, just being on a website and accepting its privacy policy gives a business permission to obtain that information.

Then there comes third-party data. Third-party data is anonymous data collected or bought through various sources (i.e.loyalty cards) by major platforms like Facebook or Google. That information is then used for target advertising.

At one point in time, this was the cheapest form of data. Campaign costs were low, and third-party targeted advertising was an effective way to drive traffic to websites.

However, in recent years, third-party has taken a hit. It first began when more businesses started flocking to this method of advertising, which drove costs up. Then Apple introduced app tracking transparency (ATT). Facebook lost an enormous amount of data as 62% of iPhone users opted out of allowing the social media giant to track their activity (CNBC, 2021).

On top of all this, cookies are being phased out. Google announced back in 2020 that by 2023, third-party cookies would be removed from Chrome.

ATTP, the end of cookies, and even the younger generations showing disinterest in Facebook, third-party data is no longer the best option as a long-term marketing strategy.

This creates a problem for the many businesses who put all of their eggs in the third-party basket, leaving them scrambling to source alternative options. However, the reality is an alternative solution has been here the whole time: first-party data.

While maintaining and nurturing a customer base should have been a top priority even before the fall of third-party data, it is now a must for businesses. This data, these customers or audiences that have subscribed to EDMs or monthly newsletters, need to be communicated with in order to keep your business top of mind. Engaging with and nurturing first-party data will have a much longer, more viable payoff than anything you can do with third-party data.

Although, this then brings about two questions:

  • 1. How do businesses convert third-party data into first-party?
  • 2. How do businesses nurture this data and keep them coming back?

There is a significant amount of information you can collect when visitors visit your websites, like items they've clicked on or things they've purchased. Then, you can deliver more personalised experiences to keep those customers coming back based on that data. This strategy has proven successful, with one study finding that 60% of consumers feel better about purchasing from a company that has sent them personalised messages (Taxoo, 2020).

By getting these users to come back, you essentially turn them into advocates for your business. You'll start receiving referrals from those customers, which is a much more powerful tool than repeatedly spending money trying to attract people who don't know your brand. Converting, nurturing, and maintaining your customer base is essentially like creating a passionate fan base that keeps returning and purchasing.

Once that fan base starts to become more loyal, suddenly, cost is no longer a priority. With third-party data, who is the cheapest option is the name of the game. These customers know nothing about the different brands and simply look for the most cost-effective option. First-party data gives you the power to leverage your brand. Customers will return not because you're the cheapest option but because they want to buy specifically from you.

One retail company found that they could increase their conversion rate by 158% if they developed a comprehensive email-marketing strategy that consisted of multiple trigger messages based on a subscriber's purchase history, browser behaviour, and product interest (Data Axle, 2021).

The best thing about first-party data is it's the most sustainable data available for one simple reason: it's yours.

Third-party data is like growing a garden at a rental property. You can put energy into growing and nourishing it until it becomes fruitful and profitable. However, the landlord can decide to sell the property one day, and all your carefully cultivated plants are no longer yours. Similarly, Facebook can suddenly decide to remove your page or accidentally suspend your Ads Manager account. Third-party data does not belong to you, no matter how much work and money you put into it.

On the flipside, first-party data is a garden in a home you own. You will be able to live off of the fruits of your labour, and nothing can take that away.

While first-party data has been around forever, it's now, more than ever, the sustainable option for businesses. As privacy changes continue to decrease the value of third-party data, the riskier it becomes for businesses investing too much in it.

The best solution now is to leverage the power of first-party data.