Why Everyone is Talking About First-Party Data and What You Need to Know
GDPR, CCPA, Google cookie depreciation, Apple’s privacy changes — it feels like there has been an endless stream of subtle threats for years now warning marketers that they need to focus on building their own arsenals of first-party data.
Many marketers ignored this until Q4 2021 when Snapchat announced a $72M loss during their earnings call and blamed iOS privacy changes. Skip ahead to Q1 2022, and Facebook loses $251B in valuation, the biggest one-day drop in market history, also thanks to iOS privacy changes.
The need for brands to focus on their own first-party data isn’t solely about preparing for the cookieless world. The massive shift to a direct-to-consumer (DTC) business model, made by disruptor brands and massive legacy brands alike, requires one key ingredient: owning the customer relationship (aka first-party data). In this new world, the brands that know their customers better than their competitors and recognize their consumers’ wants and needs (aka personalization) will win.
The challenge of collecting first-party data
But the battle for first party data comes with a new challenge or set of rules driven mostly by consumers themselves. The challenge is HOW you capture their data. The battle is no longer won by scraping, stealing, and following consumers around in order to get that data. Today’s consumers care more about HOW you know what you know about them more than WHAT you know about them.
Are you capturing their data in a trustworthy and transparent way?
Are they willingly giving you this information?
Have you given them value in return for this information?
First-party and zero-party data
This is the shift happening that goes beyond first-party data to a subset of it called zero-party data. Twitter has been aflame recently, debating as to whether zero-party data is a real thing or not, but whatever you choose to call it, the important difference is that this isn’t observed consumer data like behavioral or transactional first party data. This is about engaging consumers directly and having them explicitly give you this information.
There are two common ways to capture zero-party data. The first is a brand preference center, but brands have struggled with this concept. Let’s be honest — with the exception of initial account sign-up or loyalty program sign-up, not too many consumers will seek out and update their preferences for brands they buy from.
The second way is through gamifying the consumer experience, a strategy many are calling “Conversational Commerce.” A product match or personality quiz, trivia, live polling, interactive lookbooks — these are all forms of interactive experiences that are highly engaging to consumers, capture their preferences, and provide value back to the consumer in return. All of this happens between the consumer and the brand directly, creating a more trusted and transparent data-driven relationship.
A cosmetics company increased their Instagram engagement, driving 25x more swipe-ups and 2x higher email open rates compared to their benchmarks with a quiz helping customers understand their skin type, climate, age, make-up preferences and skin care goals. In return, the company delivered product recommendations both in the moment and in future communications. This simple quiz was used across social, onsite, and email to deliver a more personalized consumer experience, resulting in a 92% completion rate and 46% lead capture rate.
A leader in infant and juvenile products created a stroller and car seat recommender to help parents through what can be an overwhelming process of finding the right car seat for their child. This onsite quiz increased conversations 46% and reduced bounce rates by 19% while helping the company understand if the purchase was for new parents, a gift, or a growing family and what features are important to each customer.
What do you do with zero-party data?
Many brands are successfully deploying these interactive experiences across channels, driving immediate ROI as well as lifetime value. The improvement to lifetime value doesn’t just happen, though. There is another challenge that brands must address — which is now that they’ve captured the data, what are they going to do with it?
Three important things must happen:
First, now that the consumer has provided their preferences, brands must honor that and use it to provide a more relevant experience to them.
Second, brands must break down channel and data silos to effectively deliver that relevant experience across all channels.
Third, brands must break down channel and data silos to replace third party data, cookies, and other forms of tracking and use their first-party data instead.
This last point is key for how brands will survive, dare I say thrive, in a cookieless world.
Pam Erlichman is the CMO if Jebbit.