What is Zero-Party Data and Why is it Important?
By Jordan Torpy
May 26, 2021
33 min read
What is Zero-Party Data and Why is it Important?
Table of Contents
It is one of the hottest buzzwords in marketing right now. Zero-party data. And it's all about asking instead of inferring.
Why should you care?
Customers are becoming increasingly wary of how their data is being collected and used. And legislation like the General Data Protection Regulation (GDPR) are starting to be more strictly enforced. A recent lawsuit was brought against Oracle and Salesforce for their use of third-party tracking cookies, which if successful could end up with fines in excess of €10BN.
At the same time, customers demand a more personalized experience, with 66% of shoppers saying a poorly personalized experience would stop them from purchasing.
This creates a serious tension for retailers: needing to respect consumer privacy while simultaneously having to craft wow-worthy personal experiences.
Zero-party data offers a solution. We’ll take a detailed look at what it is and some ways you can use it. But first, let’s see how it even became an issue in the first place. If you want to jump ahead to use cases, just use the table of contents below.
A Brief Overview of Customer Data
In 1923, Claude C. Hopkins published the landmark text Scientific Advertising. It showed how advertisers can apply scientific principles, including testing hypotheses and measuring results, to the field of advertising. This book is still considered a must read, and it played a significant role in making marketing activities measurable.
Of course, a lot has changed since 1923. Nowadays, you’d be hard pressed to find a marketer that doesn’t at least claim to be “data driven”. Some of the most valuable companies in the world have been built on vast troves of customer data. And according to The Economist, data is now the world’s most valuable resource.
Marketers in digital commerce have traditionally been concerned with three types of customer data: first-party, second-party, and third-party. Let’s take a look at some of the differences between these data types, and why they might be useful.
What is First-Party Data?
First-party data is information about a customer that a company directly collects via its own channels and sources.
Transactional data, demographic data, behavioral data, information from customer service...anything you directly collect from interactions with customers is first-party data.
It can come from both online and offline sources. This usually means a company will have various pools of first-party data sitting in different places: call center data in one place, transactional data somewhere else, and on-site behavior in another system. A tool like a customer data platform can help consolidate all that data into one place, making it more useful for marketers.
Why is First-Party Data Valuable?
First-party data is unique. It’s the information your company (and your company alone) owns, unless you share it with others.
Since you’re collecting it, it’s also free. Sure, there might be costs associated with actually collecting that data (like paying an employee), but you’re not paying another company for it.
Perhaps most importantly, you know the source of the data. Since you did the collection, you know if the quality is low or high, and if it was gathered with correct consent or not. This is incredibly important for being GDPR compliant.
Issues with First-Party Data
The main issue with first-party data is that you just might not have enough of it. Maybe users don’t want to share their information with you, or maybe you haven’t set up a strong collection process. Or maybe you’re a new, relatively unknown brand. In any of those cases, you won’t have a ton of first-party data to work with.
If that’s the case, you might consider turning to another type of data.
What is Second-Party Data?
Second-party data is another company’s first-party data that’s packaged and sold. There’s no other party involved: one company collects data, then sells it directly to another company. It’s the same type of data as first-party data, but the source is different.
Imagine you run an online direct-to-consumer sunglasses company, specializing in premium men’s sunglasses. You’ve collected a lot of information about your customers: what sort of products they buy, how often they shop, when they’re most active, their discount sensitivity, and so on.
You can use that data to optimize your marketing campaigns and improve your customer experience. But you could also sell that data to another business with similar clientele — say, an online shop specializing in luxury shaving products.
If you sold that data, the buyer would now have a bunch of second-party data to help them improve their business.
Why is Second-Party Data Valuable?
Second-party data is valuable because it can help you get more information about your customers. If you’re a business that’s just getting started, you might not have much data to use. Second-party data can help you build a customer base.
Second-party data can also help fill the gaps in your own first-party data. If your own data collecting methods aren’t very robust, buying second-party data can get you more information.
Finally, second-party data has the benefit of being sold directly by the company that collected it. That means that you, as a buyer, can audit the way they collected that data to be sure it was done in a GDPR compliant manner.
Issues with Second-Party Data
Second-party data has similar issues as first-party data, mainly related to scope. Since the data is being purchased from one company, the dataset often isn’t massive. If you want to work with truly large datasets, you often need to turn to third-party data.
The other issue with second-party data is related to security, privacy, and compliance. You need to make sure that you trust the vendor providing the second-party data, and be sure that they have permission to share that data with you.
What is Third-Party Data?
Third-party data is data that’s been collected from many sources, aggregated into one dataset, and packaged and sold. The companies that sell third-party data are typically not the companies that collected that data in the first place. Instead, they buy first-party data from many other companies, then bundle it to be sold.
Third-party data is frequently purchased through a data exchange, which is a unique marketplace specifically created for this type of data.
Why is Third-Party Data Valuable?
Unlike first and second-party data, third-party data isn’t limited to just what one company can collect. It’s got a major scale advantage over the other two data types.
Programmatic ad buying, which uses software to handle the purchasing of ads, relies on third-party data due to its large scale.
Third-party data is often sold via a data management platform, or DMP.
Issues with Third-Party Data
With first-party data, you know where your data is coming from. You know how it was collected, how accurate it is, and if you have the proper consent to collect and store it.
With third-party data, that’s not necessarily true. You might (rightfully) have questions about the quality of data you’re getting from a third-party data vendor. You also might be unsure if the data they’re selling has been collected with proper consent.
Another issue is exclusivity. Your first-party data is yours and yours alone. Unless you sell it, no other company has access to it. Third-party data, on the other hand, is available to anyone willing to pay for it. Your competitors could very well be using the same data that you are.
The Need for Zero-Party Data
All three of the data types mentioned above have their place and see widespread use. But consumers are becoming more wary of the type of data that’s being collected about them, and how that data is being used.
Companies are also more aware of the threats posed by legislation like the GDPR, with stories of massive fines coming out on a regular basis.
The makes zero-party data incredibly important.
What is Zero-Party Data?
Zero-party data is information that a customer freely provides to a company. It’s not inferred from how a customer behaves on your site. It’s explicitly given by a customer, typically with the expectation that giving their data will reward them with a better shopping experience.
“How often do you want to receive emails from us?”
“What type of content do you like to watch?”
“How was your most recent experience in our store?”
The answers to questions like these are all zero-party data, and brands can use that information to create better experiences for their customers.
Zero-party data differs from the other three data types because it is provided by the customer, not inferred from their behavior. It’s information a customer wants a company to know. It doesn’t have the creepy, invasive nature that some other forms of data collection can have. And it’s always given with full consent.
Zero-party data presents marketers with an opportunity to collect valuable, actionable, and ethically-gathered information about customers in a time where data collection and usage is fraught with challenges.
We’ll take a look at some of the ways brands can collect zero-party data, and then see some of the use cases that can be implemented with it.
How to Collect Zero-Party Data
Since zero-party data is given freely by a customer in return for a more personalized experience, it doesn’t make sense to collect it for anonymous customers. Zero-party data only makes sense for identified customers.
This means the first place you can start to collect zero-party data, is during the new user registration process (or when they sign up to receive your newsletter).
Zero-Party Data Collection Upon Registration
The exact type of information you ask for at registration will depend on your particular business. Let’s see some examples for inspiration.
Bloomreach customer baby-walz collects zero party data when users register for its mailing list. baby-walz specializes in products for expectant parents, infants, and young children. So when a user registers for its mailing list, the company asks for some information about the child.
New customers are often happy to provide this information because they know they’ll get more relevant information from baby-walz. And baby-walz gets higher quality data that they can use to create improved customer experiences online.
Stores that sell pet food use a similar strategy, asking new subscribers to give a little bit of information about the pet they’re shopping for.
It’s important to not overwhelm customers with questions when they register their accounts. You need to maintain a careful balance between getting enough information to improve the customer experience and keeping the experience relatively friction-free.
Another important note: only ask for data that you will actually use to improve the customer experience. If you ask your customer about what type of pet they have, then send them totally irrelevant offers, you’re going to annoy them. You might even lose them as a customer. So only ask for what you can actually use.
Collecting Zero-Party Data on Your Site
Collecting zero-party data upon customer registration is an obvious choice, but it’s not the only one. Zero-party data can be collected during any interaction with customers, including while they’re on your site.
You can collect zero-party data from category pages. An example below shows how a clever choice of button copy can turn a simple “see more” button into an opportunity to collect zero-party data.
Some companies have even dedicated entire sections of their site into a zero-party data experience. Take a look at this example from Victoria’s Secret.
Source: Victoria Secret
Customers are willing to share information because they’ll get a wardrobe that’s tailored to them. In return, Victoria’s Secret gets valuable zero-party data about its customers, which can be used to further improve its communications and customer experiences.
Collecting Zero-Party Data from Social Media
Another powerful way to collect zero-party data is by using social media. Polls, surveys, and engaging posts can all offer the opportunity for customers to share their preferences and intentions. This requires thoughtful execution, but the results can be great.
L’Oreal lets customers virtually try on their products via their camera, then lets users share their photos directly to their social accounts.
In theory, such an application lets a brand like L’Oreal see what types of products specific customers are interested in, which can be used to improve their future communications. It also has the added benefit of creating social proof for L’Oreal when users share photos with their networks.
Collecting Zero-Party Data from Other Channels
In theory, zero-party data can be collected from any channel that a customer interacts with. We don’t have examples for every channel, since many brands are just starting to realize the value of zero-party data. But we can walk through some hypotheticals.
Customer Service. An interaction with customer service is a direct link to the customer, and provides a valuable opportunity to collect first-party data. The problem, however, is that CRM systems are often not connected with marketing systems. This means that whatever zero-party data you collect from a customer service call won’t be used to improve the customer experience.
Email. Most brands ask for feedback from a customer after they’ve had some interaction with them. This feedback can be considered zero-party data.
Again, if you have a single customer view, you can use the zero-party data collected from email campaigns to improve the customer experience across all channels.
In-store. In-store and online experiences are starting to blend together, and most retailers want to find a way to connect the physical shopping experience with the virtual one.
It’s not uncommon to see tablets in stores, letting customers register an account, browse through a shop’s catalog, or even set up an appointment.
These can also offer a chance to collect zero-party data. Bloomreach client Sofology, a popular furniture retailer in the United Kingdom, uses tablets in its store to help customers design their dream sofa. The information collected from an in-store visit is added to their customer profile and used to create more relevant messaging.
Watch this video below to see how Bloomreach makes it possible to connect online and offline interactions into one seamless shopping experience:
Any Other Channel. Again, wherever there’s customer interaction, there’s the chance to collect zero-party data. As long as you can connect it with a unified customer profile, you can use it to create impressive customer experiences.
Zero-Party Data Principles
One of the major differences between zero-party data and first, second, and third-party data is its focus on customer centricity, transparency, and respect for the wishes of the customer.
In the spirit of respecting those differences, we recommend a few principles for collecting and working with zero-party data.
Triple Transparency. GDPR requirements demand transparency when collecting data. But that transparency often takes the form of an incomprehensible cookie banner that’s displayed when you visit a site. Many of these banners are so unclear or hard to navigate that it’s impossible to tell if a customer has opted in to data tracking or not.
On the contrary, zero-party data collection should be clear, transparent, and easy to understand from the very beginning.
The principle of triple transparency means being clear when you’re:
- Collecting data
- Utilizing zero-party data
- Letting customers change their data
Maintaining this transparency helps ensure you’re using zero-party data in a customer-centric manner.
Transparency When Collecting Data
Thanks to legislation like the GDPR, many companies are already transparent about when they’re collecting data. Nevertheless, it’s important to maintain that transparency when you’re collecting zero-party data as well.
For example, when a customer is signing up for your newsletter and you’d like to ask them for some additional information, be sure to clearly tell them exactly what information you will keep, and how you want to use it.
This level of transparency helps generate trust in your business, and gives the customers an incentive to share their information with you.
Transparency When Utilizing Data
Being transparent about when you’re using zero-party data can help reinforce a customer’s decision to share that data with you. It doesn’t need to be anything excessive, a simple message is often enough.
Letting Customers Change Their Data
Preferences change. Tastes change. Interests and budgets change. All of these changes are reflected in what customers want and expect. It’s important to allow customers to alter the zero-party data that they share with you.
A customer might love your emails and want to receive more of them. Maybe they recently moved, and their preferences for furniture have changed. Or maybe they’ve discovered a favorite new brand, and want to see more from them on their homepage.
A company with a sophisticated zero-party data strategy will let customers change their zero-party data. This is often handled from a preference center, connected to their account with your business.
Amazon provides an excellent example of such a preference center, as shown below.
An excellent preference center will show the data that’s been collected so far, how that data is used, and will let the customers update their preferences directly.
Zero-Party Data Use Cases: From Simple to Advanced
You don’t need to jump straight into complex use cases to start seeing value from zero-party data. You can start simple and build from there. The most basic use cases can most likely be accomplished with the tools you already have. More advanced use cases will require sophisticated technology, but the rewards for your business and your customers are worth it.
We’ll take a look at some sample use cases here.
Simple: Product Discovery via Quiz
Requirements: Developer capacity, creativity.
A quiz can be an easy way to collect zero-party data while also helping your customers to find the right products for them.
You could make a short personality quiz that recommends products based on your customers personality. That info could then later be used to personalize communications with your customers (provided you gathered it with the right consent).
These types of quizzes can work for all types of verticals. A bank could use a personality quiz to understand spending habits and then recommend the right type of credit card. A travel agency could use a quiz to recommend destinations. And a clothing company could use a quiz to recommend the right styles.
All you need to execute this use case is some developer skill and some creativity. But if you want to use the data you collect for future campaigns, you will need to store it in a single customer view.
Bloomreach customer My Jewellery had incredible success with this strategy. It created the style profile test to collect zero-party data from customers. It increased email open rates by 20% because of the creative campaign.
Intermediate: Personalized Newsletters
Requirements: Zero-party data collection upon customer registration, email marketing tool.
The most simple way to start using zero-party data is to start personalizing your newsletters. Collect relevant information when customers subscribe to your mailing list. That could be things like their favorite brands, their gender, birthday, info about their pets...anything that’s pertinent to both them and your business.
Then, use the information you’ve collected to personalize your marketing emails. If you’re collecting only basic information (e.g. gender), you can then segment your mailing list and create different emails for each segment.
If the information you’re collecting is more varied (e.g. favorite brands), you can either use a recommendations engine to help create your email, or use another type of personalization tool to fill your emails with relevant information.
BrewDog, a Bloomreach customer, used personalized email campaigns to increase revenue from email 13.8% and conversion rate from emails 11.5%.
Advanced: Personalized Homepage
Requirements: On-site personalization capabilities, single customer view with zero party data.
A completely personalized homepage or storefront is perhaps the pinnacle of zero-party data usage. It means curating the page a user see when they visit your site, based on the information they’ve provided to you.
Accomplishing this means you need the ability to completely personalize your website based on the information you have about your customers. Tools like Bloomreach or other marketing automation tools make this possible.
A personalized homepage can significantly speed up product discovery and customer satisfaction, leading to increased average order values, reduced time between repeat purchases, and lower cart abandonment rates.
Jenson USA used Bloomreach Discovery and Bloomreach Engagement to increase revenue per visitor (RPV) 8.5% thanks to optimizing search results based on customer segments. The strategy also led to a 26% increase in RPV for segmented searchers on mobile devices.
Bloomreach: The Most Powerful Way to Collect and Leverage Zero Party Data
Zero-party data sounds like an answer to customers’ simultaneous demands for increased privacy and increased personalization. But capturing zero-party data and using it to improve the customer experience presents significant challenges for businesses.
Bloomreach Engagement makes it possible for companies to deliver game-changing zero-party data experiences. Our solution lets you collect zero-party data, use it to build comprehensive customer profiles, and then activate that data across all your customer touchpoints.
Zero Party Data Collection
Bloomreach lets you collect zero-party data from any of your channels. If you want to collect zero-party data directly from your site, Bloomreach weblayers provides an easy interface that won’t be blocked by pop-up blockers. Data from any other source can easily be integrated thanks to a powerful import function.
Single Customer View
Bloomreach’s single customer view is a comprehensive profile of each and every customer in your database. All zero-party data provided by a customer can be stored in this single customer view, giving you one source of truth for your customer data.
The single customer view also makes it easy to alter or remove customer data, making it easy to stay compliant with privacy-friendly regulations.
Bloomreach's flexible campaign builder lets you create complex workflows that send personalized communications to every customer, based on the data kept in the single customer view. This lets you personalize every piece of content a customer might come across.
And Bloomreach's Experiments module lets you even personalize your website for individual visitors, based on the information kept in their single customer view. That means that if you have zero party data on customers, you can use that to personalize their experience on your site.
See Bloomreach in Action
If you want to make zero-party data a significant part of your company’s data strategy, you’ll need the right tools to get you there. Bloomreach’s customer-centric architecture makes it one of the best zero-party data tools on the market today.
Schedule a personalized demo today to see what Bloomreach can do for your company.