First-Party Data: What is it and How to Use It
First-party data allows you to make the interactions with your audience/customers highly contextual and customized. You can use it to serve every individual uniquely.
Since last November, we have been getting a lot of questions regarding how to use first-party data effectively, as the new IOS Update 14.5 has made tracking cookies a bit problematic. And as I foresee, in no more than a few years, we’ll be a part of a cookie-less future where the reliability of third-party data will dwindle even more.
But for now, we live in our kind of the first-party data of Renaissance in so many ways because we have a lot of cool opportunities in terms of what we can do for businesses.
Especially in the e-commerce space, some really fascinating and unique things can be done.
So, let’s talk about those opportunities, how you can apply them, how you can use them, and the difference between first, second, and third-party data.
What is First-party Data?
First-party data refers to the first-hand information you’re able to collect from your individual customers. This is the data you can store and leverage in many different ways for your business moving forward.
Some people may also call it zero-party data, but it is just another name for, again, first-party data.
You can use it in the email to segment your audience differently or in your automation like Heyy, this person’s birthday is coming up, so when do we send in an email? Those are going to be data points you can use in a forward-facing manner. And when you’re up on your tiptoes like that, all proactive in the marketing game, it makes your customer’s journey really smooth and allows you to improve the overall customer experience as well.
Since there are multiple ways you can use this data, people also call it the oil of the 21st century.
Why is First-party Data Important?
Firstly because the reliability of third-party data is decreasing in so many spaces across the internet, for instance, Facebook ads are becoming less and less impactful. And not just me but many other people in the digital marketing area are also facing and observing this.
For you, it might be manifesting itself as declining ROAS because, again, the IOS 14.5 update has made tracking difficult and less precise.
So it has changed the way that marketers can leverage that data to target their particular audience for more customized content specifically. The same is the case with Google ads as well.
So, with third-party data losing its credibility, first-party data becomes an even more valuable and powerful tool for your business because it allows you to create a seamless experience for that end user.
For example, suppose I own a business. In that case, I can ideally create a highly impactful contextual relationship with my customer because I can serve them uniquely in the way they need to be served.
For example, there are different ways we can do this but what we really love is leveraging the use cases. (As always, I’m going to quote that example of children’s clothing here.) So, you can go about this like, Heyy, are you a parent? Or a grandparent? Or a gift giver?
That would help us understand what they are here for because, of course, all of these three groups are going to need very different things. And if you can specifically speak to them in the way they need to be spoken to, that’s a lot more powerful way of developing that relationship.
That would also help you understand how often you should be communicating with each of them. Like do you need to communicate with a gift-giver in the same way as a parent? Maybe, maybe not, because the parent may need some extra information.
So, we ideally would want to make it impactful whenever we talk to them, and for that, it has to be relevant and at the right time around specific times of the year.
This system of data collection is revolutionary because it has changed businesses in so many positive ways. Contrary to that, if we see how businesses were typically framed in the past, it was like, first we have a producer, then a wholesaler, then a retailer, and then an end-user/consumer.
So if you notice, there’s a lot of gap and distance between the producer and the customer. And if you have multiple intermediaries like that in a business, not only does your margin decrease, but also you collect very less data along the way.
So the more this gap can be compressed, the more benefit we’d be able to reap. That way, we’ll need fewer wholesalers and maybe fewer retailers as well.
So this new system of data collection allows us to connect these dots and create a direct consumer relationship in a way to drive more revenue for the business, and this is something that hasn’t been possible in the past.
And with resources like Shopify in the picture now, things have become a lot easier since businesses do not have to go through that hassle of developing the infrastructure from scratch. One such example is Heinz, the ketchup brand, like how they built a Shopify store in just three days during the beginning of the pandemic. However, in the past, it would’ve taken them months or years to do it.
First-Party Data Examples
· Use Cases
When talking about examples of first-party data, we always start with the different categories you have divided your customers into. For instance, what is your primary segmentation category? As we talked about it earlier, like are they a parent, a grandparent, or a gift giver?
And if you own a coffee business, you’d segment them into categories based on their coffee preferences in terms of whether they prefer a unique type of coffee or standard ones?
These are all going to be small chunks of information that will help you communicate with them uniquely in a way to add value.
So these use cases are what will help you think about them differently.
We can also think about first-party data in terms of behavior. Like, is my audience engaging with my content? This is the stuff you can use in an email that can help you in a forward-facing way through your CRM.
You can look for patterns like when did a person last engaged with your content/email? Was it 30 days ago? Or 60? Or 90?
You can also look for data like if this person has visited my site or store, has he reviewed products? Or submitted forms? Do they follow you on social media? – All of this is the first-party data you can collect based on their behaviors and then use it to interact and engage effectively.
Similarly, you can also check if they have submitted any online requests? If they had a complaint? If they have canceled a subscription in the last ten days and so on.
· Customer Journey
Moving forward, their customer journey can also help you a lot in collecting some valuable first-party data.
For instance, have they recently visited your store and made a purchase? Did they receive their welcome sequence? Are they being appropriately nurtured?
All of that is, again, going to allow you to adjust and tailor your communications accordingly.
Similarly, their demographics can get you some really valuable first-hand information as well. For example, what’s their age and gender, and what devices do they prefer? Like do they lean more on mobile or desktop? Are they open to SMS or not?
· Customer category
In some cases, it can also be like what categories do they fit into, like are just visitors or purchasers as well, they a high average order value purchaser, low AOV purchaser? If you have a subscription-based product, are they a subscriber or a non-subscriber?
Do they purchase apparel equipment? All of these different areas are going to be different ways we can use this.
And also, I think one area where more businesses are going to be looking at is; are they omnichannel purchasers or single-channel purchasers?
For instance, we have this one client who recently migrated over to Shopify POS, and it’s been really illuminating and interesting to see that the work we’re doing in email is driving a lot of in-store transactions because we’re keeping them engaged.
They may not be transacting through e-commerce every single time, but if they’re again opening emails, clicking emails, and engaging in emails, they’re converting and bonding in that in-store relationship.
So that way, when our emails are engaging them ahead of time, they’re actually calling in to convert and make a purchase and need some extra information to do so. They’ll want to talk to an expert to feel safe and confident while making that decision. And we’ll help them out at that point, which would ultimately strengthen our relationship and make us certain that Heyy, this person, opened an email, clicked on it, and is taking action immediately.
So, that’s, again, that omnichannel purchaser that’s really unique and valuable. And typically, those are going to be the highest value cohorts in your audience. Therefore, do take care of them well!
Let me quote an example of one such group that has done this really, really well, and I always like to talk about it. It was one of the biggest moments in the history of e-commerce (that no one mentions) when Nike announced their direct consumer offense in 2017.
So what they basically did was pull out of their 30-50% retail channel partners. By doing that, they intended to develop a direct relationship with their consumer through their apps like Nike run plus and nike.com to secure higher AOVs and more significant profit.
So that way, they focused more on their right customers and not the bright customers in terms of like, maybe a runner spends $800 versus someone else who spends $50 every two years. In such a case, you’d also want to focus on that high-value category.
Moreover, with their Nike run plus app, they have so many ways to connect data with value to the customer and vice versa. For instance, they have training plans to offer, a unique playlist for the users, exclusive deals on new gear and early releases, and most importantly, the GPS functionality inside the app.
With that GPS functionality, Nike get heaps of first-party data because when you use their app to train for a race, they would know it by how much you have been running and possibly even the date of your race.
And let’s say you’ve run 500 miles since you first bought that pair of shoes, and now your race day is coming up, they can send a nudge saying,
“Hey, looks like you’ve been running really consistently lately, and we notice you might be in need of a new pair of shoes?”
“Hey, you’re race is coming up? This is the time you’ll need to replace your shoes, so here’s a 5% discount for your race day”.
So, as you can see, these are the unique ways that can help them connect with their customer at a deeper level.
How to Collect First-party Data?
Now, let’s discuss the different ways you can get your hands on this treasure.
1. Via Emails/Quizzes/Surveys/SMS
First and foremost, you can collect it through email. And then surveys or quizzes are another powerful way to do that. For example, tools like Octane AI provide a software where you can easily create quizzes and collect data.
So, you can collect some highly valuable data through those quizzes for making recommendations and improving your understanding of the customer to see whether he fits in a certain category or not. That can be done with the help of some pop-over or welcome sequence forms for data collection.
And ideally, you’d want to do that segmentation very early because that’d help you create a more impactful relationship with them over time.
Similarly, you can do that through SMS as well.
2. Via Website or App
Secondly, you can collect all the precious first-party data through your website by monitoring the number of pages and products viewed by them or how much time did they spend on your site.
Or, if you have an app as Nike does, that could be another clever way of collecting some highly useful zero-party data.
That’s where that omnichannel relationship may come to play a role as well.
3. Via In-store POS
If you have an in-store POS that’s connected to your online POS or your data management system, that’s also going to be a place where that data can live, and you can collect more and layer on top of it over time.
And if you can do that well, it will not only allow you to leverage it in a forward-facing manner but also keep you from having any security or data privacy issues.
How to use First-party Data?
As we’ve discussed earlier, it is all about connecting everything with your CRM. Like Heyy, we have online customers; we have offline customers, so how do we connect those to understand their customer journey and what they find valuable? That’s where the first-party data comes into play.
And when we establish that connection, we can use it to recommend products/content specifically tailored to their needs and interests.
In a nutshell, you’ll need to use that data to create highly contextual interactions. But to collect such data in the first place, you’ll have to start with earning enough trust. The more they trust you, the more actionable data you’ll be able to gather and leverage.
And slowly but steadily, you can ask for more, like their date of birth, the name of their horse and its birthday, and so on. Then, with all this data, we can serve them highly uniquely via automations and ping them at the right time with the relevant content.
Pros & Cons of First-Party Data vs. 2nd and 3rd Parties Data
Since we have already talked a lot about first-party data, let’s focus on 2nd and 3rd party data now.
So, 2nd party data comes from a group or a partner you’re working with. It’s as if you’re sharing each other’s first-party data.
For example, if I’m a clothing brand and I partner up with a travel brand, I’ll have all kinds of first-party data owned by them, like how many travelers they have from different areas. And then, we can use that data to connect it with our audiences to improve and enhance the quality and context of what we’re already doing.
Then comes the 3rd party data, which is a little bit little different. That’s typically going to be leveraged by a third-party aggregator.
These third-party aggregators are groups like Google and Facebook that programmatically serve ads and other kinds of content. But unlike 2nd party, you don’t own this data; in fact, you just borrow and leverage it for your good. And that makes it a bit volatile, but again you have to balance that volatility with the opportunities provided on those platforms for your growth.
Benefits of First-party Data
Here’s a quick rundown of the benefits of first-party data:
- It’s owned by you. So you can tie it to different areas of your organization and see how things work out.
- Omni Channel Measurement makes it easy for you to understand how well your marketing strategies are performing in different areas.
- It allows you to improve the customer experience by understanding what people expect and want. For instance, 2-day shipping was a big deal back in the past, but now people wish to have their products shipped on the same day. As you can see, expectations keep evolving, so we have to!
- It allows you to serve each customer uniquely—for example, contextual messages/emails, offers, product recommendations, etc.
So this is all that makes first-party data really beneficial and powerful because it has allowed us to do things and achieve goals that weren’t always possible in the past.
Challenges of Using First-Party Data
The challenges that we usually see businesses face include lack of strategy or, like, what data should we be collecting? Also, sometimes there’s a communication gap between the teams within an organization, and a data silos kind of situation is created. And that can further create a lot of ambiguities like who owns a particular list? Who’s going to take care of that segment? How are we not going to bombard people with emails from our sales team, from our service providers, and more stuff like that?
Another challenge your business might face is a lack of trust or credibility. So, as I always talk about it, you have to gradually earn that trust back and so the right to ask for more first-hand information.
I know I have talked a lot about this, but yet again, I’d say that first-party data can do wonders, especially in the e-commerce space, because it eliminates our dependency on the third-party providers and still allows us to do some really exciting and innovating things with our businesses.
All in all, this was an extensive yet unique topic, but we tried our best to touch every single point. And I hope you find the information provided in this article valuable and helpful, but do not hesitate to let us know if we missed something.
Looking forward to your questions and comments!