Zero Party Data: What It Means + Why And How You Should Be Collecting It

customer information on computer

As a growth marketing agency, our ability to access customer data is a major (if not the most important) factor in developing growth marketing strategies and executing them to find traction or scale. That’s why—before we spend a dollar with a new partner—we make sure proper tracking is set up and correctly capturing user’s data. 

In the last few months, accessing specific types of data about customers has been increasingly more difficult. It’s a topic that’s so monumental to the future of marketing and even business growth, as well as user privacy, that it’s been making headlines across the world. Don’t get us wrong, though, we believe this is a good thing; consumers should be able to control how their data is used in advertising. 

Despite that, brands should know the realities of what the advertising landscape looks like in a world without pixel tracking. 

There are varying levels of customer data that have become more difficult to access due to restrictions put in place by tech giants like Apple & Google that have reshaped the online advertising space (ahem, iOS 14). To understand how these changes have impacted digital advertising, start by understanding the different types of data. 

The three most common types are first-party, second-party, and third-party data. 

First-Party Data: Company-Owned

First-party data is any data collected by a company about their customers. This information is compiled through a brand’s website and used to develop various marketing strategies that cater to an individual or group (ex: target audience). For example, we use first-party data at Tuff when we look at a brand’s users’ website behavior, listen to inbound sales call recordings, or analyze purchase history to learn more about a company’s existing users and customers. 

Second-party data: Provided by a Partner

Now that you understand first-party data, second-party data will be easy to pick up. Second party data is first-party data that is provided by a known partner. Say you run an online outdoor publication and you know that your customer list would be good for a specific brand that sells backpacking tents. The brand that receives that audience to use in their targeting would be receiving second-party data.

Third-party data: Provided by an Outside Source 

Unlike first-party data, third-party data usually comes from an outside source (third party) that has collected the data about its customers. I don’t want to name names but so let’s make up a third party platform that might collect vast amounts of data about its users to be used for advertising. We’ll call it Facebook. Hypothetically speaking, let’s say Facebook has 2.89 Billion active users on its platform and due to how it tracks users on its platform and used to be able to across the web, then Facebook has copious amounts of data on a large chunk of the world’s population. Facebook then shares that data with advertisers to help them target specific audiences.

That’s third party data! 

Restrictions on Data

20 years ago, the internet embraced digital advertising and, in the process, annihilated traditional forms of advertising like print, FM/AM radio, and television. 

The reason? Hyper-specific targeting. 

Before the internet, advertising used broad targeting that was rather inefficient in comparison to what the internet made possible. Reaching your audience was done through the earlier mentioned traditional forms of advertising and their targeting options were fairly general. 

As Brian X. Chen from the New York Times explained in his article “The Battle For Digital Privacy is Shaping the Internet”, the internet made hyper-specific targeting available at scale and for a much lower cost than radio and tv could sell. 

Brands splashed their ads across websites, with their promotions often tailored to people’s specific interests. Those digital ads powered the growth of Facebook, Google and Twitter, which offered their search and social networking services to people without charge. But in exchange, people were tracked from site to site by technologies such as cookies and their personal data was used to target them with relevant marketing.” 

In April 2021, Apple released an update to their iPhone software called iOS 14 which contained a feature that enabled iPhone users to block their personal information from being shared. The feature has disrupted the advertising industry because it has made it fairly difficult for advertisers to retarget to users as well as measure how their ads are impacting conversion. 

Once a user on an iPhone clicks an ad on Facebook and leaves a Facebook-owned property,  without pixel tracking, we lose the data that tells us where that person came from when they get to the external website and begin their customer journey. 

This makes it incredibly difficult for us to analyze data in such a way that says definitively for every $1 you put into this paid acquisition channel you will receive $5 from a paying customer or with this channel you see an average cost per sale of $10. The reason? We have no idea of the channel source. 

To be clear though – attribution was never perfect, but it’s harder than ever now. 

Meet Zero Party Data: Provided by Your Audience

Zero-party data is optional information that the consumer chooses to willingly provide to a company, to hopefully improve their user experience. 

For example, you might position a “how did you hear about us” survey at the end of your customer journey after they convert. You can then tie the conversion amount to the source and then back to your ad spend to determine effectiveness.

Forrester Research first defined the term as follows:

“Zero-party data is that which a customer intentionally and proactively shares with a brand. It can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize [them].”

The great thing about zero-party data is that it displays intentionality between the user or customer and brand.

As SalesForces.com expresses:

“As industry regulations such as GDPR and the CCPA put a heightened focus on safeguarding consumer privacy, and as more browsers move to phase out third party cookies and allow users to easily opt out of being tracked, marketers are placing a greater premium and reliance on data that their audiences knowingly and voluntarily give them.”

Zero-party data doesn’t have to be post-purchase only.

Take StichFix for example, they’ve built the majority of their $2 billion business off of their sign up quiz, which asks users numerous questions about how they feel about shopping and what types of clothes they like to wear to develop a consumer profile for them that enables StitchFix to send their customers customized clothing selections in a subscription service. 

Ultimately, we know that as consumers get savvier and the methods for blocking data trackers like pixels gets more sophisticated, relying on first, second, and third-party data will only get more complex. So, although it takes more time, intentionality, and strategy, we believe zero-party data is the future.

Do you have any strategies in place for collecting zero-party data? Whether your answer is yes or no, we’d love to talk!