What is First-party Data?
October 07, 2021
Marketing and customer support rely heavily on data in contemporary markets. Companies aim to know as much as possible about their existing and potential customers in order to provide them with the best offers and services. When firms through their own means gather data about their customers what they get is known as first party data. This type of data is at the very foundation of the data-driven approach to marketing and customer relations. Let’s look more closely at what it is, how it relates to business data from other sources, and how it’s used to boost decision-making.
Defining first party data
At the offset, we should try to define first party data more clearly. What makes data first party is the fact that companies get it themselves through various interactions with customers. Thus, all information held in a firm’s customer relationship management (CRM) systems, or some related customer data platform is first party data. In other words, in business and marketing, we call data first when it’s collected by the company directly from their own audience or actual customers.
The difference between other data types
So, if first-party data is the kind that a company collects directly from its customers, second and third party data will be indirectly obtained information. Second party data refers to customer data that a company obtains from a trusted partner. Thus, second party data first was gathered by a company about their own customers, but it is now used by a partner company. For example, a hotel network might share their customer information with a partnering transportation company so that the latter could provide transport options to and from a hotel. In short, second party data is someone else’s first party data or partner data about customers.
Third-party data refers to the data points provided by a third-party company that has no direct relationship with the customer. These are usually data providers or independent researchers that collect third-party data first party can purchase. Third-party data is often online data, collected by various data mining methods, third-party cookies, and market research activities. Companies turn to data providers as an alternative to additional data collection when they wish to enrich customer information stored in data management platforms. Integrating data points a firm already has with third-party data as well as second-party data might seriously boost the company’s digital assets.
Data sources and types
First-party data is collected by utilizing many online tools and sensors, as well as analyzing offline data in the firm’s data management platform. Additionally, companies can collect data by actively seeking feedback from their customers. Below are the most common sources for first-party data and the information that can be learned from them.
Firms gain audience insights by analyzing their website traffic and the various activities of the site visitors. This is especially important for any e-commerce company or businesses that do at least part of their sales online, as it allows them to track customers’ purchase history. However, every movement on the website along with the information provided by registered users is helpful to gain customer insights that lead to improvements on the website itself as well as the entire marketing strategy.
In some cases, the firm’s social media page, rather than the website, is its central platform for first-party data collection. Since users willingly provide a lot of information about themselves on social media, firms can easily see how particular demographics react to their posts and other marketing efforts. Thus, on the one hand, alternative data from social media allows companies to learn about the features of their customers and their social habits. And, on the other hand, businesses can see in real-time how well their marketing campaigns work.
Mobile app usage
Another important part of the first-party data strategy is utilizing mobile apps. It is projected that by 2023 worldwide mobile app revenues will exceed $935 billion. Users today are more than willing to do their shopping, registering for a service, all kinds of reserving and booking on mobile apps. This means a lot of transactions generating vast volumes of valuable data. Additionally, mobile apps are where customers can easily leave their evaluations and feedback, which relates to another source of first-party data that we’ll get into soon. From mobile app activity businesses can not only learn what already works or doesn’t in marketing but also get ideas for innovation and improvement of service.
Tech products and sensors
Many companies today in one way or another deal with high-tech solutions when marketing or communicating with customers. This includes hardware and software that companies provide to their customers as well as various in-store sensors. Such devices, from simple in-store cameras to more sophisticated geolocation tools help to collect behavioral data about the customers. From the time that a customer spends in-store, online, or offline, to their movement through it, all can be used for valuable insights into what attracts the attention of the consumers.
Customer feedback and surveys
As mentioned before, customers can leave their feedback simply using the company’s mobile app, or even some other app meant for evaluations of particular services. But feedback can be received in many different ways, from asking to fill out feedback forms online or in-store to surveying customers by phone calls or after service was provided. This type of first-party data source provides information from the point of view of the customer, shining a light on what they liked, disliked, and what actually matters to them when choosing a product or a service. Thus, data points acquired from client feedback are extremely valuable for future improvements.
Finally, companies have for some time now been collecting first-party data through email subscriptions. As before, e-mail subscriptions have been the basis of lead generation for many companies. Subscribers usually provide the key personal and contact information about themselves, which allows firms to further engage with them and make calculated offerings. Nowadays, this is still a good starting point for customer engagement that may lead to further relationships and a way to collect first-party data.
Collecting and using first-party data
Companies collect first-party data either by tracking interactions with the customers and various consumer activities or by directly asking the customer to provide information and feedback. This is done with the help of the aforementioned systems, like CRM and DMP. Both personal and anonymous data is important as such information like device ids and IP addresses help marketers target specific audience segments with tailor-made digital ads.
When asking customers for feedback or information as they register, it’s important to remember not to ask too much at the offset. For example, if when registering for a website they have to fill out a very long and detailed form, it’s likely to lead them to abandon the user registration process altogether. Thus, it is better to gradually get additional information during further interactions with the customer through event-based tracking.
Second-party data is another source for data points that can be later on used just like first-party data for lead generation and customer retention. Moving on to actually using first-party data, it is important to first consider whether data needs enrichment. Purchasing third-party data is an option that should be considered as soon as goals for data usage are set.
Now let’s turn to some of the common use cases for first-party data in business and especially marketing intelligence.
Customer nurturing and personalized experiences
Firstly, knowing more about the customers is meant to help to keep them satisfied, providing the best services and offers so that they stay the company’s clients instead of seeking something else among competitors. Thus, companies use first-party data to identify customers with particular interests and purchase history and create customs segments to make further offerings to groups of customers based on their previous choices. This allows for more personalized experiences and a feeling of being tended to for the customer when visiting the website or receiving further offers.
Predicting future behavior of the customers
A solid first-party data strategy will often include utilizing it for future planning. Customer behavior data allows making predictions about how the clientele base is likely to react to future moves or changing conditions, thus allowing them to prepare for it. For example, if a credit card company has seen in the data that their best customers largely share an interest in traveling, they can determine how COVID-19 travel restrictions or lifting of them will affect applications for new cards or purchases made by credit card. In such and similar cases companies are able to prepare for expected changes in sales revenue and get a chance to release new products or ad campaigns at the best possible time.
The method of creating custom segments based on various characteristics and then describing customer profiles or customer personas to represent each group has been used in marketing for a long time now. But with the growing volume of data that companies collect and better AI-based analytical tools, much more can be achieved with customer profiling now than ever before. As there are many alternative data types collected as first-party data today, businesses can segment users in many different ways, identifying the most relevant profiles with almost surgical precision.
Another way to use first-party data is for a broader market analysis, which would help firms with the development of new products and services. Everything from behavioral data to customer feedback helps companies to understand their industry better, thus providing insights into what sort of innovations could bring success. However, first-party data is best used for market analysis in combination with second-party data from partners and, especially, third-party data since a broader view of the market is needed to make such determinations. When precise target audience data is grounded in a wide range of third-party data, businesses can see the big picture and their exact spot in that picture.
Benefits of first-party data
First-party data is the company’s own data which it has legally collected, thus making it immediately available for marketing and other purposes. With other data types, firms have to either make deals with partners, in the case of second-party data, or purchase data from a provider. Furthermore, these data types are sometimes only leased to the company for a restricted set of goals and a defined period of time. First-party data is owned by the company, thus within the limits of laws and regulations companies are free to use such information for their analytical and business purposes on their own terms.
With third-party data companies have to take what they can get, meaning the data might not always be as relevant as needed. The relevance of second-party data is also limited to what is offered by the partner. First-party data is precisely the firm’s audience data, making it just as relevant as possible. And since it is the company itself that sets up a first-party data strategy and aims to collect data accordingly, analysts can actively aim to collect the most relevant data points for the particular analysis at hand.
Planning for the future
As mentioned above, a lot of behavioral first-party data can be used to find out what to expect from the customers. Additionally, historical customer data might be utilized in predictive analytics to forecast future trends in your audience from demographics to buying habits at particular periods of time. Equipped with knowledge about future sales or other consumer behavior, businesses are better able to reserve and allocate resources or make bold moves at the right time.
Data quality control
When acquiring information from a provider, companies expect to get high-quality data but have only limited control over it. Companies know more about the quality of the second-party data, but some of the same data management concerns remain. When there was no oversight from internal company agents when the data was collected, one can only hope that external team members of the research group have done their job right. But with statistical data, the random sample sizes of the research may have been too small to be representative and the contact information may have been gathered from outdated sources. All this heavily decreases the quality of the data. When collecting, storing, and analyzing first-party data, companies know exactly what they have in terms of data quality, as everything is happening within the organization.
First-party data is the foundation on which sales intelligence. This is true both in cases when additional offers are being made for existing customers and when trying to incite the first purchase from someone who has shown interest in becoming a client. All the key information about customer preferences and the demographics to which they belong is often first party data. Consulting this data allows preparing personalized offers and sales approaches that increase the chance of a purchase.
Improved marketing strategies
Of course, first-party data is first and foremost marketing data that helps to create ads and marketing strategies that are most likely to reach their particular audience. The effect is especially felt with digital marketing, which is based heavily on customer online behavior. Digital ads can reach customers on their preferred platforms, for example, social media or mobile apps, and send the message that relates precisely to customer preferences as shown on these platforms.
Better customer support and retention
Making customers feel like they are cared for on a personal basis is the surest way to ensure loyalty and retention. In fact, 39% of consumers will only get attached to a brand if they interact and communicate with it on social media. By collecting relevant data on their customers, companies get to know them on a deeper level which allows for anticipating their needs. This goes well beyond just offering to make new purchases and boosts customer support in general, from personalized service plans to faster and accurate support when contacted by the client.
Finally, first-party data is very cost-effective, considering how much marketers get from it. Most of such data can be gathered rather cheaply, like online data. Only such seldomly used methods as focus groups for feedback are more expensive. But even having those in mind, with the same resources one can collect more information than acquire third-party data.
Ensuring data security and privacy
The final aspects of first-party data management that deserve special attention are the security and privacy concerns. First-party data includes sensitive information regarding customer identity. Thus, when collecting and using personal data, companies have to accord with the data privacy regulations, like EU general data protection regulation (GDPR) and other national and international rules of conduct.
Thus, in order to collect first-party data, firms need not only data analysts and IT experts but data security and privacy officers as well. They must ensure that all relevant regulation is complied with, and feasible security breaches prevented. The reputational damage from failing to do this may be even greater than the legal consequences.
Conversely, customers will trust companies that manifest rigid data security strategies and therefore will be more willing to share information with such businesses. Therefore, it’s a good idea to not only implement strict security and privacy policies but also to reassure existing and prospective clients by informing them about such policies.
All data types and sources potentially matter in contemporary business. Thus, firms achieve the best results when combining the data that they collect with second and third-party data from reliable sources. However, first-party data deserves special consideration as this is the information firms get directly interacting with their customers. When the trust that clients show to the business by sharing their personal information is rewarded with care for their privacy and high-quality service, customer loyalty is more than likely.
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