Zero Party Data – What Is It and Why Is It So Important?
I attended the virtual AdWorld conference, and the buzzword ‘zero party data’ was frequently mentioned during the conference. Zero party data isn’t a new term – it was first mostly hyped by Forrester Research but has come to the forefront as a priority element in digital strategy and is gaining more attention and focus than ever before.
With plenty of changes and shifts in marketing over the past couple of years I felt it timely to put together a blog to dig deeper into zero party data and to touch on the strategies being used currently to best leverage zero party data.
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Why Are We Discussing Data?
When it comes to reaching your target audience at the right time with the right message, data has become an increasingly important component of digital advertising. The most common way users have been tracked online to date is via cookies, and – in order to explain the importance of zero party data – we need to first look at the different types of data that gets collected online as we browse. We will take a look at how each category is used and what changes we can expect in the future.
I’ll be referring to cookies a lot because zero, first, second and third-party data is collected using cookies, from either the first or third-party perspective.
What Is an Internet ‘Cookie’?
In a nutshell, cookies are small text files that are dropped onto your computer when you visit a website. The cookie contains unique identifying information that can be used for a range of useful purposes. They are stored in the user’s browser for a set period (unless the user actively chooses to erase them) and they modify how the browser interacts with specific pages.
Cookies automate a variety of essential processes, such as:
- Keeping track of interactions (e.g. products added to your shopping basket on an e-commerce site)
- Ensuring that your account details remain secure
- Website user activity
- Delivering ads to someone based on their previous interaction with an ad you served (also known as ‘retargeting’)
- Storing user preferences
There are other uses for cookies besides those listed above, the most common of which is the tracking cookie that can contain a record of an individual’s browsing history, website interaction and website activities. When you visit a website, the browser recognises your device, and – thanks to these tracking cookies – it knows how to best serve you.
What Is the Main Type of Cookie We Should Be Aware Of?
In technical terms, there are essentially two types of cookies we need to know about: the first-party cookie and the third-party cookie. While they have slightly different end-purposes, both first-party cookies and third-party cookies collect data. So even when you hear terminology such as “second-party data” or “zero-party data”, this data is all collated using either first or third-party cookies. Let’s take a look at the different data parties below:
Here is more information about the data collected online as we browse. I will explain each element from the perspective of both the brand /marketer and the user /consumer.
First Party Data
What Is First-Party Data?
In short, first-party data is the information that a company collects about you as you browse their website and is gathered throughout your visit. The company collects and uses this data to benefit your experience. The moment the user – that’s you – confirms the opt-in consent by accepting the cookie pop up /banner overlay, the company begins collecting cookies.
First-party data is gathered through first-party cookies. First-party data collection is a good thing, as it helps to provide a smooth user experience and is often an essential prerequisite of website function.
An Example of First Party Data Collection, From the Perspective of the Internet User / Browser / Consumer
I have just been in a car accident and my vehicle is written off. I’ve filed an insurance claim and I’m now in the market for a new car. I’d like to keep track of the progress of my insurance claim while I’m shopping around for a car. When I reach the website of my insurance provider and log into my account, I am made aware that the website I’m on is collecting cookies.
Examples of the first-party data collected could be my user information, my email address, my language settings and information about my claim.
The storage of this data ultimately brings me a better user experience as it saves on any duplication of information or process repetition. The insurance company knows my name and the stage of my claim, and I’m confident in the process.
Meanwhile, an Example of First-Party Data Collection, From the Perspective of the Brand / Marketer
I am an insurance company. I collect first-party cookies from our customers so that they can track their claim progress online. We are able to use this data to ensure a seamless and streamlined process. It helps with speed, saves on human error, the cost of manpower, and improves customer satisfaction. We also use this information to provide automated and personalised emails via mailshot, and product recommendations to the client while they’re on our website.
Second Party Data
What Is Second-Party Data?
Second-party data is where you – the customer and internet user – consent to a company sharing your first-party information with another company. Consent in this instance is usually in the form of a tick box at the end of a form or survey.
An Example of Second Party Data Collection, From the Perspective of the Internet User / Browser / Consumer
I have just been in a car accident and my vehicle is written off. I’ve filed an insurance claim and I’m now in the market for a new car. I’d like to keep track of the progress of my insurance claim while I’m shopping around for a car. When I first reached out to my insurance company, they directed me to sign up to their online portal in order for me to easily track the progress of my claim. When signing up I was asked to fill out a survey about my car accident.
At the end of the survey, there were two consent boxes, both of which were already ticked. One is for me to confirm joining the mailshot list and the other for me to consent to my information being shared with a separate /second company so that I can receive relevant promotional offers.
This second company has not gathered my data directly from me, but instead data about me that was gathered about me during my interactions with the insurance company website; they will then use this to target me through their mailshot list with promotions, in the hope of winning /converting me as a customer.
I may or may not remember or realise that this is happening. The emails I receive will be personalised to me, the company knows my name and my preferences and what I’m in the market for, so… am I ok with this?
Either I’m fine with this and appreciate the relevant promotions or I feel frustrated and violated.
Meanwhile, an Example of Second Party Data Collection, From the Perspective of the Brand / Marketer
I am a second-hand car dealership. I’m in cahoots with an insurance company and have access to certain data they’ve gathered about their customers, such as name, email address, location, the price range of the car they’re interested in and the type of car they lost in the accident (family car /sports car etc). With this information, I will now email the customer to try and form a relationship. I may not approach immediately with an offer, but instead, I will look to offer information to educate that individual. It could be educational content regarding how to prepare mentally to return to the roads after an accident. It could be offering vehicle or accident statistics.
As a dealership, I am using the data gathered from the insurance company in order to connect and gain the interest of the consumer without appearing pushy nor risking them unsubscribing immediately. I want them to be receptive to my emails so I can build up enough rapport and brand trust for when I try to convert them as a customer.
Third Party Data
What Is Third-Party Data?
Now, and crucially, we’ll look at third-party data. These three words have made many a marketer flinch over the past couple of years both due to data privacy changes and due to the subsequent prolonged, phased and imminent shut-down in the use of third-party cookies.
Third-party data is aggregated data collected through third-party cookies. Here, a third party gathers demographic and behavioural data about the user from other website sources. The aim here is for them to target and retarget users with advertising.
What Is a Third-Party Cookie, in Brief?
Third-party cookies track users’ shopping interests as they traverse across many different websites; however, the key difference is that it’s usually a single 3rd party, such as an advertising network, that each of the sites you have visited all subscribe to, and it’s that ad networks cookie that is placed on your computer. This enables the previously visited sites to retarget users as they move around the internet, in addition to targeting them on the site they are currently visiting, to gain more insights into the user’s online shopping behaviour.
An Example of Third-Party Data Collection, From the Perspective of the Internet User / Browser / Consumer
I have been in a car accident and my vehicle is written off. I’ve filed an insurance claim and I’m now in the market for a new car. I’d like to keep track of the progress of my insurance claim while I’m shopping around for a car.
I find a good car dealership website and engage with internet forums and Facebook groups specific to car accidents. When landing on the car dealership site, I fall into different categories depending on my online behaviour, interests and demographics.
I fall into categories built from my data footprint such as the age category, interest category, geographic location, demographic data, browsing and interaction information.
The third-party website now has access to my data, which has been collected and delivered through third-party cookies, and I am none the wiser. I am not aware that a ‘third-party’ now has my data, but I’m both shocked and amazed when I visit my social media platform later that day and see an advert for a second-hand car just like the one I’ve had my eye on. In fact, it’s an advert for the very same car I was looking at earlier. Cue my paranoia about phone hacking and speculative microphone tapping theories. Who knew it was just third-party cookies all along… I didn’t sign up for that!
Meanwhile, an Example of Third Party Data Collection, From the Perspective of the Brand / Marketer
I’m a media buying agency and I advertise on behalf of my clients, such as the car dealership company above. This means I’m able to deliver personalised and hyper-targeted ads to people who want to see them. I know they’re in the market for the product or service on offer thanks to third party cookies. I can track internet user activity across domains and target them based on who they are and the information gathered on their online behaviour and activity. I’m able to target through a range of online domains such as search engines and social media platforms.
While this activity may cause some online users to feel irritated and intruded upon, others may thoroughly appreciate the relevance, the time-saving element and the ease of process and purchase. My clients, such as the car dealership, benefit because they receive relevant leads (such as potential customers) who are ready to buy the product or service on offer. The car dealership, therefore, experiences a greater return on investment for the budget they allocate because they have less spend-wastage overall.
The platform I’m advertising on (such as Facebook / Meta) makes money because I’m spending my client’s (the car dealership) budget on their platform; I make money from the client (the car dealership) because I charge them a service fee for advertising on their behalf; the client makes money because they receive relevant leads which result in closed business; the user is happy because they’ve been delivered an ad relevant to what they want, saving them time, effort and money (as the search engine is free).
Everyone benefits and everyone is happy: sounds like a winner! If this is so good for all parties involved, then why is third party data collection no longer allowed? To understand this, first, we need to differentiate between second-party and third-party data.
What Is the Difference Between Second Party and Third Party Data?
If second and third party data both share my data for the purpose of targeting me, then what is the difference, you ask? Good question.
Second-party data is the sharing of your first-party data with a second business. Remember, this first-party data was gathered through first-party cookies by the websites you actually visit. This is done with users’ consent with the clear aim of adding you to a target list.
Meanwhile, third party data is the non-consented aggregated use of your behavioural, interaction and demographic information gathered by third-party cookies and used by a third party aggregator. Your online behaviour is tracked in order to target you through paid sponsored advertising.
The Problem, Up Until Now Has Been This….
Both first and second-party data is provided under your consent. Until now, the third party has been able to tap into your behaviours, interactions and demographics without you knowing, through the use of third-party cookies. They have been able to use this information to target you in a very personalised and intelligent way.
Some people may be completely fine with this: it removes many steps from our day, allows for purchase relevance, time-saving – and today’s consumer wants to eliminate as many steps as possible in the buyer journey. Statistically, ease of consumer experience encourages brand loyalty, so buyers are more likely to return when offered this feature.
However, there are also many ethical issues with companies being able to follow you around the internet and target you, which is why since late 2019 /2020 there are many data changes that have come into play in terms of regulatory and governance online.
Zero Party Data
What is Zero Party Data?
So with all of these changes in mind, in the midst of the trust /transparency revolution and with the phased elimination of the third-party cookie, let’s now discuss zero party data. What is it, how can we leverage it and why is it so important to prioritise today?
It’s important to think about who owns your data and how your data is being used. Data collection is good for the user and crucial for today’s internet experience. It’s also good for the business behind the website, as they gain a strong understanding of their customer base, leading to improved customer experiences and customer retention. When done with the complete trust and consent of the user within the specific context of the consented website or platform, user data enables companies to collect crucial data and better understand customers.
However, due to a combination of data restrictions, third-party cookies have been phased out, bringing marketers and customers alike into the dawn of the new era of data privacy protection. Now, more than ever, marketers must be acutely aware of data privacy concerns and the implications of these concerns for the usage of client data. This is where zero party data comes into play.
The term “zero party data” refers to the information physically offered by the user while on the website or platform. Data is provided in complete confidence, openness, and with the consent of all parties. It’s more reliable since it eliminates the guesswork associated with determining target customer preferences: the business simply asks and the user shares. Obviously, individuals will only provide information with you if they trust you, which alters the way you market to them.
As a brand, there are many creative ways to achieve this, and I’ve provided a list below of some impressive and innovative ways that businesses can capture zero party data from the user:
• Wheel of Popups – Branded Prize Wheel: A way of gamifying the user experience, enticing them into handing over their email address in exchange for a fun chance at spinning the wheel and winning an offer.
• Cosmient AI and Meta Beings: A way of bringing to life the products you are selling, using conversational AI, both in this world and the Metaverse. The products have a personality of their own and build rapport with the user. This is set to be huge for e-commerce retailers – a couple of the bigger well-known brands are already ahead of the game and experimenting with this.
• Typeform: A quiz builder for your website. This is a fun way of building your own quiz and engaging the user.
What Is the Difference Between First Party Data and Zero Party Data?
So… if first-party and zero-party data are both the collection of my data through first-party cookies whenever I use a website, what is the difference?
Though similar to zero-party data in that it originates directly from customers, first-party data is acquired within a brand’s domain (often by activating tracking) to support a transaction or as a support or service requirement. It is not derived directly from the brand /company’s website requests regarding how you should engage with them, as zero-party data is. First-party data and zero-party data are the best sources of data for understanding and connecting with your customers when third-party tracking is eventually abolished.
An Example of Zero-Party Data Collection, From the Perspective of the Internet User /Browser /Consumer
I’ve filed an insurance claim and am now in the market for a new car. I’d like to keep track of the progress of my insurance claim while I’m shopping around for a car.
I go onto a car dealership website and I’m met with a chatbot assistant asking me questions about my car preferences and price range. I then get offered suggestions and complementing items based on my preferences.
I have willingly offered this information and I welcome the suggestions. I appreciate the time saved from having to browse, scroll and compare options as the website has produced great options for me based on the information I provided.
Meanwhile, an Example of Zero Party Data Collection, From the Perspective of the Brand /Marketer
I am a car dealership website. I have asked for certain information through our chatbot function. The customer has willingly offered this information and we have been able to provide options based on first-party cookies gathered on the zero-party data offered freely by the customer. The customer didn’t choose to carry out the purchase this time, but with the information gathered we can now continue a personalised tailored conversation next time they visit. We can also send information relevant to their preferences via email, which will hopefully aid their search and remind them of who we are, what we offer, and how streamlined and hassle-free our consumer user experience is while prompting them to return to our website to finalise their purchase.
The Main Benefits of Zero Party Data:
The basis of consumer trust is developed and maintained when the company/brand approaches customers clearly and with respect to customer preferences, even down to the preferred methods of communication. That trust is priceless.
Valuable Customer Data
Customers are more willing to share their personal information with you if they feel they can trust you. More trust leads to more data, which leads to more relevant data, creating a positive feedback loop.
More Personalised and Effective Communication
It is only with the use of better and more comprehensive zero-party data that we can improve our efforts to deliver more relevant and engaging messaging to our audience. Making use of customer choices and delivering content that meets their indicated wants has never been easier.
How Is Zero Party Data Best Leveraged?
The changes are inevitable, they’re happening, and they are here to stay. In order to power their efforts and replace the data that they now borrow from tracking cookies, marketers require new sources of data. The way in which businesses can track and target people is ultimately changing. This is an exciting development because it means that businesses will have to revisit the drawing board on how they market; strategic priorities are now more along the lines of:
• “How can we build trust with the user and form relationships from the point of site entry?”
• “What can we offer?”
• “What can we do to our website that will convince the user to stay for longer?”
• “How can we creatively encourage users to offer their data willingly?”
• “How can we enhance the user experience?”
• “Can we make their life easier?”, and crucially
• “How do we make users more likely to keep our brand in their evoked set?”
With this in mind, it is also important to mention that marketers will still be able to track and target, but we are yet to have this finalised by Google. The latest announcement from Google regarding the marketing and remarketing within their platform can be found here, and there is more to follow in this regard, so stay tuned.
I’ve provided below some suggestions on how businesses are currently maximising zero party data capture:
• Conversational Techniques such as ChatBots, Survey, Customer Support Chat, Post Purchase Chat
• Recommendations based on intelligence gathered
• Personalised flow and automated campaigns (through communication methods such as email or SMS)
Ultimately the flow remains the same (below) and the aim is still to get the user /website visitor to willingly offer their email address. The more creative you can be with this the more likely the user is to like you and what you’re offering to either purchase or return to purchase.
Octane AI , a quiz provider for Shopify partners, provides some useful tips for zero party data collection:
Remember, in order to leverage zero party data – you still need the permission of the user, and you still need the user to provide you with their contact details (email or phone), so be creative about how you ask for contact information and make sure the benefits are clearly communicated to the user.
Do not ask an excessive number of or insufficient number of questions. While a quiz with 25 questions will have a high drop-off rate, users will also distrust a quiz with only one question, as it cannot possibly provide them with an accurate recommendation with so little information. The sweet spot is between five and ten questions.
Make your quizzes visually appealing. Octane AI report from their findings that questions that incorporate GIFs and visuals have a 20% higher completion rate than those that are entirely text-based.
Pop-ups should ALWAYS be conversational. Pop-ups in the traditional sense are invasive, provide no value, and serve no purpose. Offer don’t ask. Make it about the user and how you can benefit them and not about what you can gain from the conversation.
Any moment where you can ask a question to a customer or user while they’re on your website is an opportunity to acquire zero-party data, which can then be used to build rapport, re-engage and bring the user closer to becoming a client. And any zero party data collected is hugely beneficial for gaining customer insights to better guide future business activity.
A Final Note on Zero Party Data
Don’t Poke. Stroke.
What do I mean by this? I mean…. Zero party data collection isn’t new, it’s been around for a long time. However, companies have previously been able to utilise third-party data collection to market and remarket, to target and retarget, to gain direct data (such as email addresses) and to poke-poke-poke the customer with automated emails in order to push a forged interaction. You know the ones I’m talking about: those passive-aggressive automation techniques aimed at fooling you into reading and clicking on the emails with glib subject lines.
“Hey, Andrea… maybe you didn’t see my last email?”…
“Hey, Andrea, this is my last email now”…
“Hey Andrea, if I don’t hear from you – it’s your loss – you’re going to miss out!”
Well, you can take your pseudo-personalised bonus offers out of my inbox and firmly thrust them somewhere else. This is an outdated and irritating technique and one which – by now after years of this crap accumulating in users’ virtual letterboxes – most people will see straight through. The more you poke, the fewer people will engage and the more people will opt to unsubscribe. Companies absolutely risk creating brand aversion with this tactic. Here’s a link to a good article that provides a list of ways to identify when you’re annoying your email list.
So what do companies need to do instead? Look after the customer once they land on the website (in your store). For me, it’s about having an interaction in such a way that I’m going to enjoy, remember and return to again. Neil Patel has just delivered his latest marketing predictions, and one of the top in his list of trends & predictions is the innovative use of personalised content. As Patel explains perfectly, customers don’t want to just feel like a number, the experience offered by businesses online is the differentiator today and moving forward.
Make me feel important, and when you interact with me, refer back to the conversation we had when I was last on your website (in your store). You give to me, I give back to you in the form of brand loyalty. It’s a two-way street and in the increasingly virtual world, online engagement between both parties needs to be treated with the same real maxims of meaningful interaction. With real engagement, customers return; with customer loyalty, businesses grow.