Marketing

To zero-party data and beyond: The four types of marketing data

Data is the secret ingredient to a successful marketing campaign as it allows for personalization and targeting. But with so many types of data, it can be like trying to make the perfect dish without knowing which spices to choose.

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The pursuit of customer data goes back to the dawn of the 20th century when direct response marketers began placing ads in magazines and sending mail through the Post Office. Each campaign produced customer data, which could be used to finely tune future campaigns.

But today, in the online world, data has become so complex that we struggle to keep track of all the varieties. Now, things will get clearer as we sort all customer data into four categories, beginning with zero-party data.

Zero-party data is the most valuable of the four types of customer data. But what is zero-party data? And how is it different from first-party data and the other two types of customer data? We’ll get to that in just a moment. But first, let’s get clear on why customer data is such an important part of marketing campaigns.

Why is data important in marketing campaigns?

Know thy customer. Data is king. The money is in the list.

There are all sorts of succinct adages and taglines extolling the virtues of having accurate and ample information about your customers, leads, and prospects.

That’s because you can’t run a very good marketing campaign without data. Even relatively broad mass media campaigns use data to narrow targeting to some degree. That’s why you see more beer commercials and pizza ads during football games than during Hallmark movies – because these companies know that more of their target audience will be watching the game. (By the way, that’s an example of third-party data).

No matter what type of media you’re using to run a marketing campaign, you rely on data about the people you’re attempting to reach. You’re deciding:

  • Who to send it to

  • What to say

  • How to say it

  • When to send it

  • Which form of media to use

  • And so much more

And you’re deciding this based on what you know, what you can safely assume, and what you think you know, about the people you’re marketing to.

The better your data and the more accurate it is, the more you can effectively segment and personalize your marketing. With greater relevance, your marketing will be more effective at engaging your audience and motivating a response.

With that in mind, let’s look at the four types of marketing data.

What are the different types of marketing data?

If you had a meeting about this and let everyone contribute to a word cloud it would quickly grow into a large rainstorm, because there are endless examples of marketing data.

Purchase history, click-through data, bounce rates, coupon usage, survey data, appointments scheduled, abandoned carts, reviews left, average order size, purchase frequency, Nielsen data, likes, comments, opt-ins…

With online media, we have marketing data overload. And that’s why it’s so helpful to be able to categorize all this data into four categories:

  • Zero-party data

  • First-party data

  • Second-party data

  • Third-party data

Let’s take a deep dive into each type of data, how to acquire it, and how to use it.

Using data ethically and in line with privacy laws and user agreements is a key part of maintaining a healthy marketing operation long term. Sending unsolicited marketing messages will damage your email sender reputation and result in fines and penalties.

Zero-party data – highest value, most useful, hardest to obtain

Zero-party data is a relatively new term. It includes most data that’s willingly handed over to you by the customer, lead, or prospect.

In the mailed direct response world, this would be a warranty card or the product registration card, which always includes far more information than it needs. But any customer who fills it out is giving the company valuable information about themselves.

In the online world, zero-party data includes extra information filled out during sign-up, on opt-in forms, polls, surveys, post-purchase questionnaires, and contest entries.

Rather than have to guess what your email subscribers, website visitors, customers, and prospects want, with zero party data you already know because they’ve told you. It’s the most trustworthy type of customer data, because it comes directly from the source.

Another advantage is that zero-party data essentially bypasses most privacy laws. We’ll say more about that a bit later.

How to acquire zero-party data

As you can already infer, you acquire zero-party data by asking for it, which you can do in a variety of ways.

On social media, you can run polls, quizzes, and surveys.

On your website, you can do all of those as well as offer free downloads, add a question or two to your email subscription widget, run contests, ask questions after a customer makes a purchase, and use conversational popups that respond based on what the user is doing or where they are on your site.

In email, you can send links and promotions that take advantage of those tools on your website. Your email welcome series is a great place to start using this immediately. Run a survey or a poll as part of your welcome series, and see what data you can start collecting.

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How to use zero-party data

Once you have this data, you can use it to target your marketing to each customer more effectively.

Personalized email marketing, for example, will communicate to each customer and lead based on their stated preferences and other information they’ve given you. An online men’s clothing retailer, for example, might list several categories of clothing and ask which ones a new email subscriber is most interested in.

Based on the subscriber’s response, they can begin sending personalized emails. One person might select summer clothing, whereas another might choose outdoor clothing. And the retailer won’t just use that to sell clothes. They can also sell the lifestyle related to each category of clothes, and use that to increase demand for the product.

You can apply the same approach to direct mail, SMS marketing, and unique landing pages designed for particular types of customers.

You can also use zero-party data for segmenting your customers, leads, and prospects based on what they tell you. Knowing household income, age, family size, number of cars owned, and other demographic data allows you to create segments, which you can use to send more targeted marketing.

For example, put all your customers who have kids under 18 in one segment, and you can now avoid sending ads for “birthday present ideas for your kids” to people who have no children.

First-party data – useful and relatively easy to obtain

First-party data refers to information you’ve collected about your audience as a whole – as well as individuals within that audience – using your own tracking methods. Often, it’s the result of tracking pixels on your site or within your emails.

For example, Google Analytics collects first-party data based on how people engage with your website. You get bounce rates, click rates, page visits, time on page, and various other types of information. It’s not personalized to each site visitor, but it can reveal trends for what’s working, what’s engaging and motivating a response, and what’s driving people to leave your site.

In email, first-party data includes click-through rates, open rates, unsubscribe rates, and things of that sort. First-party data also includes things like average order size, purchase frequency, abandoned cart data, and other revenue-related customer information.

On a broader level, you can gain insights about how your audience responds to various landing pages, A/B tests, calls to action, etc.

But first-party data can also be used to tailor marketing to individuals based on their behavior. For example:

  • Sending an abandoned cart email

  • Displaying remarketing ads featuring the specific products a visitor viewed

  • Promoting complementary products based on what a customer’s already purchased

Basically, anything you send out that’s trackable can help you build first-party data.

How to acquire first-party data

To acquire first-party data, you have to send out some version of trackable marketing. If you can’t track it, it’s not first-party data.

Emails are widely trackable down to opens, clicks, and even revenue generated.

On a website, you can use tools like Google Analytics. You can also use tools like heat maps and other forms of software that measure hover times, engagement, scrolling, and other activities.

You can install pixels from Google and other ad networks that allow you to retarget customers with win-back ads.

And things like QR codes, coupon codes, and special one-time offers allow you to capture first-party data for your customers and leads. First-party data tells you how well your marketing assets are performing – but you have to track it and look at your metrics.

How to use first-party data

First-party data allows you to market more effectively because you have some idea of what works well to accomplish your goals.

If you have three email opt-in forms on your homepage that make three different offers, and one of them gets far more signups than the other two, that’s first-party data telling you what your website visitors seem to respond to the most. You could either remove the other two offers or change the copy and see if that improves responses.

First-party data allows you to refine and improve your marketing. It lets you test ideas and use what you learn in the next campaign.

But you can also use first-party data to offer more tailored experiences to individuals within your audience – even if they haven’t expressly handed over information to you through a form or survey.

Back to our online clothing retailer. Instead of asking what types of clothing the subscriber is most interested in, you can segment your audience based on the categories they’ve purchased from or viewed in the past.

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Second-party data – similar to first-party data but harder to obtain

Second-party data is basically the same as first-party data. The difference is who collects it.

Second-party data comes from another company or joint venture partner that your business has a relationship with. It’s their first-party data, but either through goodwill or for purchase, some companies share personal data in an attempt to boost marketing campaigns to their customers.

Even if you aren’t direct competitors, this is not a very smart way to expand your marketing reach. Sure, you’ll know much more about these prospects than when you send out a random blast on social media, but it can severely hurt your deliverability. This is something we’re so passionate about, we have an entire blog category about it.

How to acquire second-party data

If you do choose to risk your deliverability, you’ll need to have a good relationship with at least one other company whose audience might be valuable to you. With that relationship, you can work out an agreement where they essentially share their customer data with you.

Usually, such an exchange requires something in return. They might just ask you to pay them. They might give it to you for free in exchange for access to your data. You could also offer to pay them a percentage of whatever revenue is produced by your campaign. This is often a good strategy because what you’ll pay them is far less than it would cost you to acquire all these customers and leads on your own.

How to use second-party data

You can use second-party data in a similar manner as first-party data. But keep in mind that navigating privacy laws can get tricky fast.

If the other company gives you a list of people who clicked on an email or made a purchase related to something you sell, you can send an email to those people with a fair degree of confidence that your offer will be relevant to them. Just note that you might receive a lot of spam complaints and suffer a hit to your sender reputation.

Or, you could use the data to make a custom audience on social media that’s highly accurate.

You can partner with someone in a related, but non-competitive, business and share data. For example, one company might sell health food, and another fitness clothing. There’s a natural relationship between these two products. Anyone buying fitness clothing probably either goes to a gym, exercises at home, or likes to go for a run outside. The health food company can purchase data from the fitness apparel company, and send an email campaign to all their customers who have clicked on an email within the last 12 months, or everyone who made a purchase in the last six months.

The more specific the data, the more you can do. Maybe they have a list of customers who purchased gift cards last December. Well, next December, you could run an email campaign to that segment of their customers, offering gift cards! Add on an extra $10 bonus to each $50 card, and you might win some new, loyal customers.

Once you go beyond zero and first-party data, information becomes less accurate and you increase the chances for improper use. Data is powerful, but tread carefully!

Third-party data – easiest to obtain but least accurate

This last type refers to information collected by a data company that compiles huge swaths of data from a myriad of sources. They might have ways to segment data based on demographics or other factors.

If you’ve made the mistake of purchasing a huge email list – or something similar – that would have been third-party data.

But third-party data can also be offered through channels like social media advertising platforms. They obtain information – at scale – about consumer behaviors and interests, and use that data to help you target ads more effectively.

The biggest drawback of third-party data is that it’s the least useful. It’s often old or inaccurate and you’ll likely be reaching out to people who’ve never heard of you and haven’t expressed any intentional desire to do so.

In other words, when used for email or SMS marketing, it’s like cold calling potential customers. When used for things like online display ads or social media campaigns, it’s about as effective as a mass media campaign.

You’re always going to have better results with zero and first-party data – it’s more accurate and composed of people who want to hear from you.

How to acquire third-party data

Usually, you have to purchase ads on a platform (Facebook, Google Ads, etc.) to use the data, and even then you’re never actually in possession of the information – you’re just able to use it for anonymous targeting.

Otherwise, you’ll purchase an email or contact list from a cowboy data company whose rates (and accuracy) can vary dramatically.

How to use third-party data

With third-party data in hand, you can send out semi-targeted marketing. The more accurate your data, the more effective your marketing. The direct mail industry has been doing this for decades, and there are data sources out there with far more information about people than just basic demographic data and purchase history.

But it costs money to use, and even the best data is still filled with a lot of unanswered questions.

What about data and privacy?

As a final point, you’ve probably heard of the coming demise of third-party cookies, where websites will no longer be able to use cookies to track user behavior at the same level as before. Various privacy laws also make it harder to obtain email subscribers or collect other information.

With GDPR and other anti-spam and privacy laws, email subscribers must give consent to receive marketing from you, and if you abuse it, there are some stiff penalties. SMS marketing has similar restrictions.

Third-party data has the most to lose as data privacy laws increase, because this data is usually collected without the consent or even the knowledge of the consumer. So, for businesses relying on third-party data for their marketing campaigns, it would be a good idea to start ramping up your efforts to collect other forms of marketing data.

For second-party data, if your company includes a clause in its privacy policy that you will not sell or share your customer data with another company, then other companies cannot use your data. So, pursuing second-party data requires more than just the cooperation of the other company. It also must be allowed according to their privacy policy and any privacy laws governing that company.

First-party data is less affected by privacy laws, but as requirements for consent increase, even this may become something you need to ask for, as we’ve seen with cookies. And since you have to get consent for people to join your email list, you can’t collect first-party data from email until that consent has been given.

Zero-party data stands alone here. It is, more or less, immune to privacy laws, because it’s willfully handed over. If people don’t want to fill out a survey, they won’t fill it out. If they don’t want to take a quiz, they won’t take it. The data can be used to market to that person, as you see fit, unless they ask you to stop.

What kind of data are you collecting and using?

The bigger your company, the more data you can and should be using. But even the smallest companies can collect and use zero-party and first-party data quite effectively. And with a few good connections, they can use second-party data as well.

Most of the time, the problem is companies using no data and just shooting in the dark with random social posts and email blasts to their entire lists.

Shoot for the stars. Start collecting and using customer data, and your marketing ROI will improve.

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