As consumers grow increasingly conscious of how companies use their data, businesses have scrambled to find new ways to obtain customer information—namely, by acquiring the customer’s consent. Imagine that—actually asking your customers to voluntarily share their data with you instead of using third-party cookies and tracking pixels to surveil their activity across the web, or purchasing their personal information from an unscrupulous data broker. For businesses that use third-party data for personalization and ad retargeting—i.e. almost all of them—consensual data sharing is a novel concept.
Unlike third-party data, collected from external sources, often without the customer’s knowledge or explicit consent, zero-party data is gleaned from asking customers about their needs directly instead of making inferences from behavioral data.
Forrester defines it as data that a customer “intentionally and proactively shares with a brand.” For example, the customer might share an opinion about your brand on social media, fill out a form on your website, or send you an email.
What insights can you get from zero-party data?
Zero-party data helps you understand your customer’s pain points, motivations, needs, purchase drivers, attitudes, and beliefs. However, since zero-party data is qualitative, you can’t use it for advertising or improving recommendation algorithms.
Zero-party data is ideal for the following:
- Building marketing personas
- Defining your brand messaging
- Determining which marketing channels to use
- Creating content
Collecting zero-party data is all about asking the right questions. For example, you can ask which version of a product your customers favor (eg: “Do you prefer a fitness app that has a calorie tracking feature, or would you prefer a step tracker?”), what brand values are most important to them (eg: “To what extent is sustainability an important consideration to you when purchasing food items?), or what types of promotions they want to receive (eg: “How often would you like to receive emails from us?”).
How do you collect zero-party data?
Access to zero-party data hinges on an exchange of value. In other words, you only ask customers for information that can help you offer a more personalized experience. For example, if you run an ice cream shop, you might ask customers to volunteer their date of birth so you can send them a special offer. Or you might ask about someone’s coffee-drinking habits to expand your product offerings to suit their tastes.
Surveys, quizzes, polls, reviews, focus groups, and interviews are ways to gather intel on customer preferences and opinions. You can start collecting this data during the new user registration process—such as when they create an account or sign up to receive your newsletter. New customers are usually amenable to information-sharing because they know they’ll receive more relevant product recommendations by stating their needs. According to a recent study by eConsultancy, 53% of UK consumers are willing to provide data in exchange for goods or services.
Remember, you can collect zero-party data during any interaction with customers. For example, if you offer product discovery experiences on your website, you can ask customers to provide feedback during or after the conversation. The conversation itself also serves as a valuable source of data. Another example is your product recommendation system. If customers can filter products based on their preferences (eg: a conversational assistant that lets customers self-identify who they are and what they’re looking for), you can use this data to build a profile of your ideal customer.
A great example of collecting zero-party data from Gerber. The infant and baby care brand collect information through a series of questions that help create a unique profile based on a baby’s needs. This customer profile is then used to provide accurate and timely marketing campaigns for the parent.
What is the difference between first-party data, third-party data, and zero-party data?
First-party data and zero-party data are very similar. Both are a form of direct customer data which was shared with the customer’s consent. However, first-party data is quantitative behavioral data, while zero-party data is qualitative, Voice of Customer (VoC) data. First-party data includes an individual’s site-wide or on-page behaviors, such as clicking, hovering, scrolling, active time spent on site, session context, and how they respond to personalized experiences.
Transactional data such as purchases and downloads are considered first-party data, too. The point of first-party data is to understand how customers interact with each touchpoint for both paid and organic channels. This data is used to improve paid advertising, ad targeting, and optimize advertising channels.
Examples of first-party data include:
- Purchase history
- Website and app activity
- Email engagement
- Conversion data
- Click data
This data comes from your CRM, sales calls, and web analytics. First-party data is reliable because it’s collected in accordance with privacy regulations (i.e. it only uses necessary cookies) and represents data that is unique to your business.
Third-party data is collected from external sources—usually by web browser cookies or tracking methods like Facebook Pixel. Businesses can collect third-party data by advertising on Google or Facebook. They can also buy this data from a data exchange—special marketplaces that resell customer data. However, this data is aggregated from multiple sources, so it may not reflect your target market, and it ignores privacy regulations. Data laws like Europe’s GDPR and CCPA have made third-party data unreliable by limiting third-party cookies.
Benefits of zero-party data
Zero-party data is becoming an increasingly hot commodity given tightening data privacy regulations and consumer demands for greater transparency.
- Transparent, value-added relationships
When customers know that you are using their data internally for the sole purpose of personalization, they are more likely to trust you with their information.
- Better conversion and retention
Third-party data was used to lump customers together into cohorts and personalize the experience based on surface-level inferences. However, these are often inaccurate and represent over-generalizations or stereotyping, which leads to poor conversion and retention, whereas zero-party data constitutes information coming directly from the customer.
- Necessary for a cookieless world
Google Chrome is preparing to remove third-party cookies in 2023, while Apple is enabling iPhone users to block data tracking. Collecting zero-party data mitigates the risk of infringing on data privacy laws while strengthening a brand’s ability to create truly personalized engagement.