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Zero-party vs. First-party vs. Third-party data

Understand the similarities and differences between the three main types of data and why it's important for your business.


Data. Data. Data. Regardless of your industry, brands cannot escape the need for consumer data. But collecting, analyzing, and using data is no easy feat. Between new privacy regulations such as GPDR and CCPA and consumers' growing skepticism, it's difficult to know the best path to make data an essential piece of your business.

On top of all of that, differentiating between zero-party, first-party, and third-party data is complex, especially because data collection and use are rapidly evolving. In this blog, we will distinguish between the three main types of data and the importance of capturing zero-party data for your business in 2023.

What is first-party data?

First-party data is collected directly from customers by the business itself. Say you make a purchase at a store, and from the transaction, the store collects your name, address, and payment information.

First-party data gives businesses deep insight into the customer's behavior and preferences that they can use to improve products, create personalized experiences, and develop targeted marketing campaigns. However, first-party data is limited in scope and may not represent the broader customer base. Additionally, as data-privacy concerns grow, customers are skeptical about how brands gain and use their personal information.

What is third-party data?

Third-party data is collected by companies that do not have a direct relationship with consumers.

Typically third-party data can be extremely broad and provides insights into a wide range of customer behaviors and preferences. The information collected is about online behavior, including search history and website visits. It's why so much online content is free, like Google and your favorite blogs. The data is then aggregated, packaged into data sets, and sold to businesses. Generally, targeted ad campaigns rely on third-party data. These ads pay for so much of the content we consume.

Third-party data has its pitfalls. The data may be inaccurate or out-of-date. Additionally, third-party data collected without customers' consent or knowledge leaves businesses vulnerable to regulatory compliance risk. The EU and CA have implemented GDPR and CCPA laws to combat potentially duplicitous data practices. It's why websites always ask you to accept their cookie policy.

What is zero-party data?

Finally, let's dig into zero-party data. It's a more recent concept rapidly growing in popularity because it is more transparent and consensual. Zero-party data collects data from customers directly. Customers voluntarily share information about themselves, such as their interests and preferences, email address, and other personally identifiable information, in exchange for personalized and contextualized content, such as discounts from a loyalty program. Because customers willingly provide information, zero-party data is considered more trustworthy.

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What are the benefits of zero-party data?

Between first, third, and zero-party data, the latter benefits customers and brands. First, it helps foster trust with customers. Customers are more likely to share their information when they feel their data is handled responsibly. Plus, zero-party data is often more accurate and up-to-date since customers are more likely to provide accurate information if they control what is shared.

Additionally, businesses can avoid compliance and regulatory risks by utilizing zero-party data. Strict privacy laws mean companies must be transparent about collecting and using customer data. Because customers willingly share their data, the legal risks associated with third-party data are preventable.

There are some challenges of zero-party data. Customers may not willingly provide information or offer limited information. A critical difference between zero-party data and the other two types is customers typically share their info only if they get something in return, such as discounts.

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Even if customers share their data, businesses need a strategy around utilizing zero-party data for their marketing efforts. To get the most out of zero-party data, brands should use it to create tailored email campaigns, improve loyalty clubs, start digital remarketing efforts, and build out look-alike audiences.

Each data type has different use cases and can impact how customers perceive the brand. Zero-party data is deemed more trustworthy and valuable because customers voluntarily provide it making it more accurate and up-to-date and helping businesses avoid legal risks. The key is finding the right balance between privacy, accuracy, and actionability to ensure that companies make the most of their data.

Digiphy helps brands connect directly with customers and capture zero-party data. Add Meta Pixel and Google analytics tags to Digiphy Storyline pages to incorporate first and third-party data. Find out how Digiphy can help your brand collect zero-party data.

 

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