Understanding First- vs. Zero-Party Data and the Power of Owned Data

Facebook made its name in advertising from extensive customer tracking, immense third-party data aggregation, and a powerful algorithm that behaved as a magic money machine for e-commerce merchants. Many brands put money in, acquired tons of customers, and saw massive growth. Not anymore.

Facebook helped launch thousands of brands, but it encouraged impersonal customer experiences that replaced brands' access to customer data with high reported return on ad spend and new targeting opportunities for acquisition. This tradeoff was acceptable for brands as long as customer acquisition cost (CAC) remained at reasonable levels.

Unfortunately, iOS 14 has made the tradeoff less appealing. CACs have ballooned. Lookalike audiences no longer bring in the same quality customers. This is a make-or-break time for consumer product brands. The ones that survive the next two years will be those that fundamentally change their data strategy and reduce their reliance on Facebook’s third-party data.

Now is the time to fully understand and leverage owned data: first-party data and zero-party data, the foundation of building direct, owned relationships with customers. Doing so will shift data power back to brands, facilitate on- and off-site marketing personalization, and drive explosive growth through closer customer relationships.

The Starting Point: Understanding First- vs. Zero-Party Data

First-party data is the necessary customer data collected as part of selling and shipping products, such as email addresses, phone numbers, payment information, and shipping/geographical information.

Zero-party data used to be considered an innovative form of first-party data for brands to better understand their customers. Over the last few years, it has become its own category. Zero-party data is the data collected directly and voluntarily from customers, and it comes from product quizzes, surveys, SMS responses, communication preference centers, and other ways.

The nuance here is that first-party data is essentially contact information, whereas you can think of zero-party data as conversational data. If you were speaking to a customer, what would you learn from them? You might learn their birthday, that they identify as a woman, that their favorite color is yellow, that they don’t like vanilla, that they’re 5ft 8in tall, and that they would like to see product recommendations based on their purchase history.

While collecting first-party data is a part of day-to-day operations, collecting zero-party data comes from providing spaces for customers to voluntarily share more information about themselves.

The New Magic Money Machine: Owning Customer Relationships

By collecting and leveraging both first- and zero-party data, you can provide deeply personalized and thoughtful experiences for customers that will keep them coming back for years (and loving your brand). You’ll grow far more from an owned data-driven customer retention strategy than a third-party customer acquisition strategy.

A successful owned data strategy will have two components:

• First, data collection. You must actively work to collect customer data through all your channels (e.g., paid media, email, SMS). Here, your major focuses are creating a welcoming environment where customers are happy to share as well as building in customer-centric experiences that teach you the most about your customers.
• Second, personalizing your owned marketing (e.g., email, SMS, direct mail) with first- and zero-party data. With this owned data, you can treat your customers as you would treat your friends: with their preferences and needs in mind. You can show them personalized marketing content and customize every touchpoint with them based on the information they shared with you.

With a comprehensive owned data strategy, you'll retain more customers for longer because you'll have the data to keep them happier. This will keep your brand not only surviving but thriving, despite rising CACs — with the power now in your hands.

Dan LeBlanc is CEO at Daasity, an e-commerce analytics and data company.