Zero Party Data: What is it? How to Use it?

In a post-GDPR world, ensuring data is properly collected is vital. Get to know what 1st, 2nd, 3rd, and zero party data mean and how to leverage these data types.

This is Part I of a series of articles about data collection practices in a post GDPR world. Check out Part II here.

Today, over 58.7% of the world’s population is online. And in Europe and North America, almost all their citizens use the internet.

As you can see, a heavy digital presence means that data is king. While business owners once marketed to consumers based on offline data, the focus is now on online.

There are various ways you can collect and use data. And by knowing how, you can leverage it to make the most out of it.

In this article, we’ll discuss what 1st, 2nd, 3rd, and zero party data are so you know exactly what’s ideal for your company.

1st Party Data

First up on our list is 1st party data. This is the most readily available type of data for all business owners, as it’s called “owned” data. As the name suggests, 1st party data is information you’ve collected firsthand.

What does this mean? It means that this is the information you collect from your customers when they follow and engage with you on social media, visit your website, or fill out surveys.

Whenever a user browses your website, it sends a cookie to their computer (with permission, of course). If they decide to allow cookies, then it tracks their behavior on your site.

And if they volunteer any information (such as filling out a form), then that is sent to you as well. All of this rich data is then stored in your customer relationship management (CRM) system or customer data platform (CDP).

This is one of the best types of data to have, as not only is it “free,” but it’s a direct reflection of the people who are actually interested in your products or services.

How You Use It

In most cases, 1st party data is used for retargeting. Retargeting is a marketing strategy used to convince hesitant users to commit to a purchase.

Since you already know which pages they visited on your website, you can use that information to serve up relevant ads to them as reminders. For instance, if they abandoned their cart, if you serve up relevant ads to users, it may motivate them to return and follow through.

1st party data can also be used to find more customers. If you understand your current customers and prospects (such as their pain points), then you can leverage that knowledge to expand your marketing reach.

2nd Party Data

Next up on the list is 2nd party data. Like with 1st party data, the name gives you a clue as to how this data is obtained; instead of firsthand, you’re getting it secondhand.

2nd party data is almost just as valuable as 1st party data because it is 1st party data, just obtained by someone else. For example, you may decide to partner with a business that offers an auxiliary service that’s mutually beneficial to yours. So you both want the same customers, but aren’t competitors.

In this case, it’s worth sharing your 1st party data with one another. Since you’re already sitting on this valuable treasure trove of information, it’s in your best interest to make the most of it. By sharing it with a partner and receiving their wealth of data, this only serves to grow both of your businesses.

Another way you can obtain 2nd party data is to just simply purchase it. This can be more efficient than seeking out a partner, as it’s instantaneous. However, make sure you always double-check the data before purchasing, as it’s possible to spend a significant amount of money on 2nd party data that ends up not relevant to your business at all.

How You Use It

Because 2nd party data is essentially 1st party data, but obtained from another entity, it’s basically used in the same way. You’d use this information to create the optimal retargeting ads, as well as nurture any leads you have.

What’s great about 2nd party data is it gives you another perspective on your customers and prospects. While you previously only had 1 perspective on them, any 2nd party data you get adds another layer to these users. This can help you narrow your focus and create better marketing strategies that speak to your target audiences.

3rd Party Data

3rd party data is collected by companies who are solely in the business of aggregating data and selling it to others who are interested. This means that if you’re looking for volume, you’ve got it here.

But keep in mind that there are caveats to this type of data. Yes, the volume is there, but this information isn’t available to just you (or your partner, as with 2nd party data).

Instead, 3rd party data is readily accessible to everyone who can and wants to pay for it; this includes your competitors.

Also, 3rd party data is collected for all sorts of users, who may or may not be potential customers for you. As a result, you may end up with a large volume of data, but most of it may not be relevant because they’re nowhere near your target audiences.

How You Use It

As you can guess, 3rd party data isn’t something that should be at the forefront of your marketing strategy. Instead, it should be supplemental.

The most helpful way to use 3rd party data is to first look at the patterns and trends with your customers by analyzing your 1st party data. Then, compare those results with the 3rd party data you’ve obtained.

From this, you should get something called the overlap audience. This overlap is what’s most valuable to you, since you can extrapolate your 1st party data findings to a larger pool of data.

So if you find yourself lacking in 1st party data volume, you can always complement it by 3rd party data. That is, if you use it correctly. For many businesses, they find that 3rd party data isn’t actually useful for them (since customer preferences change over time), so you may want to carefully consider this option before committing to purchasing.

Zero Party Data

Zero party data is very similar to 1st party data, but with one key difference: you’re going directly to your consumers and asking them upfront for their insights.

With 1st party data, consumers are giving you permission to gather information on them while they browse your site. But this is still an indirect way of determining what they want and need, since you’re still inferring these things from their browsing behavior. The most you can get out of this is implied interest.

So what better way to address your customers’ desires than to get it directly from the source? This is exactly what zero party data does.

Because they’re in control of how their data’s collected and they know it’ll be used to better personalize their user experience, most consumers are more than willing to give zero party data, especially if they get something in return for it.

Another key difference between 1st and zero party data is the ownership of data. While you own 1st party data, you don’t own zero party data. Your customers always remain the owners of this information, which means you can’t sell this data without their consent.

How You Use It

Because it’s so similar to 1st and 2nd party data, you’d use zero party data in the same ways. For instance, you’d apply this information to retargeting and nurturing your leads.

But since you have data that’s coming straight from the horse’s mouth, this significantly enriches your marketing approaches. Your customers are telling you what they need, so give it to them through your interactions with them.

Why Is Zero Party Data the Best?

All other types of data beat around the bush; yes, even 1st party data. Zero party data is your customers telling you explicitly and exactly what they want from your brand.

In addition, zero party data is never static. Since your customers own their data, and not you, they have the right to go in and edit it whenever they see fit. As a result, you’ll have less outdated data and will have a fluid information source you can utilize to tweak and perfect your marketing strategies.

Consider Using Interactive Content

To motivate your customers to share data with you, you should consider using interactive content. This is like gamifying your content, which makes it interesting and fun for users to provide information.

For example, there are such things as interactive infographics, white papers, eBooks, assessments, and more. If you can incorporate this into your site, then you can entice visitors to share information, rather than alienate them with boring popup forms.

If you’re interested in interactive content, consider getting in touch with Ion Interactive for a demo. You can also see examples of calculators and assessments.

How to Figure out Which Type of Data You Should Use

As a business owner, you need to stay on top of your costs and overhead so you stay out of the red. One crucial thing you need to do is figure out your total cost of ownership (TCO).

This allows you to see all of the direct and indirect costs associated with adopting a solution. When it comes to SaaS, this is a must-do, as this is directly related to your storage needs for data. No matter if you use 1st, 2nd, 3rd, and/or zero party data, you need to have adequate data storage solutions or risk downtime or even loss of data.

Once you’ve figured out your TCO, then you also need to calculate return on investment (ROI) on the types of data you’re interested in. Of course, there are many tools available to help streamline this process so you can quickly figure out if a certain type of data is worth spending your time (and money) on. Learning how to use ROI calculators can enable you to make the most of your marketing spend.

Test, Learn, and Tweak

You can do all the calculations you want, but there’s nothing better than using real-world experience to perfect your marketing methods.

For instance, let’s say you’ve figured out that you should go with 1st and zero party data for the best marketing spend. But after running your campaigns for a little while, you find that you’re not getting the best results possible.

In this case, it may be worth looking into either 2nd and/or 3rd party data to enrich your current data. Feel free to test it out and learn from your results. You may find that adding some 2nd party data is enough to strengthen your campaign, or you might find that you need even more data from 3rd party sources.

Either way, the most dangerous thing to do is to stagnate. So never become complacent in your marketing; always test, learn, and tweak.

Use a Combination of Data Types for the Best Strategy

As you’ve seen from our previous sections, certain types of data have their own strengths. But to be truly successful in your marketing, you can’t just rely on 1 or another.

Yes, 1st, 2nd, and zero party data provide some of the best quality data around. But because their volume is so small compared to 3rd party data, there are limitations to what you can do with that data.

And on the other hand, 3rd party data gives you the volume of data you need to perfect your algorithms and marketing strategies. But the quality isn’t as high as with the other types, which means if you rely solely on 3rd party data, you can end up alienating your customers.

So the best way to leverage the strengths of each type of data is to use them when appropriate. Plus, always monitor your results so you can measure, learn, and adjust your strategies accordingly.

Want to learn more about running a SaaS company? Then read this helpful guide on SaaS pricing models and strategies.

Diego Gomes

Diego Gomes

Learning by doing! And always doing a lot of stuff ;) @rockcontent @12minapp @saasholic

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