If companies want to build effective business and marketing strategies, they need to collect information directly from the source: their own customers. User data helps inform their decisions and guide their efforts, whether they’re developing new products, designing advertising campaigns, or creating plans for the future. To avoid complications with data privacy policies and capture meaningful information about their customers, companies need to focus their efforts on zero-party and first-party data. What is zero-party data and first-party data, and how do they differ?

While second-party data is sold by other businesses and third-party data is aggregated from outside sources, zero-party and first-party data is completely internal - a direct connection between companies and their customers. Rather than looking at information that is potentially biased, unrelated, or outdated, businesses can get a clear look at how users perceive, understand, and interact with their brand.

Though zero-party and first-party data originate from the same source, they still have their differences. The main distinctions are how and why they’re collected:

• Zero-party data is collected through polls, surveys, quizzes, and website and social media interactions. Customers intentionally give their information to your brand so that you can better understand and serve their needs. Zero-party data is provided on a voluntary basis, and includes product reviews, blog comments, and survey responses.

• First-party data is collected through website and app registrations, social media profiles, purchasing behavior, and user feedback. Customers knowingly give their information to your brand because it’s necessary for engaging with your business and products. First-party data is provided on a mandatory basis, and includes contact information, purchase history, and customer service interactions.

To start, zero-party data helps companies identify customers who are actively interested in fostering a relationship with their brand. When users leave a product review or complete a survey, they are voluntarily giving information in order to share and improve their brand experience. Companies can then take this information to refine their customer support, build stronger marketing campaigns, and so on. They can even use zero-party data to drive personalization strategies. For example, brands can use poll results to segment users by their favorite product lines, then send them targeted messages specific to their preferred products. Data-driven personalization fosters customer retention and long-term loyalty.

Zero-party data also ensures trust and transparency with customers, governments, and data policy makers. As companies collect zero-party data openly and honestly, it reduces the ethical and legal risks typically associated with second-party and third-party data. When brands leverage survey data and poll responses in their business decisions, they know it comes with consumers’ explicit consent and understanding. Customers feel more secure about what information they provide and how it’s being used, and companies feel more confident about what information they capture and whether it can be used.

There are two main challenges of zero-party data. First, companies often risk overwhelming customers by asking for too much information. If users see polls and surveys with too many options or too many questions, they’re less likely to complete it. To avoid low engagement, brands should choose quality over quantity and focus on capturing data that is directly related to their goals. Falsified information is another potential issue. For example, customers might answer surveys at random to earn discount codes in the shortest possible period of time, or provide fake names and addresses to avoid giving companies their real information. While there’s little that companies can do to navigate this obstacle, they can start by making their data collection processes as quick and easy as possible.

Zero-party data collection is primarily conducted through surveys, polls, and quizzes. It can also come in the form of comments, reviews, and other types of direct interactions. Brands should use these formats to capture information at every stage of their consumers’ path to purchase. For example, when users create an account with their website or mobile app, brands can ask them to complete a short questionnaire about their content and communication preferences. They can run sweepstakes and contests where shoppers have to participate in a poll as part of their contest entry. Lastly, they can host Q&A sessions on social media to capture customer feedback. They can also encourage users to leave comments and reviews by providing incentives for doing so, such as discount codes and free merchandise.

Social media polls are a quick and easy way to nurture user engagement and gain consumer insights at the same time. For example, Taco Bell ran a Twitter poll to determine the most popular flavor of their Doritos Locos Taco. Brands can also use polls to find out what product features their customers like best, what potential service offerings people want to see, and so on.

Sweepstakes, contests, and giveaways are another opportunity for fostering brand awareness and capturing zero-party data. For example, Garnet Hill, a clothing and home decor company, asked customers to create a Pinterest board of their dream bedroom to get the chance to win $500 worth of bedding. Participants were to pin at least ten images, with a minimum of five from Country Living magazine’s Pinterest account. Not only did this help Garnet Hill generate comments and engagement, but it also helped them learn which product photos and styles customers liked best.

Zero-party data can and should be leveraged for three main purposes: to create customer personas, to drive retention and personalization efforts, and to nurture customer loyalty. For example, companies can use questionnaire responses to segment users by their content interests or email preferences. Brands can use comments and product reviews to serve personalized recommendations. Lastly, businesses can use poll results to send customers discounts and special offers to drive future sales. Zero-party data provides insights on how to meet consumers’ expectations along every step of their user journey, from awareness and purchase to loyalty and advocacy.

Website, app, and email preferences help companies tailor their customers’ experiences and serve them the specific types of content they want to see. Brands can build personalized user profiles based on their selections and provide value through email and advertising campaigns that nurture customer loyalty. Preference centers also reduce the risk of customers unsubscribing from their emails or deleting their accounts, as they’re receiving content they proactively asked for. For example, Home Depot asks shoppers for their areas of focus, their skill levels, and their interests. It helps them target and differentiate between novices and professionals, homeowners and contractors, and so on.

Feedback forms encourage customer engagement and help brands capture zero-party data and generate ideas that they might not have had otherwise. Feedback gives them insights into what shoppers want and how their products and services can improve. It also helps people feel more involved in the growth and development of their favorite businesses, further fostering customer retention and brand loyalty. For example, Starbucks’s My Starbucks Idea platform, which ran from 2011 to 2018, encouraged consumers to submit and vote on potential product, service, and community-building ideas. Starbucks implemented almost 300 customer-led innovations, including free wi-fi, happy hour, and cake pops.

One of the main advantages of first-party data, as with zero-party data, is that businesses have complete control and exclusive ownership of their users’ information. Unlike second-party and third-party data, which comes from external sources, brands can choose how to collect, manage, and store their first-party data. They can also feel assured that their competitors don’t have access to the same information, giving them a competitive advantage. First-party data is also more accurate and more relevant than second-party and third-party data, as brands can develop strategies directly based on how and why their consumers engage with them.

Like zero-party data, first-party data also ensures trust and transparency with users, governments, and data privacy laws. Consumers have a full understanding of when and why their information is collected, and brands have complete confidence in where and how their data is used. First-party data is also cost-effective and easy to capture. Unlike zero-party data, which requires additional effort to implement, businesses capture first-party data through their day-to-day operations. When customers visit your website, follow your social media accounts, make a purchase, or subscribe to your mailing list, their information is collected without needing to take extra steps. Brands don’t have to invest extra time and resources into capturing first-party data, provided that they already implemented customer relationship management systems and analytics tools.

The main challenge of first-party data is its finite scope and scale. Second-party and third-party data offers breadth, while zero-party data offers depth. First-party data, however, is limited to a brand’s existing prospects and customers, and lacks insight into people who haven’t engaged with their ads, products, or platforms. The narrow range of information also makes it difficult for brands to identify potential markets and scale their business and marketing efforts to attract new audiences. To navigate the constraints of first-party data, companies need to supplement it with zero-party data. For example, when asking for contact details during the onboarding process, they should include a short questionnaire about consumer preferences, too. Brands should also practice social listening to learn what people outside of their existing user base are talking about. Social listening can help them find new leads and develop strategies for customer acquisition.

First-party data collection is primarily conducted through in-store and online sales software, customer relationship management systems, and analytics platforms. They help companies capture purchasing history, contact details, website behavior, and so on. When collecting data, brands should practice progressive profiling by gradually asking for information over time, rather than asking for everything at once. This reduces the risk of losing potential users and acts as an ongoing strategy for building shopper personas and nurturing customer relationships at the same time. For example, when customers make an in-store purchase, brands can ask for their name and email address. Then, they can send a welcome email to encourage customers to create an account on their website and provide their home address and phone number. Lastly, they can use their customers’ website and email actions to determine their preferences and personalize their brand experience.

Registration forms are the perfect way to start building customer profiles and capturing first-party data, provided that brands don’t ask for too much information at once. For example, blooom, an investment company that provides financial management services, asks new users for their name, birthdate, and expected retirement age. Brands can use basic demographics like age, gender, and location to segment and target customers with personalized content and provide continuous value.

Purchase history and website analytics gives companies a clear understanding of what consumers are researching, considering, and purchasing. They can see which product pages result in the most views and conversions, what search terms people are using, and whether shoppers are returning purchases or repeating them. For example, Chewy, an online pet product retailer, keeps track of users’ past purchases to send them targeted emails and encourage repurchasing. Businesses can also use purchase history and analytics to nurture initial orders, remind customers about their abandoned carts, and request reviews for their recent purchases.

First-party data can be leveraged for two main purposes: segmentation and personalization. Much like zero-party data, first-party data helps build user profiles, drive retention, and foster customer loyalty. For example, brands can use contact details to send targeted emails and text messages. Companies can use order history to serve personalized recommendations and encourage repeat purchases. Lastly, businesses can use analytics to see which products, posts, and pages perform best with consumers, and shape their business strategies around the results to continue fulfilling their needs.

Email segmentation and dynamic messaging helps brands connect with customers based on predetermined criteria. For example, Nordstrom’s email content varies depending on the recipient’s location, interests, and shopping habits. They send abandoned cart reminders, product and brand recommendations, and sales and events notifications, determined by where and how users interact with their website.

First-party data isn’t just limited to digital business and marketing strategies, as it’s used for in-store segmentation and personalization, too. For example, Amazon Books, like most bookstores, separates books by genre, such as crime, romance, and history. However, they also feature curated collections based on consumer data, such as books that have a 4.8 or higher Amazon rating or have over 10,000 Amazon reviews. They even segment books by physical store location, such as fiction bestsellers in Chicago or popular nonfiction in Portland.

Incorporate zero-party data and first-party data in your marketing strategy

Zero-party and first-party data are crucial for building, executing, and analyzing effective strategies. They help brands gain control over their information, improve their business operations, and drive sales, engagement, and customer loyalty. From registration forms to surveys, dynamic messaging to sweepstakes and contests, companies need to prioritize data collection and analytics.

3 tier logic’s PLATFORM³ helps brands create marketing campaigns like sweepstakes, giveaways, loyalty programs, and more to foster growth and capture zero-party and first-party data. The Data Capture & Analytics provide marketers with the tools they need to understand their customers and make informed business decisions. To learn more, book a demo with our team today.