What do you think of when you imagine a data-driven business? Is it a man with sales charts and a pointer? Lots of talk about what happened in last year’s first quarter? Debates about how much the company could save by using a different brand of pen?
Of course, all that can be very important. But over the past few decades, businesses have been driven by a different kind of data: the data describes how people use the internet. Specifically, how do they interact with advertisements and business platforms? Not that long ago, companies simply bought second- and third-party data. But recently, a new data king has emerged: first-party data.
So, what’s the difference? How can it more effectively drive a company’s success? And, in an era where we understand how sensitive data can be, what best practices can we use as guidelines?
What is first-party data?
First-party data is user data about the ways customers interact with your business. You collect this data yourself, directly from the customer. You can collect this data passively, such as information about their habits when browsing your website, or more actively, such as asking if they’ll provide their email address for your mailing list.
This is in stark contrast to business practices of the past, which more commonly involved second- and third-party data. As consumers become more protective of their data, selling collected information to a second party has fallen out of favor. Third-party data often had little or no connection to the customers themselves and provided less helpful information overall.
First party-data providers
Almost any touchpoint between you and the customer can help you collect first-party data. Digital markets and electronic interfaces can help make this even easier by automating the saving and collecting of data. This means that, depending on your business, every way your customers interact with you can provide useful data. Touchpoints that provide data can include:
- Mobile apps
- Point of sale machines
- In-store beacons
- Social media interactions
- Loyalty programs
- Customer experience surveys
Of course, each source will provide its own type of data. Combining data from each touchpoint can help with identity resolution and in creating customer profiles for individuals. Using a customer data platform that includes all collected data can help give you the full picture of each customer’s journey on their path to purchase.
Why you should have a first-party data strategy
A first-party data strategy has many benefits in building customer relationships. It also helps keeps you current and competitive as competing businesses also move toward first-party data strategies to gain an edge in the market. Some of the most common benefits of using first-party data include:
Creates personalized experiences
First-party data can help create accurate portrayals of individual customers’ habits. Because of this, you can personalize their experiences in several ways. For instance, you can email them about products that might interest them or provide discounts on products they buy regularly. With a personalized customer experience, you can make your customers feel that your business is tailored to fit them—because it is!
Improves customer engagement
When you understand the ways your customers interact with your business, you can figure out what draws them to make certain decisions. What ads get the most clicks? What email subject lines get the best open rates? First-party data helps you discover what content your customers find compelling and prompts your desired actions from them.
And when your customers feel engaged, they’re likely to engage with your business.
Aids customer segmentation
After you collect the information, you can divide it into different data sets or segments. You can create segments based on various customer traits, habits, or any other metric you’d prefer. This can help you target the segments most likely to help you reach goals or to help any given campaign succeed.
Customer segmentation itself has many benefits, from increasing customer retention to improving product development. It’s a useful tool for businesses—and the more data you have, the more accurate and interesting segments you can create.
Develops effective marketing
First-party data can help you build an accurate portrayal of your customer’s relationship with your business: what they buy, why they buy it, and even how they use it. By understanding your customers’ wants, needs, and habits, you can create marketing campaigns that target them with what they need when they need it.
Something fun and interesting can also happen with these kinds of first-party data marketing strategies: they can actually create a loop. You can create effective digital advertising campaigns that prompt your customers to interact with them. Then, once those customers interact, that provides you with more data to analyze. It’s a cycle of information that’s mutually beneficial to you and your customers!
Over the past several years, internet users have become increasingly aware that their data is sensitive, available, and valuable. Knowing that businesses only use the data they collect themselves can help them feel secure that their information isn’t being bought and sold against their will. Letting them know that you only use first-person data and your plans for keeping it secure can help them feel safer when interacting with your business.
Best practices for using first-party data
Any time user data gets collected, it should be taken seriously. Understanding best practices for collecting and using sensitive data can help you build positive customer relationships, keep your data policies legal, and help make collecting data worth the effort. Some common best practices include:
When you let customers know you’re collecting their data, they might appreciate the honesty. But if you ask their permission, you’re letting them become an active member in the relationship. As an example, you could easily collect their email address when they register an account with your website. If you chose to do so, you could use this to send them marketing emails from their business. But, when they register their account, you could also ask their permission to send them marketing emails.
By asking permission, you help them feel secure; you give them agency in what happens with their data, and you get an important piece of information from them: whether emailing them would be an effective marketing method!
Check the laws
Not all countries have strict laws regarding the collection and use of user data. However, some do. For instance, the EU has the General Data Protection Regulation (GDPR). If you ever hope to do business in the EU, you’ll have to follow these regulations. Even if you don’t plan on operating within the EU, it could still be best practice to follow these regulations. Not only does it offer guidelines on what is acceptable regarding user data, it’s the kind of regulation that could influence future laws in other countries. By adopting the policies in the GDPR now, you could set yourself up to follow any regulations your country might someday pass with minimal adjustments needed.
Make a plan
Before diving into any strategy, it’s helpful to know the plan. You might create a list of goals, the steps needed to achieve those goals, and how you plan to implement strategies along the way. It can also be helpful for each team member or division to understand what their job will be going into this new strategy and how they can help make it successful.
You’re likely going to collect a lot of data, so knowing exactly what you’re going to do with it beforehand can help streamline the entire process.
Determine which data is useful
Yes, it’s going to be a lot of data. Like, a lot. Because of that, you’ll need to set some goals. This way, you can determine which data is going to be useful. Then, your data analysts can provide reports on just the information you need. It’s a simple step you can take that can save your business time and money.
Test marketing strategies
With marketing, it can often help to test different methods and strategies to analyze their effectiveness. Because first-party data collection provides a lot of information, you can use this to quickly find out how successful new strategies are. By determining a strategy’s goals and target audience, you can test a version on a small customer segment first before creating a bigger campaign.
When guiding customers through their journey, historical data can often help. But sometimes, real-time data can be even more important. Customer traits and behaviors can evolve quickly. Points along the path to purchase can last mere moments. Luckily, data can be a constant stream. This can help you stay up-to-date with current trends, so you can act fast and make on-the-fly adjustments to make sales.