In March this year, Google announced that it will start deprecating the use of third-party cookies in its ad network and the Chrome browser.
Apple too has put in place similar policies with regards to third-party data, and it is only a matter of time until other players in the field follow the lead of these data giants. Why is this happening?
Well, the increasing awareness among customers regarding the ownership and privacy of their data, especially in a post-Cambridge Analytica and GDPR world, is certainly a factor.
On the other side of the desk, businesses are also realizing that the inaccurate and imprecise nature of the data collected from third-party sources is not worth the time and effort that goes into using it.
Now, as the industry moves away from its dependence on third-party data, the importance of first party data is becoming quite apparent.
Why is first party data important?
First-party data is the data about a business’s customers owned by the business itself. It is collected from various touchpoints in the customer journey (like website, mobile apps, emails, SMS, PoS, and CRM, etc.), then compiled and analyzed by the business to create ads, content, and experiences personalized for individual customers.
The most obvious advantage of first-party data is that it’s free, which is not to say that its compilation and analysis will not cost you anything, but at least you don’t have to pay extra for raw data offered by third-party vendors.
Also, most businesses collect first-party data with express permission from the customers after guaranteeing its safety, and the customers give this permission willingly because they trust the brand and its intention of providing them with a better experience. This, in effect, leads to an atmosphere of mutual trust between the business and its customers.
The customer-first approach that is becoming the norm for all brands is also naturally aligned to favor first-party data over second or third-party because businesses want to know as much as possible about their customers. By leveraging freely shared data they can get closer to their customers without incurring a high cost of acquisition (CPA).
But, how do you go about creating value with first-party data? Let’s look at some of the best ways businesses can do this.
Align the data with your objectives
The main hurdle faced by businesses in deriving value from first-party data is not its shortage but the lack of a coordinated strategy to choose which data is to be collected, how it is to be analyzed, and what can be done to make the insights gained from this process actionable.
When brands clearly articulate their business objectives and KPIs, and the teams responsible for achieving them, they can utilize the data in a much better way. Setting up well-defined goals is also a good way to differentiate between useful and useless data.
So, for example, you can make your loyalty program the primary source of first-party data for your business if your main objective is to retain customers and build a loyal base.
When you can recognize your ideal target audience, you can offer them special discounts, communicate with them directly to let them know about your loyalty program, and increase engagement with brands and products by offering personalized interactions.
Show your customers the value of data sharing
While implementing a first-party data strategy, it is important to make consent management an integral part of your brand identity. This helps in building trust among the customers when they agree to share their data with your brand, and the benefits of that are made evident by statistics and market research.
Gartner, for instance, predicts that through 2023, organizations that can instill digital trust will be able to participate in 50% more ecosystems, expanding revenue-generation opportunities.
So, it should be a priority to incorporate consent forms into the customer experience when people interact with your brand. It will show your customers that you are responsible for their data and when you demonstrate how you are using that data to deliver a better, more value-adding experience, they will feel that data sharing is truly worth its benefits.
To make it easy for the customers to see the value of sharing their data with you, you should also continuously work on improving data accuracy, timeliness, and usability to prevent unsavory data breaches.
Recognize the resources you need and invest in them
For utilizing first-party data to its utmost extent, you must have the right technology, expertise, and smooth processes at your disposal.
In order to achieve this, you must first decide how mature your digital marketing is at the moment, and then you can work towards finding the opportunities to increase this maturity. An effective way to do this assessment is through Google’s Digital Maturity Benchmark.
The ideal approach for a business that’s beginning to adopt first-party data is to take data ownership, work on developing the capability to analyze this data and act on the insights, while also being open to fill up the gaps in technical expertise by working with an experienced partner.
Instead of investing in each new, shiny piece of technology, clearly determine where the gaps are in your capability to meet your critical business goals, and then weigh different alternatives to decide what works best for you.
Also, you should keep in mind that if you have not been able to bring together your data platforms and existing technology then adding new technology will not make much difference to the overall performance until you address current operational issues.
Partnering up with data and technology experts can help you uncover all the advantages of first-party data while allowing you to focus on your core business issues.
Learn with each iteration of the process
When you are done with finding the right sources of first-party data that’s meaningful for your goals, and you have optimized its collection and management, you can move on to focus on the way you are going to utilize it for improving customer experience.
The test-and-learn approach is a good way to do this because you can offer your customers one-to-one personalization without diverting all your resources towards this single objective.
By leveraging first-party data you can assess what level of personalization you want to deliver to different audience segments and the activation type that will help you reach your marketing objectives.
The idea, therefore, is to pick up narrow use cases in each iteration and prove value quickly to the customers.
Keep a track of your performance
As with all marketing efforts, it is important to keep a track of your performance with regards to using first-party data with suitable metrics and parameters. The data coming in through different platforms also provide a good idea of where you are making the most impact on your customers and helps you manage resource allocation.
For example, you may be getting a lot of leads from one channel, but the quality of leads with respect to conversion ratio may be better for another channel, and by leveraging first-party data you can decide which of these two is better for you as a business.
However, first-party data is only as good as the gains it brings your way, and marketers must exercise responsibility while handling it. To form a balanced opinion regarding your data strategy, you should read this detailed take on what you need to ask yourself in the sprint to scale first-party data.