What is Zero party data and its difference from 1st, 2nd and 3rd Party data

Marketing professionals use different types of data to build a detailed picture of their customers to give them a smooth and highly personalised experience. There are four primary types of data that marketers work with:

1.  Zero party data

2.  First party data

3.  Second party data

4.  Third party data

But what do these terms mean? Before we get into the definition of “zero party data” and similar terms, let us first understand the meaning of “data”. At its simplest and most basic, data is information about people, places, products, or just about anything that helps marketing teams better understand their customers.

Zero party data – definition

The term “zero party data” was coined by Forrester Research, well-known research and advisory company based in Cambridge, USA. Forrester Research defines “zero party data” as follows: “Zero-party data is data which a customer intentionally and proactively shares with a brand. It can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize them.”Simply put, “Zero party data” is optional information that a consumer gives directly and willingly to the company or brand.

Need for Collecting “0” Party Data

Zero-party data collection has become essential for marketers and digital advertisers in the last year or two because of three crucial developments regarding data privacy:

1. Introduction of GDPR (General Data Protection Regulation) by the EU in 2018. This regulation allows consumers to demand access to the data that companies have collected on them and gives them the right to ask companies to destroy their personal information

2.  Apple’s introduction of iOS 14.5 in 2020 allowed I-phone users to opt-out of data tracking by mobile apps. Called App Tracking Transparency, this privacy tool requires app developers to give the phone users a choice of allowing their data to be tracked

3.  Google’s announcement of the discontinuation of third-party cookies in its browser from 2023. This means that Google’s Chrome web browser will not allow third-party cookies to collect user information. It also means that Google will stop selling ads on websites targeted to individual users through their web browsing preferences

Difference from First-, Second- or Third-party data

These types of data result from an inbound marketing strategy to attract customers to the brands. Therefore, it is vital to understand the different types of data that companies or brands collect on their customers as they can affect the quality of the relationship between the customer and the brand.

First-party data: This type of data that companies collect from consumers, for example through download data or online purchase data. As the data is collected from the consumer, it is very reliable and relevant.

Second-party data: This data is one step beyond the direct data collection. It is collected from indirect sources such as social media profiles and responses to surveys. The data is on individual customers and is very reliable data.

Third-party data: This is the most indirect form of data, and it does not need a consumer’s consent for the collection. This type of data is collected through tracking tools (“third party cookies”) or purchased from database providers. This data is collected as a “mass of information” and is therefore not entirely reliable.

The difference between Zero- and First-party data is that Zero-party data is always optional, whereas First-party data is usually required information. Apart from this important difference, Zero party data is very similar to First-party data.

Here is a snapshot of the four main types of data and the differences / similarities between them:

Reference	Zero-party data	First-party Data	Second-party Data	Third-party Data
Source	Given directly by the customer	Collected by company directly	Indirect through social media	Completely indirect via tracking tools
Consent of consumer	Customer gives consent to collect data	Customer gives consent to collect data	Customer gives consent to collect data	Consent not confirmed
Nature of data	Data on individual customer	Data on individual customer	Data on individual customer	Mass data
Accuracy	Very accurate	Very accurate	Very accurate	Not very accurate
Shared or private	Private	Private	Shared with reliable partners	Shared with many purchasers
Examples	Preferred communication channel, Preferred products,Specific account details	Email / phone number of customer, History of previous purchases,Loyalty program information	Customer website activity, Social media pages, Customer research surveys	Customer’s income / age / other demographic data,History of websites visited, Answers to surveys

Zero party data examples

Let us look at a simple example of collecting and using Zero-party data.

Suppose that you visit a store to buy a watch. The salesperson will ask you a few questions such as your name, occupation, age, and contact details; whether the watch is for daily use or a special occasion; whether it is for personal use or gifting; whether you have any preference for a particular brand , make or style; and the budget that you have to buy the watch. The salesperson uses this data to give you a completely personalized solution or product option that matches your expectation. The information thus collected is given by you directly to the company (the salesperson), with your consent, and will be used only by the company to provide you with a practical purchase experience!

Let us consider another example:

A bank develops a survey asking its customers about its expectations for products, services, interest rates, loan offers, and business banking solutions. The data is collected through direct questions to the customers, and the data collected is analyzed and used to define or improve the customer experience with the bank. Hyper-personalization of the data means that the bank can provide instant solutions as the customer responds to the survey questions.

What are the benefits of Zero-party data collection?

There are five main benefits of Zero-party data collection:

1. It helps a brand engage with its customers in a more meaningful and useful manner.
2. The data that is collected is extremely accurate.
3. The data is very relevant to the customer and explains how they want the company or brand to interact with them.
4. The data is very cost-effective, i.e., the company or brand does not have to pay for it.
5. It removes the need for meeting multiple data compliance regulations.

How can Zero-party data be used in marketing?

Data is at the heart of the martech (Marketing technology) revolution sweeping the marketing and digital media world! The development of Zero-party data collection addresses the three issues facing data collection that we discussed earlier in this blog. Clearly, we are entering a “Data Driven Decade” and marketing professionals need to understand how to use Zero-party data.

It is important to note that consumers own the data they give in Zero-party data collection. Marketers have to use the data in a responsible and useful manner to convert anonymous customers into identified and relevant consumers. Marketers can use Zero-party data in different ways to provide a fruitful two-way relationship with their customers. Here are ten major ways of using zero-party data in marketing

1.  Customised messages on websites

2.  Offers on the landing page

3.  Polls and surveys

4.  Social media marketing

5.  Emails

6.  Loyalty programs

7.   In-store checkout data

8.  E-commerce upselling and cross-selling

9.  Affiliate marketing

Zero-party data strategy

Surveys have shown that more than 75% of advertisers are indicating that they will rely on zero-party data. Still, only a little over one-third of those surveyed are confident of having the right technology to use this data effectively.

Thus, marketers should answer the following questions to arrive at an efficient Zero-party data collection usage and strategy:

1. Will the brand / company use the data collected?
2. What will be the ideal data exchange situation with the brand / company’s audience?
3. When should Which data points will be improved with the added personalization provided by Zero-party data?
4. Is there a need for additional data points?
5. What is the right time to ask the customer for the data?

Which companies are working on zero-party data?

E-commerce companies are an obvious example of companies using zero-party data, but Zero-party data is important for any company that relies on digital marketing, the internet, or websites for customer identification, acquisition, engagement, and retention cycle.

Conclusion

Marketers face many new data collection challenges, such as rules on privacy issues, the end of third-party cookies, and higher use of ad blocking software. The new era of data privacy is driving marketers to adopt zero-party data collection rapidly. The key benefits of zero-party data collection are:

1.      Quality

2.      Accuracy

3.      Relevance

4.      Inexpensive

5.      Compliant

Companies and brands should use zero-party data carefully and dynamically to:

1.  Build a trustworthy and meaningful relationship with their customers

2.  Get a consumer’s perspective on the brand

3.  Create highly personalized experiences for the customer

4.  Provide value to the customer in exchange for receiving the data

5.  Build more effective campaigns