Global brands aren’t strangers to the power of data and how it can be used to surface meaningful insights. Customer data can inform revenue-driving decisions, resulting in exponential growth for companies and laying the foundation for personalized, more effective marketing efforts.
But the benefits of acceptable data use also come with the danger of misuse. With the introduction of the European Union’s General Data Protection Regulation (GDPR) and privacy laws in the United States looming, brands need to make sure they are using data that has been acquired in an ethical way.
This added scrutiny of data practices for brands and corporations has caused many marketers to examine their data strategies. Based on what I’m seeing, some are tightening their grip — opting to only use directly sourced data that is self-reported by their customers. This approach involves doubling down on the newest classification of declared data, which some are now classifying as “zero-party data.”
The introduction of “zero-party data” may leave brands wondering where exactly it fits in their strategy — if at all. Does it take the place of first-, second- or third-party data? Is zero-party data even the right term to use? Just months ago, it seemed many marketers were shifting their focus from third-party to first-party data, citing it as the true North Star for any data strategy. Now, brands are trying to discern the merits of zero-party data and understand its role in an already packed party.
Should marketers rely on zero-party data?
No. Well, not exclusively at least.
It’s my belief that marketers must pull multiple audience data sets from what I call the “audience spectrum” in order to get a more precise view of their current and potential customers. I find that the more closely tied the data is to an actual consumer (first- and zero-party data), the better the data can be referenced back to the brand’s third- and second-party data to cleanse, refine and enrich the estimated dataset.
So, while zero-party data provides rich insights for brands, it is only part of the pie. In my opinion, the most effective marketers are the ones who rely on a combination of zero-, first-, second- and third-party data.
Define and develop your audience spectrum.
It’s easy to get lost in the lingo around the different audience types. To fully understand the audience spectrum, you need to see how the various types of data fit together.
Let’s start with third-party data. This data is sourced from outside the organization, so the brand using it doesn’t have a direct relationship with the audience. Third-party data is inferred and can range from demographic data (household income, geographical location, etc.) to behavioral data (past purchases, websites visited, etc.). If you don’t know a lot about your audience, third-party data can act like a weather vane to point you in the right direction. It provides just enough insight to form a hypothesis which will be validated or invalidated as you move closer to richer insights along your audience spectrum.
To build on the insights you’ve extracted from third-party data, you should use second-party data, which is data collected through a direct relationship, but not collected by the brand itself. Examples of second-party data include data you get from a partnership that is cross-promoting your brand with their product or service, or data you receive from your ticketing vendor. While third-party data is inferred, second-party data is self-reported, but again, collected from outside the brand.
The fun begins when a brand has the ability to capture data directly from the source: its customers. Zero- and first-party data can be captured via surveys, opt-in campaigns and even actual customer shipping addresses. The big difference, however, is that zero-party data is more of a feedback loop that gives you permission to reach back out and have a conversation with the customer, while first-party data can be acquired after authentication takes place through device matching.
To highlight the differences between the two, consider a branded sweepstakes. The customer would fill out their name and email, and give permission to authenticate their social account for a quick submission. They might even be asked a few questions: How did they hear about the sweepstakes? What products are they interested in? Can the brand reach back out? Data that is matched through social authentication (perhaps location data and Facebook Page likes) is an example of first-party data. However, the feedback responses that are provided by the customer directly to the brand are examples of zero-party data.
Evolve your data strategy in 2019.
Using only one data set to learn about current customers can make it difficult to build a model to reach similar ones. Therefore, it is essential for brands to create a 360-degree view of their customers across the audience spectrum.
However, it’s not just about leveraging different types of data; brands need to vary their acquisition methods as well. Brands shouldn’t rely on surveys as their main source for zero-party data collection due to confirmation biases and their limited ability to only provide insight into the direct questions asked. Social data can paint a richer picture, providing a more discerned set of data that is truly representative of a brand’s audience and its broader addressable market.
By uncovering insights across an audience spectrum, marketers can discover what really matters — who their customers are, where they spend their time, what they buy, how they behave — in an ethical way that delivers unprecedented value for their brands.
This article was written by Kyle Nelson, Co-Founder and CMO of MVPindex and originally published in Forbes.