Article

Understanding 1st, 2nd and 3rd party data for marketing success

Julie Catsioulis

4 minute read

The 360 degree view of a customer continues to be the crowning glory for modern marketing organizations and the analytics teams that support them. It drives the segmentation strategies the organization needs to succeed and the personalization that consumers have come to expect. 

As more and more customer data becomes available, the picture of the customer becomes ever clearer. However, as that picture becomes clearer so too do the rules, regulations and laws surrounding how you went about obtaining your 360° view. In this article, we demystify data concepts for you and clarify the meaning of first-party, second-party, third-party and even ZERO-party data.

As marketers, it is critical that we have a clear understanding of the provenance of our data – where it comes from and what we can use it for.

What is first-party data?

First-party data is typically the most valuable to an organization; it is the data they own about their customers. It typically contains Personally Identifiable Information (PII) as well as all the information gathered about customers through their interactions with the business. As technology continues to evolve, first-party data is being collected, ingested, and leveraged more rapidly than ever before. This data is rich with information that can be used to evolve the way organizations engage with their customers and ultimately improve their customer experience.

What is third-party data?

Third-party data has been the next most thought about in the context of customer data. This is the data that is typically aggregated information about a broader group, of which your customers are a subset. Typically, an aggregator pays other organizations for their first-party data; sources may include websites, social media networks, surveys, government census and subscriptions. It typically contains information about markets the business operates in, as well as those it is not yet in. It can be helpful for prospecting, personas, understanding sentiment, identifying potential geographic regions for growth, and so much more. However, if an organization has access to this information, so too do all their competitors. It is often not precise, but more generalized and directional in nature. 

What is second-party data?

In between first-party data and third-party data is second-party data, which is increasingly being talked about in recent years. Essentially, this data is another organization’s first-party data, and organizations gain access to second-party data through a trusted partner. Typically, the partner is not a competitor, but a complementary business with a complementary target audience. Both organizations benefit from advertising and brand awareness and often co-brand and/or co-market to expand into new audiences.

There are many examples of second-party data, such as a TD Bank partnership with Starbucks, which allows customers to earn both Starbucks Rewards and Aeroplan (a travel rewards program) points faster. Aeroplan receives data from TD about customer behavior (shopping at Starbucks).

The data benefits of a loyalty program

With the upcoming loss of third-party cookies, first-party and zero-party data are becoming even more valuable.  It is critical that marketers have a good handle on the source of the data being used,  and the availability of data from other parties and to treat their existing customer’s data with even more care.

Loyalty programs are a great example of successful relationships between parties that can leverage second-party data. There are vast examples of partnerships such as AAA and its global affiliates partnering with restaurants, retailers and travel businesses, Starbucks & Spotify, Uber & Spotify, Fitbit and Health Insurers, L’Oreal & LiveNation and the list goes on. 

In these scenarios, the partnerships are meant to benefit both organizations, and both organizations are then able to leverage second-party data (with the right permissions of course) to expand what they know about their own customers and others like them. The partnership itself determines what first-party data will be shared with the partner, and precisely how it is captured and shared.

These agreements can help ensure privacy compliance and transparent data usage, giving marketers the data that they need without eroding consumer trust.

However, partnerships are not always carried out with the consumer transparency that they should have; the Facebook Cambridge Analytica scandal of a few years ago provides a cautionary tale of what can go wrong.

What is ZERO-party data?

While first, second and third-party data are the most commonly talked about, Forrester Research has coined the term zero-party data. This is data that a customer or prospect intentionally shares with a brand and includes preferences and permissions.  Some examples of zero-party data include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize their interactions.

Zero-party data is really a subset of what is traditionally viewed as first-party, this is the data that your customer has full control over; organizations are increasingly recognizing the difference between customer and prospect data that they have the blessing to act on (zero-party) and more traditional first-party data such as transaction history.

Zero-party data is the data that customers (or prospects) give to an organization, to tell it what they want them to know about themselves and they can change it as their preferences and relationship with the organization evolves. It is said that the customer owns this zero-party data (whereas the organization owns more traditional first-party data) and, as a result, it is not transferable or shareable with others.

Good, clean data leads to good decision making

There is no question that marketers will continue to find challenges in the rules that govern the use of customer data.  

Having accurate customer data  (and a clear understanding of where that data is coming from) has a multitude of benefits, and we all know – good data leads to good decision making.  If you would like support understanding where your data is coming from and how better to leverage it, talk to Trendline today!

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About the Author(s)

Julie Catsioulis

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