Differences between first-party and third-party data
Not all client data is the same. Marketers use three types of data when interacting with their customers: first-party data, second-party data, and third-party data. These three types of data are collected from different sources, used for different purposes, and subject to different laws and requirements, such as GDPR (the General Data Protection Regulation), a regulation in the European Union.
Also, we can use „zero-party data“ as information from customers that they intentionally and proactively share with you. You acquire it through quizzes, surveys, website activity, customer profiles, customer communications, and other places. Although previously assumed to be a subset of first-party data, zero-party data are more useful than first-party data in general, and this issue deserves its own page.
What is First-party data activation?
First-party data is the data you collect directly from your customers. You can improve customer interaction with your digital touch-points (like your website or app) or offline touch-points (like your store) by gathering this data.
In general, your customers understand that you collect this data. Use it to meet their needs and improve their customer experience. Make a more relevant offer of products based on what your customers are searching for on your website. As with zero-side data, first-party data comes directly from your customers. As a result, it’s accurate.
First-party data examples
- Interests: preferred content on your site, individual products or product categories that your customers viewed.
- Location: the area in which customers to your website were or the location they selected to receive goods or services.
- Demographics: gender, age, education, employment, marital status, and children.
- Marketing sources: platforms where customers are most active and frequently interact with your marketing such as social media.
- Purchase history: products or subscriptions purchased, purchase values and discounts, successful cross-selling or additional sales.
How the first-party data are collected
You can collect data from trackers like Google Analytics 4 or AppsFlyer or others from such sources:
- User behavior on a website
- User behavior in a mobile app
- User interaction with email, sms, push notifications
- CRM (customer relationship management) customer data
- ERP (Enterprise resource planning) customer data
- POS (Point-of-sale) customer’s purchase history
What is second-party data?
Second-party data is first-party data from one firm that is sold to another partner company that uses that data to attract consumers and sell products or services.
Second-party data gives access to much more specialized data from partners. They typically have higher quality than third-party data. Third-party data is not publicly available. You have to build a relationship with another company and negotiate a deal to share second-party data.
Second-party data examples
For example, when a financial institution that provides credit products partners with an omni-channel retailer to give consumers interest-free financing on a specific range of its merchandise. To construct customized advertising campaigns for certain consumer groups, the financial institution may use client data such as their location and the things they explored on the retailer’s website before purchasing.
How the second-party data are collected
Businesses are hesitant to share their first-party data with partners because it threatens their competitive edge, as well as the reputational hazards of data breaches and subsequent consumer complaints, as well as the danger of high fines under data protection regulations.
The difficulty with getting second-party data is usually that it requires building relationships and working with strategic business partners. However, it is just gathering data, as indicated in the preceding section on first-party data collection, and then retrieving that data by extracting it from a data warehouse or a buffer database.
What is third-party data?
Using third-party data, you can target potential customers with whom you haven’t had a previous relationship, meaning they haven’t interacted directly with your business. Third-party data is user or behavioral information that businesses purchase from data aggregators and advertisers, or that they place tracking ads on platforms such as Facebook and Instagram. It is usually aggregated from multiple websites and segmented based on purchasing behavior, user interests, demographics, and more.
Third-party data examples
According to Google personalized advertising policy you can use third-party data to segment your first-party audiences. Third-party data can be used to determine when your remarketing tag can add visitors to your remarketing list. If the business sells cruise packages, it can use third-party data to determine which visitors are families with children and then set up remarketing tags to target them.
But it is not allowed to use third-party data to create audiences for ad targeting. Place remarketing tags on sites or apps that you do not own or manage, or allow other sites to place remarketing tags on your site or app.
If you run a children’s clothing site, you can’t allow an unaffiliated baby stroller site to place its remarketing tag on your site so they can create a remarketing list.
This is not a very good example. A client applies for a mortgage on an aggregator website that cooperates with financial companies that offer mortgages. His interests, income level, and marital status are provided, and he expects to receive good mortgage offers. It would, however, be the sale of third-party data without the explicit consent of the user if an aggregator company of such applications sold this information along with information from other applicants to financial institutions that offer mortgages as well as to real estate agencies.
How the third-party data are collected?
You can use third-party data from any big advertising platform like Google, Facebook, or Criteo, and it will help connect you with people you would otherwise never interact with.
In the past and partially in the present, third-party data has helped create a passive stream of customer engagement. But sometimes this data is collected and shared with companies without explicit consumer permission. Let’s highlight that we are not talking about big advertising platforms but about more niche market players.
A common conclusion is the age of third-party data is coming to an end…
What are the advantages of using first-party data?
The benefits of first-party data can be attributed to the fact that it is collected from customers with whom you have a direct relationship.
Privacy issues solving
- If you specify it in your data policies, first-party data is collected with the consent of your customers. Customers know what information you collect and how it is used. Therefore, you don’t have to worry about data and privacy issues when using third-party data.
- With first-party data, you can show your customers relevant products based on their interests, or remove unnecessary offers.
Higher data accuracy
- The first-party data you collect is more accurate than third-party data. Customers provide information directly or based on their interactions with your website, application, service, or email newsletter.
How to prepare first-party data for activation?
Before you set up a customer data platform or make hasty business decisions, it’s critical to achieve consistency among the organization’s stakeholders. This entails reaching consensus on what primary data is required, where to gather it, and of course, obtaining a broad understanding of how it will be used.
Make sure the first-party data you gather is consistent among all of the points of contact from which it is gathered. You must specify sources of reliability that guarantee consistency regarding parameter names, metrics, and the event schema of all components of the client data platform in order to ensure data integrity.
Even if developers follow strict implementation guidelines, non-compliant data will inevitably end up in your marketing and analytics software. You can prevent the use of inaccurate data for management decisions by using a quality assurance (QA) system. We’ll go into more detail about the guidelines for developing a data quality monitoring system in another article.
Consistency of data
Ensure that all tools in which first-party data will be utilized are consistent. To prevent inconsistent customer interactions, changes to user interaction event settings in one component of the customer data platform must also be made in the other components. For instance, if a customer modifies the city address settings for the closest store in their account on the website of a multi-channel retailer, do not bombard the customer with emails about regional sales in the old city. Instead, focus your efforts on relevant offers in the new city.