The global Big Data and Analytics market is worth $70 billion. It is predicted to grow to $103 billion by 2027, helping 95% of businesses worldwide cope with the same problem - the need to manage unstructured data. Developments in big data get attention worldwide, but one type of data doesn’t: Zero-party data.

What is Zero-party Data?

Forrester Research first introduced the term “zero-party” data in 2022. It is defined as data that customers intentionally and proactively share with a brand. Zero-party data can include purchase intentions, preference center data, personal contexts, and how an individual wants to be recognized by a brand.

Context

With GDPR, CASL, and CCPA guidelines, along with Google phasing out the third-party cookies support by 2023, companies across the globe are having a hard time collecting data from users. These data laws make it difficult for companies to understand customers and their brand aspirations. It becomes difficult to run effective marketing campaigns and serve customized content.

Due to increasing data breaches, customers are becoming more concerned about how their data is collected and used. According to statistics, almost 19 billion data breaches were registered in 2021, and the activity of such leaks continues to grow.

Why is Zero-party Data Important?

Hyper-personalization in Marketing

In today’s scenario, zero-party data is revolutionizing how businesses interact with their customers, creating strong engagement, loyalty, and retention and playing a critical role in personalized marketing.

Personalization by the numbers:

• 91% of consumers are more likely to shop with brands that recognize, remember, and provide relevant offers and recommendations.
• 48% of all consumers have left a company’s website and purchased products from another website or in-store simply because it was poorly curated.

Brands can acquire zero-party data through customer profiles, quizzes, polls, website activity, or customer messages. The data can then be used to build personalized product suggestions and targeted marketing for each customer.

Collecting zero-party data is crucial for marketers as it reduces the guesswork in customizing the customer experience by helping brands build trust with their customers, increasing their engagement and loyalty. Many eCommerce brands, such as Sephora, Yelp, Mockingbird, and Mecca, have already incorporated it into their companies and are seeing the benefits.

Harnessing the Power of AI

More than three-quarters of large companies are pursuing projects involving neural networks or deep learning systems trained on colossal data repositories. However, many of the most valuable datasets in organizations are pretty small and lack the volume and velocity of big data. Consequently, these datasets are often overlooked and unconnected to enterprise-wide IT innovation initiatives.

Small data can play a significant role in AI coping with this problem. Zero-party data can be helpful as it is high-quality, relevant data that can be used to train AI systems for organizations that don’t have massive amounts of customer data. Companies can train their AI systems to predict customer behavior more accurately, improving their marketing and sales efforts and creating a more personalized customer experience.

What’s the Difference Between First, Second, Third and Zero-party Data?

There are various ways to collect and use data, such as first-, second-, third-, and zero-party data. How does zero-party data compare to these types? How much does it differ in improving customer acquisition and marketing improvement? Let’s compare.

First-Party Data

First-party data is the information you’ve collected firsthand from customers on your website. It may include purchase history, subscription periods, and discounts used. It includes customer behavior on a website, such as frequency of clicks, length of time on a page, etc. It is the most readily available data for all business owners.

This data directly reflects the people interested in your products or services and, in most cases, is used for retargeting. First-party data can also be used to predict trends and draw conclusions about customer preferences based on behavioral analytics and purchase history. It is a foundation of RFM analysis that allows eCommerce brands to segment and rank their customers by value over a specific period, using three dimensions:

• Recency (how recently someone purchased)
• Frequency (how frequently someone purchased)
• Monetary (how much they spent)

Second-Party Data

Second-party data is the first-party data of one brand that is then sold to another company, aimed at bringing in customers based on specific data. This data isn’t readily available, but you can seek a partner or purchase it.

The biggest hurdle to acquiring this data is building relationships and dealing with strategic business partners. You should double-check the data before purchasing and ensure it is relevant to your business.

Second-party data tends to be better quality than third-party data but is smaller in scope. It works best when you know what kind of marketing growth and new customer demographics you’re looking to target.

Third-Party Data

If you’re looking for volume, third-party data is a great choice. Third-party data is collected from aggregators solely in the business of collecting data and selling it to other interested parties or gaining by running tracking ads with companies like Instagram or Facebook.

By leveraging this type of data, you get the information that isn’t available to you or your partner (as with 2nd-party data). Third-party data is accessible to anyone who can pay for it and tends to be lower quality and less actionable.

Third-party data is predicted to become less available and valuable as time passes and privacy laws and practices tighten. You can use it to look at the trends by analyzing the first-party data and then comparing the results with the third-party data you’ve obtained, leveraging it to supplement your marketing strategy.

Zero-Party Data

Zero-party data is similar to first-party data and used to be considered its subset. However, zero-party data has one key difference - you go directly to the customers and ask them upfront for their insights.

With first-party data, customers permit you to collect information about them when they browse your site. It’s still an indirect way to determine what they want or need, as you infer it from their online behavior. With zero-party data, they control how their data is collected and know it’ll be used to personalize their user experience better, so they’re more willing to provide it.

Another key difference between first- and zero-party data is data ownership. While you own 1st-party data, you don’t own the zero-party data. Your customers are the owners of this information, and you can’t sell this data without their consent.

What Will Marketing Look Like Without Cookies?

The end of the third-party cookies era has been on the horizon for years due to security and privacy concerns. According to a Google announcement in 2021, it will stop using third-party cookies in Chrome, and by the end of 2024, new tracking technologies will replace them. What does it mean for marketers?

Many advertisers worldwide have relied on third-party cookies since the 1990s as this technology enabled them to deliver targeted and relevant ads to users and collect valuable customer data. Given the global popularity of Google Chrome with its 2.65 billion users worldwide, such a transition will significantly impact the advertising industry, changing how companies serve personalized ads and reach customers. This can alter how companies handle their data and how data engineers work going forward.

Digital advertising relies on third-party cookies to track website activity. With Google’s decision to end cookies, businesses need to adjust their marketing strategies to use customer-provided data directly. Although generally safe, third-party cookies potentially represent a security risk if, for example, the cookie isn’t secured correctly, the data is shared without authorization or includes personally identifiable information.

First-party cookies and zero-party data are considered the most trustworthy and relevant approaches to discovering the target audience, purchase process, brand engagement, and best ways to reach customers. With first-party data, a website can collect customer data and use it to predict better what a customer might purchase next, improving the user experience.

At the same time, zero-party data is considered the best option for businesses to maintain quality marketing efforts and earn customer trust through transparency. In a cookie-less world, this technology will allow brands to capture the audience’s intentions, preferences, interests, and motivations, creating a truly personalized experience for each customer.

How to Launch a Successful Zero-Party Data Strategy?

Customers worldwide are willing to share data with brands in exchange for an experience customized to their wants and needs. However, a pivotal moment in this concept of value exchange is that customers want to control what kind of data is shared to get this personalized experience with a company.

Zero-party data eliminates the “creepiness” that may occur when a customer realizes their data is sold to brands to whom he didn’t provide a company with personal information. Zero-party data also helps to solve the personalization-and-privacy paradox, allowing marketers to collect data that consumers willfully share directly with them.

The main steps to launching a successful zero-party strategy include

• Registration: The first step to targeting the audience and offering it a personalized experience is encouraging it to register on your app or website. This strategy works well on new users who want to start using your products or services and is widely applied by brands to collect zero-party data from their customers.
• Website: Brands offer options to users to choose what type of communication they would like to receive from a brand, therefore collecting zero-party data. This information helps companies to provide customized services to their clients. You may have seen this yourself; brands ask if you want to receive communications through SMS, email or WhatsApp.
• Emails: Some brands capture zero-party data by asking their customers about their birthday or anniversary date in exchange for vouchers and discounts. Westside and Levi’s Jeans ask for each of its customers' birth date and send them personalized discount coupons when the date arrives.
• Social Media: Many brands use social networks to collect zero-party data. For example, Adidas and Nike commonly use Instagram polls to learn customer preferences.
• In-store: Collecting zero-party data is also possible in-store. To get the data, companies like Harrods and Macy’s offer their customers to sign a loyalty card, which collects the points from each purchase. In the future, they can exchange the points for cash or other discounts in the brand stores.
• Preference Center: Brands can also create an email preference center, allowing customers to select whatever they want from the brand.

Companies are also helping brands and media groups collect first-party and zero-party data from their customers in a fully GDPR-compliant and transparent way. You can combine zero-party data with first-party data by integrating it with existing systems and making it a part of the overall omnichannel experience for a successful zero-party strategy.

The Future of Zero-party Data

While business owners once sold products to consumers based on offline data, the focus is now on the online marketplace. The web is actively moving toward greater interactivity and participation. Companies like Meta aim to take advantage of this trend, offering users new ways to interact. A heavy digital presence makes its corrections, making zero-party data a critical part of the new interactive paradigm, allowing people to share their data to create more engaging experiences willingly.

Zero-party data offers personalized marketing with which brands and customers can be comfortable. It allows companies to respect their customers’ privacy while providing the personalized experience they expect.

Zero-party data is built upon trust and transparency and can be an excellent relationship builder for customers and brands, allowing companies to meet and exceed customer expectations while respecting their privacy concerns.

The future of personalized marketing is about finding a balance between personalization and privacy, and zero-party data plays a crucial role in it. It will be interesting to see how the role of data evolves, what data will be available for marketers and how data engineers will adapt.

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