What Is Zero-Party Data and Why Is It Important in 2022?
Customers are concerned about the security and misuse of their personal data, yet they continue to expect high-level personalized experiences. With the enforcement of governing regulations and laws like GDPR and the newly implemented California Privacy Rights Act (CPRA), which adds GDPR-like consumer rights to the existing California Consumer Privacy Act (CCPA), collecting customer data in 2022 has become much more difficult.
Because of these changes, the collection of zero-party data has become increasingly important to marketers who want to continue providing quality customer experiences. In contrast to first-party, second-party, and third-party data, which are indirectly (and often covertly) collected from customers, zero-party data is data that a customer voluntarily shares with your company. In this article, we’ll discuss zero-party data and why it’s important in 2022.
What is zero-party data?
Zero-party data is data that comes directly from customers. The term was first used by Forrester Research in 2018, who defined it as, “data that a customer intentionally and proactively shares with a brand, which can include preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize [them].”
Marketers can use quizzes, surveys, etc. to collect zero-party data and offer rewards and incentives to encourage customers to volunteer their information. Zero-party data gives you specialized, unique information that you can use to build more personalized product suggestions and interactive customer experiences.
Why is zero-party data important?
A zero-party data strategy is the best response to an increasingly privacy-centric world, where data privacy regulations like the GDPR and CPRA define how consumer data can be collected, managed, and used. Sites are now required to inform visitors of their use of third-party cookies, and customers often opt out. When given the choice, many people don’t want to hand over their data to a third party.
Big tech companies like Apple have also made privacy changes that prevent app creators for iPads and iPhones from collecting data without explicit user permission via pop-ups or user settings. As of September 2021, only 21% of mobile users worldwide using iOS 14.5 had consented to app tracking. Google is moving in the same direction, committing to phasing out third-party tracking cookies from its browser by 2023.
With these changes, marketers are beginning to recognize the value of zero-party data. It gives customers control over whom they share their information with and how much of it they share, and it creates transparency about why a brand is collecting that data and what they intend to do with it.
This strengthens customer relationships, making people feel valued and increasing the likelihood that they’ll share insightful information with marketers who can use it to improve customer experiences and drive more sales.
Difference between first-party and zero-party data
The major difference between first-party and zero-party data is that first-party data is data collected passively from customers using cookies and other tracking technologies, while zero-party data is data customers give you directly.
First-party data includes data about customer interests and behaviors such as personal information, purchase history, time spent on a page, and frequency of clicks, and it is owned by the company.
Zero-party data is requested and collected by the company and provided directly by customers. The customer owns their own zero-party data and it cannot be sold without their consent.
Benefits of zero-party data
A zero-party data strategy allows you to collect customer data without going against data privacy laws and regulations. It respects your customers’ right to data privacy while allowing marketers to continue providing true personalization amidst the increase in government data use restrictions and browser privacy features.
Greater customer trust
Zero-party data allows you to be more transparent about the data you’re collecting and the value that customers receive in exchange for their data. Privacy concerns are reduced, making customers feel more at ease and creating trust between you that leads to better, longer-lasting relationships.
While second- and third-party data are available to you and your competitors alike, zero-party data is unique to your business. Because this is data you have specifically asked your customers for, it is more precise than the data you might receive from other sources.
A zero-party data strategy allows you to collect data that directly relates to your business and products. By allowing your customers to share unique information with your business exclusively, you gain a significant advantage over your competitors.
Lower acquisition costs
Focusing on zero-party data eliminates the cost of purchasing information from second- and third-party data sellers. In addition, it doesn’t require the same level of mining and analysis to gain insights, since you are directly requesting the information you need. This saves both time and money.
Zero-party data examples
Quizzes and questionnaires
Quizzes are a simple and fun way to collect zero-party data and help you determine what customers are looking for or what they prefer. With the help of a quiz, customers can figure out what products best fit their needs to make better purchasing decisions, while giving you valuable data to refine your marketing strategies.
Beauty and skincare companies like Fenty Beauty and The Ordinary use questionnaires to collect zero-party data. Fenty Beauty’s Shade Finder allows customers to find the perfect foundation shade for their skin tone. And with The Ordinary’s Regimen Builder, customers can find products to create a skincare routine that addresses their specific concerns.
These tools lead to more purchases and satisfied customers, while providing the companies with data to better market to their customers’ specific needs.
Polls are a fast and effective way to get feedback from customers, prospects, fans, and followers. By asking customers questions such as, “What are you looking for today?” at strategic points of the customer’s journey on your website, you can learn more about their interests and use their answers to direct them to specific product pages on your site.
Social media polls are also a great way to gather customer thoughts and opinions on specific products. A simple poll asking customers to choose between two options, e.g., “Which do you prefer?” allows them to give you direct feedback that can support product recommendations.
Pre- and post-purchase surveys
Pre- and post-purchase surveys can help your company learn more about customer expectations before and after a purchase. Pre-purchase surveys can help you discover which products visitors are looking for, while post-purchase surveys help you better understand their purchase experience.
Subscription pet brand and Simon Data client, The Farmer’s Dog, offers 20% off to first-time visitors, who are presented with a pre-purchase survey that asks questions about their dog’s weight, age, activity level, medications, and the foods they eat. At the end of the survey, The Farmer’s Dog makes suggestions for two weeks worth of meals that the visitor can add to their cart with the promised 20% discount.
Subscription, loyalty, and membership programs
Customer loyalty, membership, and subscription programs allow customers to share information about themselves in exchange for benefits like loyalty points or exclusive discounts. You can ask customers for information such as their birthday, skin type, style, or other preferences when they sign up.
Starbucks uses its loyalty program to reward members with a free drink on their birthday, while craft retailer Michaels offers exclusive discounts through their rewards program.
Preference centers allow customers to choose how they are marketed to. Brands such as Apple and Spotify use this method to allow users to share their interests. First-time users choose their preferred artists and types of music so the apps can make personalized recommendations.
Limitations of zero-party data
The major challenge with zero-party data lies in its collection. Even with greater protections in place, some customers are still concerned about data privacy and the misuse of their data. Though zero-party data collection is more transparent, people may still be hesitant to share information—or at least too much of it. If you ask customers for too much information, they may become overwhelmed and stop responding.
Marketers must ensure that data is collected ethically, and customers must clearly understand that their information is being collected and could be used for marketing campaigns. Maintaining transparency with your customers is the best way to build trust so you can continue to offer them personalized experiences.
Optimize your zero-party data with a CDP
Companies using a zero-party data strategy will not only learn more about their customers, leading to an improved customer experience, but they will also be seen as more trustworthy with customer data. And that trust will ultimately translate to more sales.
Zero-party data can be collected across a wide variety of channels, and it’s crucial that you can easily access and activate this data in one location to build better pictures of your customers.
Simon Data’s customer data platform (CDP) gives you one tool that you can use to combine and consolidate your zero-party data, manage your customer data profiles, and create unique, personalized experiences based on zero-party data attributes. Discover how Simon Data can help your organization maximize the value of zero-party data by requesting a customized demo today.