Personalization is the name of the game for the future of marketing, but there’s a right way and a wrong way to do it, so it’s important to know the difference. There’s a fine line between helping your customers by providing valuable, tailored insights for their shopping experience and being interpreted as “creepy” if implementing tactics that ask, or don’t ask, for too much information. Although 71% of consumers expect personalized experiences while shopping, consumers also have a heightened desire to protect their privacy. What is customer personalization, and how should brands implement it without crossing boundaries regarding consumers’ private information?

What is customer personalization?

Customer personalization occurs when brands intentionally create and execute data-based strategies to customize their marketing efforts to fit a customer’s specific needs or anticipated wants. Research shows that 76% of consumers will get frustrated if their experience with a brand is not personalized, meaning that personalization is a marketing tactic that brands can no longer overlook.

So, where to start? Brands can’t practice customer personalization without data about their existing and potential customers. The good news is that 55% of consumers will agree to share their data in exchange for something of value. Customers may value services such as consumer loyalty benefits, one-to-one messaging, or tailored suggestions. In this digital age, consumers’ value of personalization has skyrocketed, but so has their desire to protect their privacy. Ultimately, respecting consumer privacy comes down to capturing zero-party and first-party data that falls under the guidelines of existing privacy regulations.

It is crucial for brands to know the differences between zero, first, second, and third-party data and how they can be used accordingly.

Zero-party data comes from voluntary information provided by consumers themselves, such as answering surveys or taking polls.
First-party data comes from information provided by consumers themselves such as their name, email address, or birthday.
Second-party data comes from information purchased from a brand’s trusted partners.
Third-party data is information that is purchased from external sources like data marketplaces.

Considering that zero and first-party data both come directly from consumers, they are the most reliable pools of data for brands to work with. With Google’s promise to phase out third-party cookies by 2023, businesses need to create a reliable plan for capturing, storing, and using zero-party and first-party data. Zero-party and first-party data can help brands create meaningful connections with customers, giving them deeper insights into their preferences and behaviors. Arguably, customer personalization cannot happen without this data. Brands must know how to ask the right questions to gather information that will take their customer personalization to the next level, while ensuring they are protecting consumers' private information. Being able to execute customer personalization while respecting consumer privacy is key for businesses looking to build trust with their customers.

Benefits of customer personalization

The main advantages of customer personalization are being able to build trust between brands and consumers, increase loyalty with existing customers, and provide high quality service. As reported by the 2022 Gartner Customer Service and Support Survey, “71% of B2C customers and 86% of B2B customers expect companies to be well informed about their personal information during an interaction.” First-party data helps companies not only meet customers where they’re at, but also go above and beyond their expectations.

BabyCenter is an excellent example of how asking customers relevant, useful questions to collect zero-party and first-party data can help personalize their shopping experience. The brand can build customer profiles by asking parents if they’re expecting, if they’re trying to conceive, when their baby’s due date is, and more when they create an account for their website. Those that create accounts will then receive emails that contain useful information for the stage of pregnancy or parenthood that they are in. These questions help to send valuable information to the right people. For example, a mother of a four year old may not be interested in receiving emails containing tips for a healthy pregnancy, but may be interested in receiving emails with advice for preparing a child for kindergarten. Meeting and anticipating the needs of customers using zero-party and first-party data in these ways helps to build consumer trust and increase loyalty among existing customers.

Another example would be Universal Pictures, who faced a need for increased sales, in-depth purchasing insights, and first-party data on consumer demographics and preferences to personalize consumer experiences. They partnered with 3 tier logic to launch the points-based, tiered Universal All-Access Rewards loyalty program for customers in the United States. Consumers can earn points via product purchasing and other activities such as taking surveys or watching movie trailers, which are then redeemed for rewards.

When program members fill out a survey to redeem points, their first-party data is collected and securely stored in PLATFORM³, 3 tier logic’s next-generation mobile shopper marketing technology. Universal Pictures can use these survey results to segment and target users through Dynamic Messaging. For example, if their results show that a high number of program members who are male, ages 18-25, and like thriller movies, they can email them special offers on new thriller releases or show them pop-ups on their website for upcoming thriller movies. This is a great example of how first-party data can be appropriately used to personalize services to different consumer profiles.

Challenges of customer personalization

As mentioned above, the glaring challenge of customer personalization is consumer privacy. Cheetah Digital recently reported that “86% of consumers are becoming increasingly skeptical when it comes to their data privacy.” Brands need to be forthright about how they handle consumers’ data in order to face this challenge. Consumers have seen the destruction that has come from not protecting their information, and are now holding their information close.

Privacy policies that have been put in place in recent years have contributed to a major shift in protecting consumer data, and we are currently in the midst of this shift. Gartner Senior Director Analyst, Brad Fager, says that “By 2025, 75% of the world’s population will have its personal information covered by modern privacy regulations.” This is a drastic increase from just 10% of the world’s population being covered in 2020 due to a few key privacy policies that have been enacted in recent years.

In 2018, the European Parliament and Council of the European Union implemented the General Data Protection Regulation (GDPR). The GDPR gives guidance for how users, companies, governments, and nations should process, use, and share data between each other. Based on seven fundamental rules, the GDPR is a sequence of data protection laws that cover: (1) lawfulness, fairness, and transparency, (2) purpose limitation, (3) data minimization, (4) accuracy, (5) storage limitation, (6) integrity and confidentiality, and (7) accountability.

The implementation of the GDPR sent seismic waves throughout the world of businesses and marketers, with the effect surpassing Europe’s borders. For example, the Privacy Shield was once an approved mechanism that authorized American companies to have access to European consumer data. However, in July of 2020, the Court of Justice of the European Union (CJEU) invalidated the Privacy Shield on the grounds that (1) there were not sufficient safeguards put in place for the collection of this data, and (2) EU individuals were not provided an adequate system to seek rectification for the misuse of their data. Similarly, in May 2020 the CJEU specified its cookie guidelines, stating that consumers need to give active consent to website tracking (eg. checking a box), as opposed to passive consent (eg. needing to uncheck a box to opt out). Europe taking steps towards protecting European’s privacy has set a standard that marketers and businesses must conform to, or they risk facing antitrust lawsuits like Google and Apple.

Following the GDPR, the California Consumer Privacy Act (CCPA) came into effect in January 2020, giving California citizens the right to (1) opt out of their data being sold, (2) ask for any collected data to be disclosed, and (3) ask for that data to be deleted. Unlike the GDPR, the CCPA only applies to specific commercial companies. In January 2023, California plans to implement the California Privacy Rights Act (CPRA), which extends beyond the CCPA. It is based on five important regulations: (1) the protection of sensitive data, (2) tripling of fines, (3), data accuracy, (4) official audits, and (5) the formation of a governing body. With the influence of the GDPR, the CCPA, the CPRA, and consumers’ high value for privacy, it is expected that privacy regulations will continue to be put into action and raise the standard of privacy protection on a global scale. With current privacy rules to follow and more to come, how can brands offer the personalized service that consumers want?

Customer personalization best practices

The good news is, there is hope for customer personalization amidst consumer privacy challenges. This hope is based on the strong desire consumers have for personalized experiences. If brands can find a way to hold both in harmony, they will draw loyal consumers who trust their brand is using their data for their benefit. Here are five ways to manage and optimize consumer data for personalized experiences while still respecting their privacy:

1. Ditch second-party and third-party data

Using zero-party and first-party data is the first crucial step to managing consumer’s information in a way that respects their privacy. Not only do second-party and third-party data hold the risk of violating privacy regulations, but these streams of data also make it difficult to track accurate information and create tailored marketing strategies that generate valuable leads. On the other hand, customers voluntarily give zero-party and first-party data when engaging with your brand, which provides access to accurate and relevant information. Examples of this could be providing their email to subscribe to a newsletter, filling out a survey about products they have purchased, or submitting their address for shipping. According to a recent Google report, marketers who integrate first-party data across channels see a 150% boost in cost savings and nearly 300% revenue growth. 3 tier logic provides a way for brands to store and view real-time first-party data through PLATFORM³, and offers suggestions from experts for strategically optimizing the data in a way that takes your brand to the next level. We believe that first-party data is one of the key building blocks for sustained growth, and have advanced many brands such as Kellogg’s, Mars, and Coca-Cola, through our platform. To learn more, read a few of our success stories.

2. Minimize data to collect to only what is needed

Limiting questions asked of consumers to only what is necessary and helpful to both the brand and the customer can aid the protection of consumer privacy. For example, it may feel out of place for a B2B company to ask for their client’s birthday. However, a B2C company could utilize that information to send customers a personalized birthday coupon. Similarly, it would not be necessary for most brands to ask the age of their customer’s children. However, it is necessary for companies like BabyCenter to ask so that they can customize their services to meet their customer’s needs as they look for products and parenting advice. Each data point that brands collect should have a purpose behind it to benefit the growth of the brand and expand the personalized experience for the customer.

3. Prioritize transparency in privacy settings

Ensuring that customers know how and why your brand is collecting their personal information, and giving them the option to opt in or out, helps to foster an environment of trust. Consumers will be less suspicious about how brands are using their personal information if brands are transparent about why they are collecting this information. As previously mentioned, consumers are willing to provide personal data in exchange for personalized services, so brands have no need to fear being honest about their data collection and privacy practices if they are upfront and following the current existing privacy regulations.

4. Use collected data for its original intent

As brands collect first-party data, they need to be aware of the purpose behind each data point and only use that information for what it was originally intended for. For example, a company should avoid basing a marketing campaign off of data originally collected for product improvement. Using data for alternative purposes may raise the consumer’s skepticism, and lead them to decide to no longer engage with the brand. Consumers want to be aware of how the information they choose to provide is being used.

5. Create a loyalty program

Loyalty programs provide a great way for brands to provide value to their customers while also collecting zero-party and first-party data. Basing loyalty programs on zero-party and first-party data helps to personalize incentives to suit the desires of consumers engaging with the brand. Loyalty programs enable brands to collect data with the customer’s consent, while also providing value through points or rewards and a sense of community for the customer. As mentioned previously, Universal Pictures utilized 3 tier logic’s PLATFORM³ to launch a loyalty program where dedicated movie watchers could earn points from watching movie trailers, take surveys or quizzes, or like specific Facebook pages, and cash points in for rewards. Universal can then use this information to continuously improve their consumers’ experience through personalized content.

Personalize consumer experiences through capturing first-party data

Customer personalization and consumer privacy can successfully exist together by abiding by existing privacy regulations and through collecting zero-party and first-party data. To boost sales, improve ROI, drive customer loyalty, and protect consumer privacy, brands should collect first-party data in a safe and secure way, while being honest with consumers about their privacy practices. Leveraging first-party data in this way can build trust among brands and consumers. Opportunities to implement this include rewarding consumers with discount codes, exclusive content, and free products in exchange for information like purchase history and product preferences, then sending personalized content and messaging based on the captured data. Over time, this strengthens a company’s understanding of their consumers and a consumer’s trust in their favorite brands, all while protecting consumer privacy.

With PLATFORM³, brands can run data-driven campaigns to build consumer trust, including loyalty programs, contests and sweepstakes, and gift with purchase promotions. Modules like Contests and Promotions, Points and Gamification, Dynamic Messaging, and Data Capture & Analytics give marketers the tools and information they need to guide their decisions and develop stronger consumer relationships. PLATFORM³ enables brands to collect first-party data in a secure and safe way. To learn more, chat with an expert today.

5 Ways To Protect Consumer Privacy Using First-Party Data