When it comes to making strategic decisions and designing effective campaigns, businesses need to prioritize collecting, analyzing, and leveraging the right data. Companies should arm themselves with relevant information that can help drive sales, increase brand awareness, and foster customer loyalty. Some brands rely heavily on second-party and third-party data for convenience and ease. However, with governments and organizations discussing and addressing the growing concerns around data policies and privacy protection, companies should redirect their focus to zero-party data and first-party data instead. What is zero-party data, and how does it benefit businesses and consumers?

Zero-party data, a term first coined by Forrester Research in 2018, refers to information that “customers intentionally and proactively share with a brand”. It comes with consumers’ explicit consent and understanding of who has their information and how it’s being used. Examples include “preference center data, purchase intentions, personal context, and how the individual wants the brand to recognize [them]” - in other words, insights that consumers have given on a voluntary basis so that businesses can understand and fulfill their needs. Therefore, zero-party data is sometimes referred to as “explicit data”.

Since companies collect both zero-party data and first-party data from their customers, they may sound similar at first glance. Both types are directly given to businesses without interference or bias from outside sources. However, the main distinction between zero-party data and first-party data is how and why they’re collected:

• First-party data comes from customer relationship management platforms, website and app registrations, social media profiles, in-store and online purchases, and customer feedback. Customers provide this information because it’s necessary for engaging with and forming a relationship with your brand. For example, first-party data can be the email address they provided when creating a website account, the number of purchases they made on your app in the last year, or the quality rating they left after contacting your customer support.

• Zero-party data comes from surveys, contests, polls, quizzes, and website and social media interactions. Customers willingly and knowingly provide this information because they want brands to understand their individual preferences and learn how to satisfy their needs. For example, zero-party data can be the comments they made on your latest Facebook post, the product review they left on your website, or the survey they answered as part of their sweepstakes entry.

Zero-party and first-party data are also distinctly different from second-party and third-party data. Second-party data is packaged and sold by other companies, while third-party data is aggregated from multiple sites and sources. While zero-party and first-party data is derived from a direct connection between company and consumer, second-party and third-party data come from external sources that may be of varying relevance, quality, and trustworthiness. 

Forms connections and relationships

Second-party and third-party data originates from external sources, creating a disconnect between the company using the information and the consumers whose information is being shared. Zero-party data is given directly and proactively with the intent of fostering a meaningful relationship between the customer and the business.

When customers buy your product, they aren’t necessarily looking to get more involved with your brand beyond potential future purchases. But if you send out a survey or host a contest, you know the responses and entries you receive are from consumers who are interested in actively forming a connection with you. Companies need to capitalize on this data to refine their customer service, marketing campaigns, website experience, and so on. When brands improve themselves based on consumer feedback, they see increases in repeat customers. As a bonus, customer lifetime value also increases, leading to higher profits and lower costs.

Builds transparency and trust

Today’s customers are growing more and more concerned about data ownership and privacy. They want to know and control who has access to their home address, phone number, financial details, and more. With zero-party data, both companies and consumers can feel secure in knowing that the information shared between them was given specifically and voluntarily. Customers don’t have to worry about providing extraneous information, and businesses don’t have to wonder where their data came from or whether it can be used.

It also gives users a clear picture of how their information is leveraged, building a stronger sense of trust and honesty. For example, when brands run a loyalty program, they’ll likely want to have a survey that asks customers what they like about it and how it can be improved. When companies are explicit about how they collect and use consumer data, customers are more willing to share and engage with businesses beyond their initial awareness and purchase.

Secures accuracy and compliance

Other kinds of data, especially third-party data, can potentially leave room for error, leading to inaccurate information. For example, if users misclick on a banner ad or accidentally navigate to the wrong product page, brands might draw the wrong conclusions from the data collected about their preferences and behaviors. Zero-party data ensures that the information is accurate and coming straight from the source through poll responses, survey answers, and so on.

Zero-party data also reduces legal risks and solidifies compliance with various data privacy laws, including the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA). It ensures that companies are collecting and leveraging consumer information securely and honestly. Businesses can feel confident in making strategic decisions and designing effective campaigns based on zero-party data that was lawfully collected from their customers.

Fosters personalization and loyalty

Like first-party data, zero-party data can help enhance your products and services with personalization. The more information you have about your customers’ needs, interests, and preferences, the easier it is to tailor their experience with your brand. For example, soda brands can conduct a survey to ask shoppers about their favorite flavors and send them coupons for their drink of choice. Design apps can ask consumers how they use their app and send them targeted email newsletters for photographers, logo designers, and so on.

When brands listen to their customers and offer them personalized experiences, they’re more likely to become repeat shoppers, loyal customers, or even brand advocates. Personalization nurtures customer retention and encourages customer loyalty through trust, commitment, and reciprocity.

Creates potential for dishonesty

The biggest challenge of zero-party data is the possibility of fake information. While zero-party data is fairly accurate, consumers may still provide false information to achieve their desired result. For example, if they need to fill out a survey to get a discount code, they may choose their answers at random so they can finish within seconds. If they’re asked to provide contact details to download a digital coupon, they might submit a fake email address to avoid being contacted in the future. Unfortunately, there is little businesses can do at this time to prevent users from giving purposefully inaccurate data, short of making their data collection processes as quick and easy to navigate as possible.

Increases risk of oversaturation

When designing a registration form, survey, or poll, marketers need to strike a balance between collecting information that is necessary and collecting information that would be nice to have. Otherwise, when consumers see a registration form that asks for too many details or a poll with too many options, they’re less likely to complete it. Even if a small number of people do complete your form or survey, the depth and breadth of information collected might not actually be that relevant to your brand’s needs and goals. For example, if you have no intention of using consumers’ home addresses or phone numbers, why ask for them? Companies should prioritize quality over quantity to avoid the risk of overwhelming users with too many questions and oversaturating their database with too much information.

When users create an account for your website or app, you can capture additional information during the onboarding process to better serve their needs. Once they’ve provided the necessary registration details, such as their name and email address, offer a short questionnaire that will help them personalize their experience. For example, clothing brands can ask consumers about their preferred styles, while grocery delivery apps can ask shoppers about their purchase frequency. However, companies should be careful not to ask for too much information at once. They can always ask more questions in the future in order to capture additional data and nurture customers throughout their user journey.

Duolingo, a language-learning website and mobile app, provides a great example of collecting zero-party data during the customer onboarding process. Once users have created an account and selected which language they want to learn, Duolingo asks a few questions to help tailor their experience. This also helps Duolingo segment and target their customer base, such as by their initial language proficiency or by their reasons for learning a new language.

One of the simplest ways to increase brand engagement and collect zero-party data at the same time is by running polls and Q&A sessions on social media. Polls and Q&A sessions can help you promote products, drive traffic, and conduct valuable research. For example, you can ask your followers whether they prefer your best-selling product in black or white, or what new features they want to see in your upcoming release. Email campaigns are another way of capturing customer information, as you can send them surveys and requests for feedback in exchange for things like discount codes and free products.

One example of capturing zero-party data on social media is IKEA’s use of the poll sticker in their Instagram Stories. They use polls to gain insights into consumers’ preferences, such as whether they like kitchens with a dark or light backsplash, or if they prefer an open or closed wardrobe. They also use polls to gauge brand awareness by asking their followers questions, such as if they know about their newest brand collaboration or latest toy design contest.

Contests, sweepstakes, and giveaways give customers an incentive to fill out registration forms, answer questions, and provide feedback that brands are looking for. Whether it’s an instant win or a grand prize, consumers are always seeking out deals, offers, and rewards. Brands should take advantage of this by including questions and options in their contest entry requirements.

One example of collecting zero-party data through contests is Practical Parenting, an online retailer and magazine for parents of babies and young children. Their ‘Write & Win!’ contest offers consumers the chance to win bottle packs, strollers, high chairs, and so on. Rather than selecting their prize for them, Practical Parenting gives shoppers an opportunity to pick for themselves. This helps Practical Parenting in two different ways: first, shoppers are more likely to enter a contest when they can choose their own reward, resulting in higher customer engagement. Second, contest entries double as both poll results and zero-party data, as they tell Practical Parenting which products their customers are most interested in.

Businesses should also look for ways to collect zero-party data through face-to-face interactions with consumers as well. Rather than simply capturing shoppers’ names and email addresses at checkout, they can create interactive experiences that encourage customers to volunteer information about their favorite products, desired service features, and so on.

One example of using in-store interactions to collect zero-party data is Reformation, a clothing retailer that incorporates technology into their brick-and-mortar locations. When customers want to try something on, they use Reformation’s tablets to specify their items and sizes, rather than taking things off the rack. Their choices are then delivered directly to their fitting room, where they can also choose from a variety of lighting options and plug in their phones to play their own music. This technology-driven approach helps Reformation capture information about what their customers are trying on and how they like to try things on.

How to leverage zero-party data

Zero-party data can be leveraged in much the same way as it’s collected, primarily by refining and personalizing customers’ brand experiences. It can help improve your website, mobile app, email marketing, social media presence, and overall business efforts. For example, taking poll responses to decide on the features of your next product, or analyzing survey results to enhance your website experience. Unlike with second-party data and third-party data, companies can feel confident about leveraging zero-party data, as it comes directly from customers who want to cultivate a meaningful relationship with their brand.

With 3 tier logic’s PLATFORM³, brands can capture zero-party data and first-party data through sweepstakes, contests, loyalty programs, and more. The Data Capture & Analytics dashboard can give them insights into consumer preferences and behavior that help to continue driving sales, increasing engagement, and building customer loyalty. To learn more, book a demo with our team today.