The most important resource for brands to invest in is data. From developing new products, discovering new markets, and driving ongoing sales, data can inform innovative and relevant strategies that support your brand’s development and growth. However, not all data is created, sourced, and leveraged equally. Marketers must be aware of the similarities and distinctions between various data types. Otherwise, they won’t be able to glean the full benefits of data-driven marketing. Marketing tactics such as loyalty programs, brand communities, augmented reality, and personalization can be used to their full potential when utilizing the right data sources. What is zero-party, first-party, second-party, and third-party data, and how do they differ?

The commonality across all types of data is that they provide information and insights that companies need to understand themselves, their customers, their industry, and their competitive landscape. Brands use data to guide their strategies in every facet of their business, such as business and product development, marketing and sales and supply chain management and logistics. Each type of data has their own distinct differences:

• Zero-party data is generated 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 comments made on your latest Facebook post, product reviews left on your website, or surveys answered as part of a sweepstakes entry.

• First-party data is generated from customer relationship management platforms like PLATFORM³, 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 an email address provided when creating a website account, the number of purchases made on your app in the last year, or the quality rating left after contacting your customer support.

• Second-party data is generated from a brand’s trusted partners (i.e. other organizations). Their partners provide this data because it’s mutually beneficial for both businesses. Second-party data essentially consists of the same information as first-party data, with the only differences being where the information originates from and who it’s about.

• Third-party data is generated from outside sources and companies that aren’t directly related to a brand or its audience. External sources provide this information because it provides industry and market insights that brands can use to create well-informed strategies. Examples of third-party data include user feedback, website and app interactions, and interview and focus group responses.

The main advantage of zero-party data is its ability to help marketers foster meaningful connections with their customers. Zero-party data indicates which users are actively interested in forming a relationship with a brand, as it’s given on a completely voluntary basis. Brands can identify which consumers provide the highest return on investment and customer lifetime value and gain deeper insights into their audience’s preferences and behaviors. This data can then help create personalized marketing strategies that drive continuous conversions, sales, and engagement.

Zero-party data is also fully compliant with data protection laws, alleviating concerns about having access to consumers’ personal information and privacy. This data type prevents marketers from facing monetary fines, legal action, or ethical risks. In return, consumers understand who has access to the information and how it’s being used. This creates a sense of trust and transparency between both parties, further strengthening user retention and customer loyalty.

The biggest challenge of zero-party data is the possibility of fake information being provided by consumers. 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 randomly 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 to prevent users from giving purposefully inaccurate data, short of making their data collection processes as quick and easy to navigate as possible.

Marketers need to be aware of only collecting necessary information. Consumers will be less likely to complete a registration form with too many questions or a poll with too many options. Even if a small portion of consumers do complete your form or survey, the depth and breadth of information collected might not be relevant to your brand’s needs or goals. If your company has no intention of using a consumer’s phone number, why ask for it? Marketers must prioritize quality over quantity when designing forms, surveys, or polls to avoid the risk of overwhelming users or oversaturating their database with unnecessary information. 

Businesses collect zero-party data through their ongoing website operations, marketing efforts, and promotional campaigns. Companies often start by capturing information through their website and app so they can nurture users along their path to purchase. For example, brands might ask users what emails they’d like to receive when they first register for an account or encourage them to leave a review once they’ve made a purchase.

Zero-party data can also be collected through social media and email campaigns. Brands often use polls, surveys, and Q&A sessions to promote products, drive traffic and engagement, and conduct market research simultaneously. Lastly, marketers can run promotional campaigns to create brand awareness, increase sales, and capture consumer data. Contests, sweepstakes, giveaways, and gift with purchase programs provide shoppers with incentives to answer questions, provide feedback, and so on.

Zero-party data can be leveraged to segment and target audiences based on their preferences, behaviors, and shared similarities. The continuous cycle of collecting, analyzing, and using zero-party data helps businesses refine their marketing strategies and improve the user experience over time, leading to increased customer retention and brand loyalty.

For example, zero-party data can be used to send product recommendations, exclusive offers, and targeted messaging. Amazon provides shoppers with different types of recommendations based on user preferences, prior purchases, and what other Amazon users are buying. This personalization-driven approach incentivizes users to engage with them to get the products and brand experiences they’re looking for. Personalization ultimately results in increased conversions, higher customer lifetime value, and a stronger sense of loyalty.

One of the best ways to collect and incorporate zero-party data throughout a long-term promotion is through loyalty programs. When consumers initially join a loyalty program, brands can collect first-party and zero-party data over time, such as what website pages they visit or which email content they prefer. This helps marketers segment users and personalize their program experience, further nurturing customer loyalty. For example, Universal’s All-Access Rewards program members can complete a survey about their movie preferences to receive points that are redeemed for physical and digital rewards. When customers get the chance to receive something of value, they’re more likely to engage with brands and more willing to provide their information.

The biggest advantage of first-party data is that companies have complete ownership and control of their information. Being able to collect, manage, and use their first-party data without outside influences or biases allows brands not to worry about their competitors having access to the same information, as the data is exclusively theirs.

Another primary benefit of first-party data is its compliance with data privacy and consumer protection laws, such as the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA). This reduces the legal and ethical risks associated with other data types and ensures trust and transparency with users, governments, and policymakers. Both consumers and companies can feel confident about first-party data as they know exactly where, why, and how businesses collect and leverage user information.

First-party data is also more accurate and relevant than second-party and third-party data, as it comes directly from a business’s operations and customers. Lastly, first-party data is cost-effective and easy to collect because it comes from a business’s pre-existing operations. Companies can gather large amounts of valuable information without extraneous effort from themselves or their users

The main disadvantage of first-party data is its finite scope and scale. As first-party data is limited to a brand’s audience, it can lack insights into the broader market and industry they are involved in. User feedback, social media and website analytics, and CRM data can only tell a brand so much about its competitors, industry, and potential customers. To circumvent this, brands should practice social monitoring and social listening to track conversations outside their networks. Social listening can help them monitor competitor performance, identify new leads, and develop business strategies.

Businesses capture first-party data through sales software, customer relationship management platforms like PLATFORM³, user support and feedback systems, and website, app, and social media analytics tools. Using these tools, brands can collect consumers' contact information, social profiles, purchase history, comments and reviews, and so on.

Once their customer data has been captured and analyzed, companies can then leverage their first-party data for customer segmentation and personalization. Customer segmentation allows brands to separate consumers into geographic, demographic, or psychographic groups. When brands track the behaviors and preferences of specific segments, they can provide unique, customized brand experiences that nurture consumer retention and foster customer loyalty.

For example, Bimbo Canada launched the Vachon Market Consumer Rewards loyalty program to gain first-party data through website registrations, receipt validations and online orders. Through capturing first-party data on PLATFORM³, Bimbo Canada was able to track the loyalty program’s progress and growth in real-time and collect deeper insights into their consumers. Not only did they learn about their consumers’ purchasing habits and product preferences through their receipt uploads, but they also captured important information about their interests and behaviors via the aforementioned daily questions and weekly surveys. For example, asked consumers when they purchased their first Vachon product, whether they plan to purchase Vachon’s limited-edition flavors, and so on. Bimbo Canada was able to use this data to make well-informed business decisions and determine how to better serve their customers and fulfill their needs.

Another example of how to capture first-party data can be found in Lysol’s $5 gift with purchase promotion. Participants who purchased eligible Lysol sanitizer products from Walmart, Target or Kroger retailers were rewarded with a $5 digital gift card to the retailer they purchased from. When customers registered and validated their purchase by uploading a photo of their receipt to the promotion site, Lysol was able to collect valuable data about their consumers’ purchasing behavior such as which products they purchased and what store they purchased from. 

The main advantage of second-party data is its ability to help businesses identify potential prospects and develop strategies for scaling their acquisition efforts. Second-party data is essentially another company’s first-party data, meaning that brands can learn what worked for them and what to avoid. Companies typically purchase this information directly from trusted partners, so they can feel assured they are one of the few brands with access to the same data.

Other benefits of second-party data include its precision and transparency. During the purchasing process, brands can be very specific about the information they’re looking for, such as website activity or product reviews. Paying solely for the information of relevance to them rather than paying for an entire database helps to reduce costs. Second-party data also typically goes through a comprehensive vetting process, meaning that brands can trust in its legitimacy and accuracy.

The biggest disadvantage of second-party data is its lack of connection to a company’s unique needs and strategies. While it helps businesses learn the ins and outs of another brand’s customer base, their interests may not align, meaning the information could be irrelevant to a brand’s goals. Additionally, second-party data can be difficult to transfer, store, and integrate, as data management methods may vary from company to company. Lastly, second-party data can be costly and risky if companies don’t invest in the vetting process to retrieve essential information. 

Businesses collect second-party data directly from trusted organizations and partners or data marketplaces, which help buyers and sellers come to a mutual agreement. As mentioned previously, second-party data is another company’s first-party data, meaning businesses are buying and selling another brand’s customer contact information, purchase history, user feedback, and so on. Both parties must agree to what data is being sold, how much it’s been sold for, and how it will be passed from seller to buyer.

Once brands have purchased and accessed their second-party data, they can leverage it much the same way as they do with first-party data. They can create customer segments, develop personalization strategies, and nurture users on their path to purchase. Second-party data can also merge with first-party data to build predictive models. Comparing existing customers to potential leads and vice versa gives companies a better understanding of consumer behavior, such as purchase motivations and how they like to interact with brands.

Hootsuite’s social media strategy survey is one example of user feedback that can be sold as second-party data to other organizations. In this survey, they ask customers questions about who is involved in their social media strategy and what they need to be successful. This information can help businesses in various marketing industries to get a window into how people use social media for their business.

The biggest advantage of third-party data is its large volume and broad scope. First-party and second-party data face some limitations, considering the amount of information captured and who the information is about. With third-party data, organizations are obtaining aggregated datasets from other companies, giving them a significant amount of data about a significant number of people. This helps businesses reduce the time and resources they would otherwise need to invest in the data collection process themselves. 

As with second-party data, third-party data also helps brands identify potential customers and develop strategies for acquiring them. Third-party data is typically already categorized into audience segments, making it easier to find relevant target markets and build buyer personas.

Despite its scope, scale, and convenience, third-party data has many disadvantages. To start, third-party data is of varying accuracy, reliability, and quality. The information gathered may come from unreliable or unknown sources, potentially causing marketers to draw the wrong conclusions. This also puts businesses at risk of breaching data protection policies, as they don’t know where their data is coming from or how it was originally collected. Governments and organizations are especially concerned about user privacy and data ownership, and Google will be phasing out third-party cookies in the near future.

Third-party data’s broad scope is a limitation rather than a benefit, as much of the information provided is likely to be irrelevant to a brand’s strategies. For example, audience segments that don’t align with their existing customer base or user purchasing habits that don’t apply to their own industry. As a result, businesses may get a lower return on investment than expected. Third-party data is also available to everyone, meaning that a brand’s competitors have access to the same information. Lastly, third-party data shares a few similar challenges with second-party data, as it can also be difficult to store and integrate into existing data management systems and methods. Like second-party data, third-party data also creates an impersonal disconnect between company and consumer.

Businesses acquire third-party data from data marketplaces, data vendors and brokers, and DaaS (data-as-a-service) companies who have paid other businesses for their first-party data. Most third-party data originates from online activity, including social media interactions, search history, and online transactions. Unlike first-party and second-party data, third-party data sources typically have no direct connections or interactions with customers.

Like second-party data, third-party data can be used in combination with first-party data to build predictive models, identify potential leads, and nurture customer acquisition through segmentation and personalization. Third-party data is also leveraged in retargeting strategies. In retargeting, companies use third-party cookies to track users across different websites and serve relevant ads based on their browsing history. For example, a customer Google searches how to create a survey, and looks at their options. When they navigate to another website, they may see an ad for SurveyMonkey, one of the survey softwares they looked at.

Each type of data has its own advantages and disadvantages, and can be leveraged in a number of different ways. However, if companies want to connect with customers, comply with data protection laws, and create impactful strategies, they should focus on zero and first-party data. Segmentation and personalization are crucial for customer retention and brand loyalty, which is only possible when businesses collect information from their own users.

3 tier logic’s PLATFORM³ helps brands nurture customer loyalty and capture valuable first-party data through sweepstakes, contests, loyalty programs, and more. The Data Capture & Analytics dashboard can give them insights into consumer behavior that informs and supports their future strategies. To learn more, book a demo with our team today.