Most consumers already know the websites they visit collect their data, so when they get personalized offers and content, they're not surprised. Consumers also are increasingly aware of the distinction between first-party and third-party data and that some companies collect third-party data and resell profiles of personal information to willing buyers.
Third-party data aggregation is under attack, which presents an opportunity and incentive for digital marketers to favor first-party data to build a more strategic and personalized marketing strategy.
The Power of First-Party Data
The more you know about the way your customers engage with your digital properties, the better you can align what you're selling with what customers are interested in. Though third-party data can be useful in the marketing process, a skilled and nuanced first-party data strategy is a more reliable and respectful way to deliver offers with a higher likelihood of engagement and conversion.
To clarify the differences between the two, first-party data is generated when an organization collects visitor behavior about customers on its own digital property. Sometimes, this is anonymous data, but more often, an organization knows the visitor's identity because he or she is either a registered user or has provided identifiable information in a previous visit. Brands then track consumers to serve up relevant information and offers.
Using first-party data means that the data comes from a company learning how its customers interact directly with its brand. This is its real value.
For example, first-party data lets a retailer know whether a customer favors brown shoes over black based on current or past shopping activity, or whether a consumer prefers to shop on a company's website or via a mobile app. Typically, this approach is enabled through first-party cookies placed by your company and are almost universally accepted by consumers.
Understanding Third-Party Data
Third-party data collectors also use cookies to track consumer behavior. However, these cookies are typically dropped by a third-party ad provider, and they are now frequently rejected based on a consumer's browser settings. But when those cookies are enabled, those third-party aggregators can track users across multiple sites and stitch data together to form a user profile. That tracking can ultimately be paired with a consumer's identity and a host of other information, such as names, demographics, interests, and preferences, as well as potentially more sensitive data, such as medical information.
Data aggregators—which have neither relationships with consumers nor their explicit permission—then sell that data.
Third-party data also collects other personally identifiable information culled from entirely unrelated online experiences. For example, third-party data might tell an online news site to show a consumer an ad for women's jewelry because of a gift he purchased for his wife months earlier. That sort of conflation is not only counterproductive, it can also undermine consumers' trust in your brand.
Though third-party data has gained traction, it's not new. Marketers have historically used the buy media approach to find new customers through third-party sourcing of information.
For example, direct marketers may send circulars to certain ZIP codes based on what third parties know about demographic information within that ZIP code. The technique hasn't changed, but the sophistication and the ability to track consumers across multiple sites while collecting personally identifiable information has. This evolution has prompted the growing backlash from consumers and privacy groups.
Shifting the Focus to First-Party Data Collection
The answer for today's marketer is first-party data: Marketers should collect and harness their own data based on one-to-one brand experiences instead of relying on third-party sources' purchased and unrelated customer information.
Marketers ought to cultivate relationships directly with consumers and only augment with third-party data when appropriate. By shifting the focus to first-party data collection, marketers can evolve their processes before the current, largely prevalent one is made obsolete through legislation and consumer backlash. Not only is first-party data richer and better in quality, it allows marketers to enhance the customer experience continually without raising the hackles of privacy advocates and consumers.
If your company is investing the time and money in technology to know customers better, one of the best ways to do that is to build upon how customers are already interacting with your organization and its digital properties rather than based on what a third-party aggregator may put forth.
