The expanding role of first-party data

You might be hearing more discussion about the growing importance of first-party data, not least because Google and Apple have announced changes heralding what some are calling “the cookie-less future” when access to third-party data will be vastly reduced. It’s widely recognized that first-party data—sometimes called 1P data—is a powerful tool for strengthening customer relationships and driving better business outcomes. Yet, the Boston Consulting Group reported in 2021 that fewer than one in three companies are creating a single customer view across channels and only 1% to 2% use data to deliver a full cross-channel experience for their customers.

In addition to its utility as a marketing asset, 1P data can provide valuable context for insights derived from primary research findings and is an important item in the insights team’s toolkit. Getting the most value from it can involve significant investments in infrastructure and a cultural commitment that supports best practices around data governance.

Data types

Let’s start with a quick review of the types of data available.

• First-party data is information you collect directly from your customers through channels that you own. 1P data can include contact information (names, email and/or physical addresses, phone numbers), invoice and payment data, demographics such as age, gender, income, employment, and tracked information, e.g., comments, downloads, websites visited, etc.
• Second-party data is collected as first-party data and shared with your organization by a trusted partner. Airlines share such data with their credit card company partners, for example.
• Third-party data is obtained from outside sources that collect, aggregate, segment it and sell it.

Using second- and third-party data is relatively simple, requiring little or no investment in processing infrastructure. On the downside, the companies that provide it control which information is sent—useful metadata can be lost along the way—as well as the age, accuracy, and overall quality. And third-party data is not necessarily exclusive as it can be sold to your competitors. First-party data, in contrast, is yours from start to finish.

The most valuable data

While 1P data often requires more time and effort to process, in the long run it offers the highest ROI of any data type. It is ultimately less expensive because it eliminates the middleman. As noted above, it gives you control over accuracy and quality. Furthermore, it puts you in control of user privacy and data protection, both issues of growing concern among consumers and regulators.

Because it is derived from interactions with your customers and prospects, 1P data is more reliable and relevant than second- party or third-party data that may (or may not) closely mirror your target customer base. It can yield deeper understanding of your customers, enabling you to provide more relevant experiences that support stronger, deeper relationships with your brand.

Finally, the process of obtaining 1P data helps build trust with customers as you secure their consent and inform them about how you use their information.

Leveraging your 1P data

Collect data strategically

First and most important, you need a data strategy based on understanding your data sources: what you are collecting, how, and why. Typical sources include loyalty programs, online interactions, and any other touchpoints, e.g., support calls. Many organizations have fallen into the habit of simply gathering as much data as possible without a clear strategy for using it, which is bad practice for several reasons. Collecting extraneous data creates unnecessary burdens for customers and makes storage and management unnecessarily complicated and expensive. Begin with a roadmap that sets specific customer experience goals linked with business objectives.

Also worth noting is that much of 1P data’s value lies in its immediacy. It decays quickly so you need the ability to use it promptly, even in real time. At the same time, long-term warehousing enables you to leverage valuable historical perspectives.

Assemble the tools and the talent you need

Essentials include the capability to extract data from disparate sources including third party technology partners and integrate it across platforms; to resolve identity and create individual customer profiles; and to test and learn to determine the optimal approach to targeting and personalization that will improve outcomes for your brand.

In addition to identifying and deploying the best technologies and processes for acquiring, organizing, and storing customer data, your advanced analytics teams need the necessary capabilities to deliver the business outcomes you seek.

Offer customers a transparent exchange

As the landscape around data privacy continues to evolve rapidly, consumers’ attitudes about sharing their information continue to change. Loyalty programs are an established model for capturing data in exchange for rewards and they offer a good starting point for strengthening customer engagement and bolstering retention. Beyond that traditional framework you may find additional opportunities to prompt account creation and data sharing, e.g., when customers initiate product returns or exchanges. It’s also worth looking at new channels and platforms you may not have used before.

In any case, the key to effective 1P data gathering is transparency—acknowledging that customers rightfully control their own data and offering something relevant in exchange for their sharing it, e.g., an enhanced product experience.

Data governance is key

While first-party data gathering present opportunities to build trust and bolster customer relationships with your brand, a single lapse—or perceived lapse—in privacy can damage your credibility irreparably. It’s critical to develop a consent management system that ensures customer data is used only for purposes that customers consented to. Similarly, with multiple touchpoints in play, linking device-level data to a unified customer profile not only enables the personalization and targeting your marketing teams are after but has implications for privacy as well.

As the golden age of third-party data draws to a close, developing the capability to leverage first-party data is rapidly becoming a necessary strategic investment.