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Why do you need First-Party Data?

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Estimated reading time: 5 minutes

In today’s competitive business world, it is imperative to develop a top-notch marketing strategy that equates to strong marketing performance with customer data. 

First-party data is at the center of this marketing strategy. In this article, we examine the ins and outs of data collection—the different types of data and how they can be used to improve the customer experience and achieve all of your digital marketing goals.

What are the Different Types of Data?

First-party data: This is information that an organization collects directly from customer/audience interactions (such as on your website or mobile application).  Owned by the company, this information is compiled via software and crm systems and is used to gather details on customers and develop content and ads tailored to your audience segmentation. 

This data is extremely valuable for your marketing efforts because companies collect it directly. As a result, it is guaranteed to be accurate and relevant to your business. Sources of customer data platforms include the following:

–email and newsletter subscribers

–website and mobile web behavior

-mobile apps

–lead generation campaigns

–social media

–surveys

–website activity

–call centers

–sales interactions

–customer feedback

–email engagement

–subscriptions

–support calls

–demographics

–customer purchase history

–customer success programs

–marketing programs 

There are numerous advantages to collecting this data. For example, gaining insights into your audience not only allows you to personalize your content, but helps you focus your efforts on the right customers, improve customer relationships, and comply with privacy laws. In addition, companies use first-party data to build brand awareness, re-engage former customers, and drive more leads. 

Second-party data: While first-party data is information about a company’s customers, collected and owned by the company, second-party data is first-party data from a trusted partner, which allows companies to achieve greater scale. Examples include the data that media publishers sell to advertisers and companies selling their customer loyalty data to credit card companies.

Because you are familiar with your partner, you can feel completely secure that the data is relevant since it comes from a partner with whom you have a mutually beneficial relationship. In addition, knowing your partner also means that you can feel confident that the information collected complies with all privacy regulations and was collected with consumer permission.

Second-party data offers several advantages, such as connecting you with new audiences that match your own audience data, and developing stronger audience insights by analyzing a larger audience group. Some organizations choose to combine first-party data with second-party data to find new audiences to target.

Third-party data: This data comes from an outside source, which collects the information from a variety of sources across the web. This data is typically sold to companies for their advertising campaigns.

Third-party data is information you acquire from a data aggregator, which obtains it from other companies and compiles it into one dataset. Most third-party data is purchased through a DSP (demand side platform) or a DMP (data management platform) for advertising. Additionally, there are numerous third-party data marketplaces, such as Nielsen and Google.

Organizations purchase third-party data because it can help you reach a broad audience for advertising programs and help improve targeting when combined with first-party data. 

The problem with this data is that organizations can’t ensure its reliability or accuracy, since you do not know where it came from. Additionally, you can’t assume it was collected according to data privacy regulations. Due to the numerous security and privacy issues, third-party data is currently being phased out by some organizations.

For example, in June 2021, Google announced it would begin to phase out the use of third-party data because users are “demanding more privacy, including transparency, choice, and control over how their data is being used,” explains Justin Schuh, Chrome’s director of engineering.

According to David Temkin, Director of Product Management, Ads Privacy, and Trust at Google, “People shouldn’t have to accept being tracked across the web in order to get the benefits of relevant advertising. And advertisers don’t need to track individual consumers across the web to get the performance benefits of digital advertising.”

He adds, “Advances in aggregation, anonymization, on-device processing and other privacy-preserving technologies offer a clear path to replacing individual identifiers.”

Using Data to Improve Marketing Performance

Once organizations collect data, many wonder how to best use it. There are several ways to improve marketing performance with first-party data. The main ways include the following:

Learning about the customer journey: Data allows businesses to map out the customer journey and understand the exact steps taken by buyers. This information helps marketers develop the best messaging at the right time. 

Developing customer profiles: Data helps businesses develop a detailed view of customers, which includes understanding what inspires customers to take action.

Creating Brand Experiences: Effectively shaping the customer experience and designing unique messaging is possible, thanks to first-party data. This information enables marketers to develop brand experiences, which are specifically tailored to the preferences, locations, interests, and buying history of customers.     

The key to improving the customer experience is understanding your customers, as well as their unique needs and wants. And the best way to achieve this is to use data—specifically first-party data—to help you gain specific insights into your customers, which helps you create effective, personalized messages and content.

In the words of David Farkas, CEO and founder of The Upper Ranks, a boutique link building company that specializes in building hard-earned links through manual outreach, “First-party data from customers is the most trustworthy and relevant approach to discover your target audience, their brand engagement, purchase process, and the best way to reach them.”

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