How Zero-Party Data Can Improve Your Customer Experience
By: Sarah Borchers
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Note: This article is part one of a two-part series on zero-party data. Read on to learn what zero-party data is and how it improves the customer experience, then dive into part two for examples of how it can be incorporated into each stage of the customer life cycle.
Marketers need to deliver relevant, personalized customer experiences to compete with the many products and brands on the market. But personalizing the experience in the correct way can be tricky.
Done right, personalization contextualizes the customer experience in a way that boosts value to customers. It often involves combining first-party data, marketing expertise and your insider knowledge about your unique audiences. To personalize the experience, marketers need to take what data they have and use it to make informed decisions about how to increase customer value across all touchpoints in the customer life cycle.
And yet, increasing concerns about privacy have disrupted the use of first-party data and launched new opportunities for marketers to use zero-party data (data that is voluntarily given) to not only boost value but make the customer experience more tailored, relevant and better overall.
Zero-party data is the gold standard of data because it’s straight from the source (so it’s extra reliable) and can be used to make the personalized experiences customers crave. Because zero-party is shared directly, it’s trustworthy and unambiguous information that can be used for segmentation, personalization engines and product recommendation tools.
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Why Privacy Concerns Are Affecting Data Collection
Until recently, the primary form of data that marketers used to personalize the customer journey was third-party data. Third-party data is data acquired from a data aggregator. Data aggregators don’t collect data directly, but rather obtain it from other companies and compile it into a single dataset.
The problem with third party data is it comes from unrelated and unreliable sources, such as cookies and click trails. As a result, it quickly becomes outdated and has no direct relationship with the individual customer. Using this sort of data to power campaigns has been the key driver is growing customer mistrust.
While third-party data is still used (and many marketers aren’t ready to pivot away from that model), its days are numbered. Google is set to phase out third-party cookies beginning in 2024. Many other popular internet browsers, like Safari, have been blocking them for years. Major publishers, including The New York Times, are transitioning away from third-party advertising data. And Privacy Sandbox, a series of initiatives that began in 2019, is creating new standards for privacy online with safer alternatives to existing data-gathering technology.
More and more customers are concerned about protecting their data and their privacy from digital trackers, installing ad blockers and changing privacy settings to deny them access. In fact, a recent survey found 66% of consumers find targeted advertisements generated from cookie tracking to be creepy instead of cool.
We call this the “era of privacy,” and it’s made it increasingly difficult for marketers to build and maintain trusted relationships with customers, who feel like marketers are tracking and taking advantage of them without permission.
However, within this challenge is an opportunity for marketers to switch to zero-party data, which lacks the negative connotations and provides more accurate insights into customers’ behaviors. Because zero-party data requires consent, it’s automatically compliant with privacy regulations as well. It’s a win-win.
What Is Zero Party Data?
Forrester defines zero-party data as data a customer intentionally and proactively shares with a brand, often in exchange for something they view as valuable. The exchanged item could be something like a personalized recommendation, a price reduction, a prize drawing entry, etc.
Because the item is perceived as valuable, customers will voluntarily give up a bit of information about themselves. In a survey by Accenture, 91% of customers said they will shop with brands that provide relevant offers and recommendations. Zero-party data can help you discover what’s relevant to your customer and use that relevant offer to procure additional zero-party data. Each offer is an opportunity to learn more about your customers and their needs.
There are many benefits for the brand in this exchange, too. It helps the customer build trust in the brand. Because it’s directly from the customer, you don’t have to guess what the data means. For example, is this customer buying baby clothes because she’s pregnant or because she’s going to a baby shower? Algorithms might not be able to tell. Zero-party data can give you the full picture. Everyone gets what they want.
For zero-party data to be useful, it needs to be connected to a first-party customer profile. This means brands need to collect the data digitally after customers identify themselves through registering or logging in to a customer-experience platform.
Related: Learn how to leverage customer data you've gathered.
How to Collect & Leverage Zero-Party Data
The first step to winning over skeptical customers who are hesitant to hand over data is to keep them entertained and engaged through interactive digital experiences. They need to feel they are receiving something worthwhile for their attention and, eventually, their personal data. Marketers can even speed up the process of collecting zero-party data by incorporating incentives (such as instant wins, gamification and giveaways).
When asking customers for zero-party data, keep these three key principles in mind:
- Be transparent. Explain why you are collecting the data and how you intend to use it.
- Don’t force things. Ask just for what data you need and let them share as they are ready.
- Deliver a fair value exchange. Offer a meaningful exchange and make sure what they’re offering feels equal to what they’ll get in return.
When done well, interactive experiences create an engaging process for collecting zero-party data, inviting customers to build trust in the brand and continue engaging throughout the customer life cycle. ITA Group can help you be creative with how to gather zero-party data and use it to build lasting customer engagement.
For example, we helped one of our manufacturing clients learn about their customers' preferences by developing a sweepstake with a grand prize all-expenses-paid trip to attend the Indy 500. We crafted the sweepstake entry to include a few tailored questions that allowed our client to segment customers and target industry professionals who entered the sweepstakes. Within that professional audience, our client was able to further segment customers who were planning on attending an upcoming product expo.
Our solution allowed the client to organize a targeted marketing outreach to potential attendees found through the sweepstakes promotion—all while adhering to customer privacy laws. The buzzworthy nature of the grand prize garnered incredible media attention, prompting even more people to volunteer zero-party data in the hopes of winning the trip. In the end, there were 4,600 entries, 636 of which were industry professionals planning on going to the expo—they were immediately added to the communications cadence to help customize their experience. This allowed the client to cultivate warmer leads ahead of the expo.
Why Zero-Party Data Is a Powerful Marketing Tool
While many marketers still cling to third-party data, zero-party data is a huge opportunity that is often overlooked. It eliminates much of the guesswork and privacy concerns surrounding other methods of data collection and has broader applications for personalizing the customer experience.
By offering the right motivators and value exchange, your customers will tell you the information you need—from what products they desire to what they look for in a service to what motivates them to purchase.
Curious which customer experience solution will make the most of the zero-party data your organization has gathered? Take our customer experience solution assessment to find out.