Everything you need to know about zero-party data

Zip. Zilch. Zero. Nada. That’s the number of insights marketers risk gaining if they continue to rely solely on third-party data. The savviest marketers know that the most valuable data comes directly from customers. Most of you will be familiar with "first-party data," but you might not know exactly how it differs from "zero-party data." Both types of data come directly from your customers but the main difference is how that data is collected.

The good news is that you can definitely improve your marketing efforts with zero-party data. You just need to know the best ways to encourage customers to willingly proffer their personal details, purchase intentions and other information that can help you create more engaging experiences — and drive sales.

What is zero-party data?

Here at Funnel, we've spent quite a bit of time defining first, second and third-party data. However, a latecomer to the party (pun intended) is zero-party data. That's not to say that we've never noticed or used zero-party data; it's just that it's suddenly a lot more relevant.

Zero-party data was a term originally coined by Forrester Research and refers to consumer data that a customer proactively provides.

How zero-party differs from first-party data and third-party data

Third-party data is information gathered utilizing external sources. In other words, it's not gleaned via a direct interaction between you and the customer. In many cases, the consumer's only input is to provide consent (e.g., when they click "Accept" when they see a message prompting them to accept cookies during a website visit). Third-party data is often purchased from companies that specialize in data collection. You must, of course, ensure that any data you gather using third-party tools respects privacy regulations.

First-party data is completely different. It is data gathered directly from your customers, but they rarely have to lift a finger or do anything other than browse your channels as normal. A brand's first-party data may include:

• Website or blog clicks
• Purchase history
• Time spent on your organization's channels (website, app, etc.)
• Response to email marketing campaigns
• Data analytics of various marketing channels

There's also second-party data which is when you partner with an external entity that gathers data directly from customers, for example, an outsourced marketing or research team.

Zero-party data differs from all these options as it is collected by getting customers to willingly do the work for you. When a customer intentionally provides you with information about their needs and wants, that's marketing gold.

For example, if you run an online gift store, you'll have tons of data on overall purchase history, trends and how consumers use your site. These help you go some way toward personalizing your content and consumer experiences. However, when your customers tell you exactly what they want, you collect zero-party data and can approach hyper-personalization. Wish lists, preference centers, and even comments on your social channels can all tell you exactly how that customer wants to interact with your business.

Essentially, zero-party data comes from customers with minimal interaction from your organization. It represents information that a customer intentionally and proactively shares with a brand.

Why zero-party data is gaining importance

In the very near future, marketers will have to say goodbye to most aspects of third-party data. Third-party cookies are literally crumbling, and increasingly stringent data security regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) are driving a real need to focus on information that comes directly from the customer.

Marketers who can gather more customer data types while respecting consumer privacy will likely edge ahead of competitors who fail to recognize the importance of zero-party data.

Benefits of zero-party data for marketers

One key benefit of zero-party data is that it shifts away from faceless masses of sales figures and demographic-wide customer behavior charts and places data in a highly personal context. This is extremely valuable for marketers who are interested in micro-targeting techniques or cohort analysis.

Build trust with your customer base

The more your customers trust you, the more happy they are to offer up their personal data. And the more personalized you make their experiences, the deeper that trust becomes. You can use zero-party data to create lasting bonds with customers who come to love your brand.

Collect consumer-explicit data

Data that your customers proactively provide is not generic or vague. It is entirely explicit (i.e., accurate and relevant at that moment). It's worth noting that the accuracy of consumer-provided data changes with time. For example, when a shopper changes their mind about how they want to be contacted or their favorite product types. But because you've built trust with your customer base, they'll probably let you know about those changes pretty quickly.

Create genuinely personalized experiences

Let's think back to the online gift store. If you know that your greeting cards sell better around winter and February, then you can focus on increasing your email campaigns and social media posting around these times. You can focus on products that cross-sell well with cards and maybe do a drive on gift vouchers that are easy to slip inside a card. All these decisions are simple to make with first- and third-party data.

However, when you've got data about exactly what each customer wants and when, you can go so much further than this with your marketing strategy. Claire, for example, hates Valentine's Day and is likely to go to a competitor if you send her content during this time. However, she told you this in her preference center, so you avoid sending emails to her during the first two weeks of February.

Robin, on the other hand, always makes a big purchase around this time and told you in his preferences that he is happy to be contacted by SMS. You can tweak your SMS campaigns to promote slightly more expensive items that resonate with his purchase history.

While first-party behavioral data is undoubtedly useful, when your customers trust you enough to tell you exactly what they want, you can make every interaction personal.

How to collect zero-party data

Collecting zero-party data is critical for ensuring you have relevant, timely information about buying habits, purchase intentions and customer experiences. So how do you gather this type of customer data?

Here are a few zero-party data collection techniques you could implement into your marketing strategy.

Customer accounts

Get your customers to set up an account as early as you can. Whether you do this via a website pop-up, at checkout or via email, prompting them to create an account instantly gives you a great foundational lump of personal data.

Preference centers

Any app or website can have a preference center where the customer simply notes things they prefer. These can be how they like to be communicated with, how often they get updates and even the types of products they want to be shown.

This preference center data is a prime example of zero-party data. You give the customer the option to tell you fantastic facts about themselves and they choose exactly what they want to tell you and when.

Loyalty programs

Awarding customers loyalty points for particular actions is a great way to encourage interactions. If they gain these points not just for buying but for sharing your products on their own channels, referring their friends or even reviewing products, you can collect data that you can then add to their customer profiles.

Gamification

Everyone loves a quiz! Get your customers raving about what they love with surveys and tests that gather preferences while allowing them to have fun.

A gift store can run quizzes on the best birthday presents and favorite aesthetics or a social media competition to name the "worst gift ever." Customers love these unique interaction points, and they proactively give you their personal tastes and buying signals.

How to use zero-party data effectively

Once you've collated and identified zero-party data from your customers it's time to put it to work. Understanding how to leverage zero-party data like customer preferences helps fuel your personalized marketing efforts.

Real-time interaction management

Real-time interaction management (RTIM) was another term coined by Forrester Research way back in 2017. They noted that customers want and even expect "contextually relevant interactions." The increase in third-party data usage may have overshadowed the importance of RTIM but as the relevance of third-party data wanes, RTIM could reemerge as a driving force for gathering and utilizing zero-party data from your customer base.

The basic ethos of RTIM is that it offers personalized experiences at the right moment, ideally as soon as there's an opportunity. For example, the ability to respond in real-time to social media comments is a type of RTIM. Some companies have social media management teams to do this. Others use AI-powered tools. Calling a customer back when they've sent an email query that's too complex for a quick reply is another form of RTIM, as is recording the data within those interactions to drive and further personalize future communications.

Tailored bundles and bespoke offers

When you know exactly what a customer wants you can offer it to them. It really is as simple as that. While it's still okay to have pre-made bundles of products or services in your catalog, carefully collated zero-party data empowers you to create bespoke bundles or offers that are specifically targeted at individuals or small groups of customers.

The online gift store could supplement its greeting card drive by bundling a card, a gift voucher, and a small gift together. The right data would allow e-commerce sites to offer different cards and products within this bundle depending on the customer's preferences.

Cross-selling that works

Similarly, a deep understanding of your customers can help you offer additional products they're more likely to buy. Including a "Did you forget something?" section before checkout is a great place to include previous frequent purchases, where appropriate.

For example, if you have a customer who purchases a gift voucher 90% of the time, remind them of that as they're finishing up their purchase. But you can also offer additional products or services based on their history, similarity to other customers, and chosen preferences.

Start working on your zero-party data strategy today

Research shows that 69% of customers want personalized experiences as long as companies use data that they've gathered themselves rather than via third parties. Zero-party data is the ultimate solution to this, so figuring out your customer-focused data collection strategies is essential. Review your data stack to ensure you're making it simple for customers to tell you exactly what they want.