Understanding First and Zero Party Data: What It Is and Why It Matters

There is no worse feeling for a manager than having to base their decisions on opinions while guaranteeing nothing. An informed business understands precisely how to collect customer data and will actively refine their operations based on that data. This data can help understand our weaknesses, reveal opportunities, but most importantly it can shape our future.

In our technologically driven industry we are able to obtain this data from a number of different sources. Each source is inherently different in its qualities, the source itself is how we differentiate the types of data categories. This article will divulge on those differences and highlight the significance of Zero and First Party Data.

What are the different types of data?

Customer data can be broken down into four distinct groups based on the data source. Each category has specific characteristics that involve privacy rules, degree of relevance, and overall quality.

Zero-Party Data: This data type is attributed to direct input from customers and is produced from your direct audience. This data can be gathered from sources such as questionnaires, surveys, quizzes, registration forms, and loyalty programs. Zero-party data is rated as the most relevant type of data as it originates from your core audience. While this type of data often produces the most informative responses, motivating engagement can be challenging. We will explore methods in later sections.

First-Party Data: This data type is formulated through customer interactions with your channels. It contrasts from zero-party data in that it’s primarily aggregated from customer behavior as opposed to produced from direct customer input. This data can include insight into demographics, behavioral patterns, purchase history, website activity, social media engagement, and mobile behavior.

Second-Party Data: Contrary to the first to two types of customer data, second-party data is obtained from external sources. It is essentially first-party data but is sourced from a comparably similar business, typically a partner with data sharing agreement. This data can include all of the same information that you may find with zero and first party data, and is obtained through similar methods. 

Third-Party Data: This data type originates from industry wide aggregations and is typically produced by data providers. While there is value in analyzing broader data sets, third party data has the characteristic of being indirectly related to your core customer base. This type of data takes the most data into consideration, with the correct framework it is possible to generate quality data. 

The Importance First and Zero Party Data

We know that zero party data is related to direct input from customers and first party data being synthesized from customer interactions with your channels. While second and third party data originate from external sources, their resulting utility can often be misleading and misrepresent customer sentiment. For this reason, the industry prioritizes internally generated data to guide their organizational decisions.

Personalization has been gaining prominence in recent years for its ability to create highly engaging experiences. Customer feedback and behavior has proven to be the most acute representation of their expectations, and when utilized in day to day operations, has demonstrated greater performance. When given the choice between internally and externally generated data, businesses have leaned towards more direct sources.

One of the main challenges faced by businesses historically has been motivating customer feedback. Modern trends have made zero and first party data easier to obtain, while also improving their quality. One example of such tools include loyalty programs that have a unique ability to incentivize interactions and maintain customer engagement for longer periods. Loyalty members are recognized as being one of the most vested types of customers and as a result provide the deepest feedback.

Another prominent advantage of using first party and zero party data is the ability to identify strategic opportunities. Given the quality of information and its origination, the findings from these data types can yield high value insights. This same degree of reliability cannot be expressed for alternative external sources. The key to refining operations using customer insights is gathering the data, which later sections will discuss.

The Benefits of First and Zero Party Data

It’s well regarded that first and zero party data are accurate and reliable insights that can help a business tailor their product and services. This section is dedicated to the specific benefits business can produce through the implementation of these findings. 

Benefits from first and zero party data:

• Improve Customer Service: Customer feedback expressed on matters related to their experience can produce weaknesses to resolve and opportunities to capitalize on.
• Develop Product and Services: Observing interactions with products can highlight customer sentiment, and expressed opinions can divulge details about their preferences.
• Improve Marketing: Customer behavior and feedback can be used to isolate specific patterns or products that can then be leveraged for marketing purposes. This will highlight products or branding concepts that will be more engaging to customers.
• Personalized Experiences: Integrating your findings, particularly those based on actual customer behavior and sentiment, can produce a personalized effect. This can enrich the customer's experience, making your presentation more compelling.
• Increased ROAS: Ad spending can often be expensive, while having a clear idea of what customers are responsive to can improve your chances of engagement. This can improve your returns on ad spending and further generate data that can drive you optimization efforts.
• Privacy Compliance: Adhering to regulation can be challenging when depending on external data. While data generated internally with proper approval can be used with confidence.
• Reliable and Relevance: Understanding that your data is produced by actual customers visiting your store can be assured. This data is also highly relevant and tied to actual interactions with your channels and products.

How to Collect Zero Party Data

Zero party data can be obtained through a number of approaches, and each method produces different data. While reviewing this list of ways of collecting zero party data, consider also the type of data that would be most beneficial for your business. Think about the type of customer that provides the most informative data. It is more than likely that more than one of these methods can fulfill your criteria. 

• Surveys: Carefully construct your survey so that it touches on the most important topics for your business. This will enable you to gather thorough insight straight from your customer. These can be timed along the customer’s journey for optimal engagement, such as post purchase.
• Registration Forms: Registration forms can be customized in additional fields for some critical information on custom segments, where customers originated from, or their expectations.
• Customer Feedback: Reviews and customer feedback can be a great way to identify winning opportunities and issues. This information is derived from your active customer base and can prove valuable.
• Email Campaigns: Email can be one of your most effective marketing channels, but that depends on how you managed to collect credentials. If you’ve collected an active and engaged customer base, they can be a limitless source of data.
• Social Media Polling: Social media followers have an established interest in your brand, product, or service. This interest creates the conditions for quality data which can be used to better understand customer expectations.
• Interactive experiences: This can include quizzes, trivia, voting, contests, or gamification. This when executed effectively can be a wealth of knowledge on your businesses most important topics.
• Conversational Pop Ups: These have historically proven effective as they appear during your customers shopping session. They can be crafted to be highly engaging and can reveal opportunities based on customer responses.

How to Collect First Party Data

First party data is inherently different from zero party data. First party data is gathered from customer interactions as opposed to their direct input. As such, how we gather this data, its source, and the metrics we use are all different.

• Website Analytics: As your primary source of first party data, your main website will be where you will most likely drive the majority of your traffic through your various marketing channels. With Google Analytics and alternative tools it is possible to create a framework of key metrics that you can actively test and iterate.
• Outbound Marketing: Outbound marketing such as email and sms can reveal trends with metrics like open, click, and engagement rates. An essential part of any business is maintaining customer relations and promoting repeat business. These metrics can help you optimize while also revealing opportunities in other parts of your business.
• Loyalty Program: Loyalty programs have become an increasingly valuable source of first party data because the data source is primarily committed to customers with a history of multiple purchases. Loyalty members represent your core audience and generate some of the most trustworthy data.
• In store Point-of-Sale: As is the case for countless businesses that have a combination of physical and online sales points. In-store POS can help gather quality data that can also be compared to your other sales points. Unlike online stores, physical environments enable customers to interact with your products in person.
• Social Media: Social media can be a great way of collecting zero party data, but can be just as effective for first party data. We advise tracking metrics like follower growth, engagement rates on individual posts, and enabling analysis by strategically crafting your posts. 

Implementing First and Zero Party Data

How does the process of implementation actually work? There are three fundamental steps to implementing first and zero party data. It starts with the right tools so that we can reliably measure key data points. We then want to establish which metrics we want to monitor, create a baseline for comparison, and synthesize potential actions based on our findings. And finally, we must focus on execution for a successful campaign.

Choosing the Right Tools

You should have a clear idea on which channels are most effective for your business. Much of your choice will be based on the nature of your tech stack as your tech has the potential of hindering your progress. Remember that as important as collecting data can be, execution of your strategy is just as important. Seek a solution that will enable you to craft highly interactive designs and employ advanced logic to empower you. In the case study section we will demonstrate how a marketing agency uses powerful tools to automate data collection and execution.

Setting Up Data Collection Processes

Customer data can be more than just synthesizing data for insight. Customer data can sometimes be central to your organization, its collection may be slow, and its execution may be weak. We therefore need to understand how the collection process can be optimized.

• Establishing Key Metrics: We need to have a clear idea of the type of metrics we want to track, and organize them so that they become a normal part of our organizational function.
• Establishing Baseline: We want to begin to track growth rates, iterate our approach, and optimize. We can use our historical data or industry benchmark to evaluate the performance of our campaign.
• Optimizing Design: Data collection can be contingent on your technique and execution, potentially failing to generate the sort of engagement you are seeking. In the case study section you’ll find an example of how execution is essential for a successful campaign.
• Incentivizing Engagement: While this part is not absolutely essential there are cases where we will need to accelerate data collection. In many cases a brand may not have a strong pull factor. It's possible to set up something like loyalty points for reviews, or newsletter subscriptions.

Analyzing and Using Collected Data

Utilizing your first and zero party data will be the ultimate and most important step in the implementation process. Unless we are wise about how we craft our email campaigns or engage social media followers, then we run the risk of misusing our data. In any case, it is not as direct of a concept as it may appear. There will always be the subject of the tools you use, your execution style, and how well you target your core audience. The following section will dive deeper into this subject with some awesome examples of effective implementation.

Case Studies for First and Zero Party Data Use by Andzen

Moana Bikini x Andzen

Moana Bikini is an Aussie owned swimwear brand known for their vibrant prints and cheeky cuts in reversible styles. They opened up shop in 2011 in partnership with a Hawaiian-owned brand and has seen continuous growth since. They cultivated a community of loyal customers who are driven by female empowerment and body confidence.

It was instantly apparent to Andzen that Moana Bikini's true strength were their loyal customers. They had a massive instagram follower count at 579K and 30k posts with their hashtag. Their body-positive message was clearly resonating with a lot of people and Andzen was tasked with piecing together an approach to capitalize on the major opportunity.

There were several opportunities that were clear to Andzen. The first was automating Moana’s influencer marketing using Gatsby, Klaviyo, and Justuno.

The benefits were clear:

• Rewarding loyal customer for submitting UGC
• Increasing customer lifetime value by encouraging repeat purchases with rewards
• This enabled them to build brand awareness without expensive collaborations
• Automating the entire process to free up resources

Gatsby proved to be especially effective for their influencer marketing strategy. It enabled smart data collection, filtering, and notifications. They were able to track their followers based on their follower counts and later reach out to them in the case of a potential collaboration.

Moana’s new approach

• Data Capture for contact details and categorizing by follower counts
• Email Campaigns to maintain relationships with important customers
• Email automation also made this whole process effortless

Results

• Data Capture: They saw 68.9% engagement rate on Moana’s main data capture form
• Launch Campaign: Click rate was 30.8% and Conversion Rates were 2,400% higher then the Klaviyo benchmark
• Email Automation: Open rate as 76% higher - Click rate was 520% higher - Placed Orders 764.8% higher than the Klaviyo benchmark

MedCart x Andzen

MedCart arose in a time of strife, a time of great need. During COVID-19 we all found ourselves on the backfoot with shortages in medical equipment all over the world. We needed action and MedCart delivered by introducing a novel service. They provide medical equipment online, delivering vital resources to those that need it most.

MedCart used Marketplacer, an ecommerce platform that enabled them to quickly implement their project. However it had limitations and their email marketing was insufficient to make a real impact. Andzen took control of their marketing and quickly transformed their outreach. 

The major change they implemented was the introduction of Klaviyo into their operations, which made it possible to create automated email flows. This gave them the versatility to acquire all the relevant customer data they needed, with the addition of several high performing email flows.

Below is an example of how MedCart’s emails looked like before working with Andzen.

MedCart’s New Email Workflow:

• Data Capture Series (3 x Forms)
• Nurture Series ( 6 x Emails)
• Abandoned Cart Series ( 7x Emails)
• Post Purchase Series ( 4 x Emails)

This allowed Andzen to turn their standard transactional-style emails into beautifully-designed, on-brand customer journey touchpoints. Klaviyo also gave them the ability to create customer-coded blocks for a more personalized experience.

Results:

• Customer Experience: With MedCart’s new Klaviyo integration, they were able to not only to improve their customer experience and achieve better results.
• Abandoned Cart Series: They managed to beat all Kalviyo’s benchmark figures (Open Rate, Click Rate, Order Rate, Revenue per Recipient), with an order rate 61.23% higher than the figures set by Klaviyo.
• Nurture Series: MedCart’s nurture series was able to achieve highly effective results with a conversion rate of over 25%.

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Cherry x Andzen

Cherry Collectables is one of Australia’s biggest card collecting companies that was founded back in 2008. Their founders were avid collectors that wanted to share their passion with like minded people. They wanted to deliver an unrivaled experience and establish themselves as the premier option for the world’s top collectable bands.

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As focused as they may have been on producing an exceptional experience they still faced persistent issues. That's when they decided to shake things up and bring on an agency to help rebuild their approach. Andzen laid the foundation to a new data-driven strategy that transformed how they looked at the customer journey.

Andzen introduced a customer oriented strategy that focused on drawing customer backs, encouraging repeat purchases, and promoting loyalty. The entire process started with customer data, the foundation of their new approach. Andzen wanted to tailor product recommendations, rewards, and communication to their core audience. Personalization was the name of the game and customer data was essential for studying custom behavior.

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Cherry’s New Email Workflow:

• Data Capture
• Nurture Series
• Abandoned Cart Series (Checkout started trigger)
• Add to Cart Series (Checkout not started)
• Browse Abandonment Series
• Post Purchase Series
• Back in Stock Series
• Lapsed Customer Series

Andzen also revamped their loyalty program, which made their shopping experience more enjoyable and advantageous. They automated their influencer marketing strategy, knowing how community is detrimental to card collectors. And they introduced a new SMS marketing system to help them build a deeper connection with their most active customers.

Results:

The average returning customer rate for Shopify brands is somewhere around 28.2%, after Andzen implemented their first and zero party customer data, they saw a staggering 45.13% returning customer rate. Cherry also saw an increase in orders by 28% while online conversion rates increased by 61%.

• Nurture Series: Conversion rate 2.52x - Revenue per Recipient 4.82x the Klaviyo Benchmark
• Abandoned Cart: Conversion Rate 1.6x - Revenue per Recipient 3.8x Klaviyo Benchmark
• Browse Abandonment: Conversion Rate 4.8x - Revenue per Recipient: 18.85x Klaviyo Benchmark
• Post Purchase: Conversion Rate 7.85x - Revenue per Recipient 97.2x Klaviyo Benchmark

Conclusion

In ecommerce, we’ve seen a growing sentiment for customer data, especially for the insight they are capable of generating. Their benefits are often substantial as they’re generated by your core audience, which enables you to tailor your operations towards your most active customers. They enable you to operate with confidence, knowing that your actions are backed by data.