Where Can Marketers Find The Best Customer Data? Under Their Noses

Today’s marketers face unprecedented pressure to leverage data to deliver relevant and personalized ads, messages and customer experiences. The ever-increasing number of connected channels and devices means advertisers face stiffer competition when it comes to attracting consumers’ attention, in turn driving demand for people-based marketing, rather than simple guessing.

For most of digital marketing’s existence, marketers have relied on third-party data to reach prospective customers. Third-party data has been an easy way to reach large consumer segments that otherwise would have been unavailable — but in today’s always-on environment, it’s no longer enough.

Instead, the data that brands already own — first-party data — is quickly becoming the strategic priority for a majority of marketers.

What makes first-party data such a hot commodity, why are marketers prioritizing it over third-party data, and how can it help them achieve more effective people-based marketing? Read on to find out.

The Current Landscape

There are three main categories of data currently available to marketers:

First-Party Data is any data created by a brand’s direct interactions with customers. Some of the best sources are transaction records, marketing campaigns, the brand’s website and emails.

This data is the best source of reliable customer information, and it is therefore highly predictive. Knowing, for example, who made a purchase, for which items, and at what price means a brand can anticipate what sorts of offers or messages will be most impactful for a given consumer.

Beyond its predictive ability, first-party data is also proprietary and unique to your brand, meaning it gives you a distinct competitive advantage. There are also fewer regulations surrounding its use.

On the other hand, first-party data is limited to the data that a given company has on hand. Without a large customer base or a strong data collection program, first-party data can have limited scale compared with other types of data.

Second-Party Data is another company’s first-party data. Second-party data can complement first-party data by increasing its scale without sacrificing accuracy.

The value here is clear. Brands can expand their marketing reach without giving up the reliability that makes first-party data so powerful.

Second-party data cannot be used without caution, as the process of sharing potentially sensitive data between companies is not a simple one. Partners must be non-competitive, and processes must be in place to ensure that integrating second-party data into an existing marketing program is as seamless as possible.

Third-Party Data is aggregated data, generally purchased from a dedicated data provider that combines publicly available sources like census data with numerous other sources in order to build out customer profiles. This type of data is most useful for its reach and availability, which makes it well-suited for customer acquisition.

However, despite marketers’ decades-long reliance on third-party data, its shortcomings are coming to light as brands shift to people-based marketing strategies — specifically: quality, privacy and recency. Third-party data often consists of consumer profiles pulled from a wide variety of sources, each with a different degree of relevancy and accuracy.

It’s difficult for marketers to determine the exact quality of what they’re purchasing. For example, just because a customer visits the children’s clothing page on Target’s website doesn’t mean that he or she has a child; the customer simply may be purchasing a gift for a friend or family member.

Additionally, third-party data is available to anyone — meaning competitors can access and utilize the same data.

Shifting Priorities

Each type of data has an important role to play in the current ecosystem, but new evidence points to a shift in focus toward first-party data. A recent Signal (my employer) research report found that:

• Two-thirds of marketers believe that first-party data provides the best campaign performance.
• More than 80 percent of marketers plan to increase their use of first-party data over the next two years.
• Ninety-two percent of marketers believe that first-party data and second-party data provide the best campaign lift, while 95 percent of marketers look to those two sources as the best way to increase customer lifetime value.

These findings highlight the premium that marketers place on collecting, analyzing and leveraging their own data. In short, first-party data gives marketers the confidence that comes with knowing exactly where their data comes from and how it can be leveraged.

As a result, they are more frequently harnessing first-party data for efforts like building rich profiles for robust personalization or creating precise audience segments for deep targeting.

Early adopters and industry innovators are even more sophisticated with their first-party data efforts, paving the way as shining examples for the rest of the marketing community.

For example, Disney leverages the data collected by its multi-purpose “MagicBand” RFID bracelets, which serve as theme park admission tickets, as passes to skip the lines on pre-reserved attractions, as hotel room keys and as a form of payment for food and merchandise. Disney also has access to data from its trip-planning web and mobile apps for visitors, where they can make dining reservations, reserve spots at attractions, and connect with other members of their traveling party.

MagicBands and apps not only give Disney guests seamless, frictionless utility, but they also give the company access to first-party data about the customer journey that can be used to constantly improve interactions with the Disney brand.

Another example of first-party data in action is music-streaming service Pandora, which collects a variety of user data, including age, location and listener likes and dislikes, to create audience segments and offer tailored advertising to highly specific categories.

Brands’ own customer engagement data is reshaping the landscape as the preferred currency for knowing consumers on a one-to-one basis. The marketers who win in the future will be those who leverage this currency to drive more conversions and create smarter customer interactions.