In marketing, data is divided into first, second, and third-party data, based on their origin. Third party data, which currently still is the basis for dominant forms of advertising, such as programmatic advertising and thus for a large part of personalization in marketing, in particular in the form of cookies, loses in many cases applicability due to changing legal and technical framework conditions.
First party data already offers great potential for targeting and personalization and could therefore be a real alternative. In fact, the Boston Consulting Group described the use of first party data in a study as the "biggest driver for digital maturity and marketing results". Anyway, let us look at Apteco’s detailed explanation on what distinguishes first-party data and what possibilities they offer, especially in existing customer communication:
1. First party data is data that is collected by the company itself and stored on its own server. The fact is, that the increase in digital touchpoints results in more and more data, which is first and foremost data that is collected when there are interactions with the company website. In addition to anonymized web usage data, this often also includes personal data, such as the name and email address when subscribing to the newsletter, the address and corresponding transaction data when purchasing in the online shop, opening rates and much more. But a lot of first party data can also be collected in other ways, e.g. in the context of events, customer loyalty programs, vouchers, and competitions. In this way, first party data provides a great deal of information about a company's customers and prospects.
2. The term second party data, on the other hand, describes data that is obtained from another company as part of a partnership or a one-time purchase. The other company monetizes its own first party data. This can be, for example, market research data or campaign data made available by an agency or a cooperation partner. The extent to which the data can be used by both partners is usually stipulated in the contract.
3. If large amounts of data are required, so-called third-party data can be acquired to enrich the own data set. Third-party sources either collect the data themselves or buy it from various other providers to then aggregate and resell them.
Each of the three types presented has its own advantages and disadvantages. A clear benefit of third-party data is e.g. their rapid availability and the large amount of data that can be accessed through them. However, there are some key advantages of first party data that should be considered in this context.
First party data is available to a company free of charge; both second- and third-party data incur additional costs through acquisition.
However, the aspects of data quality and data sovereignty are much more important. Since first party data is collected by the company itself, data sovereignty is guaranteed since the company has direct control over the data and does not dependent on third parties. With the consent given by the customer or user, the company can process the data and use it for various purposes.
The applicable data protection regulations result in clear differences in connection with third party data. Strict rules regarding the transmission, use and further processing often reduce the productivity of this data. Not to mention that you are always dependent on the provider in terms of quality and conformity of the data usage.
Personalization options with first party data
As mentioned, first party data provides a lot of personal information, including demographic characteristics, response data and the transaction history. By analyzing this data, new insights into the needs and preferences of existing customers can be derived which can be used in the next step for highly personalized communication. Here are some examples:
- Geoanalysis: in geoanalysis, demographic aspects, such as the postal code, from a customer's address gets combined with spatial information: e.g. the distance between customers and a branch can be calculated and visualized. This means that suitable, regional offers can be included in communication or discounts can be staggered depending on the distance to the branch. In addition, new, previously untapped sales areas can be identified for the acquisition of new customers.
- Customer profiling: with profiling, a suitable analysis group is first defined, e.g. customers who bought product X and then product YZ in the next step, this analysis group is examined using several variables and compared with a base group, such as e.g. customers in the database. The profile provides information on the penetration and significance of a particular variable within the analysis group. When scoring, so-called lookalikes are identified, for instance, people in the base group who are most like people in the analysis group. This method can be used on the one hand to identify new potential for cross-sell and upsell, but also to identify customers who are at risk of churning.
- Campaign optimization: only communication to a customer or prospect that promises the highest probability of a response or conversion is considered. Restrictions, such as maximum volume, budget restrictions or contact strategies are also considered. In this way, not only wastage can be avoided, but also the results and relevance of campaigns improved.
With all the advantages that the use of first party data offers, it must be factored in as well that all data sources, both online and offline, have to be made available and merged for analysis and corresponding processes in order to obtain a 360-degree customer view. (Source: Apteco)