First-Party Data’s Role in Modern Marketing
- First-party focus. 75% of marketers still rely on third-party cookies, highlighting the need for strategies based on first-party data.
- Inevitable shift. 9 out of 10 marketers agree first-party data is crucial, yet many lack a companywide strategy for its use.
- Personalization pays. Brands using first-party data see a 2.9X revenue increase and 1.5X cost savings, underscoring its effectiveness.
The demise of third-party cookies, while a step forward for data privacy, is anxiety-inducing for marketing and advertising teams. A recent Adobe survey revealed that 75% of marketers worldwide still rely heavily on third-party cookies to reach target audiences.
That statistic alone underscores the importance of marketing strategies that are based on first-party data. Marketers know that moving on from third-party cookies is inevitable, with 9 out of 10 saying first-party data is more important than ever. Yet this approach will be an adjustment because harnessing first-party data for marketing requires a companywide strategy that not all companies have in place.
In this article, we’ll define first-party data, describe the benefits and challenges, and discuss the most effective ways brands can use first-party data for marketing.
What Is First-Party Data?
First-party data is collected directly from customers, site visitors and social media followers with their permission. It’s the equivalent of getting information directly from a friend, whereas third-party cookie data equates to someone telling you about a person you don’t know.
“A company’s own data about its customers’ and prospects’ actual behaviors remains the most competitive-edge component in a marketer’s arsenal,” said Jim Sterne, a marketing consultant, author, speaker, and founder of the Marketing Analytics Summit conference.
Sources of first-party data include:
- Activity across website, mobile app and product
- Demographic data in your CRM
- Social media comments, likes, shares
- Email and newsletter subscribers
- Survey data
- Customer purchase history (products purchased, subscriptions, length of time as a customer)
- Call center transcripts
Related Article: First-Party Data: Getting Creative for Cross-Channel Identification
First-Party Data: Benefits and Use Cases
With first-party data, you can tailor marketing campaigns based on what your audience has revealed to you directly rather than relying on second- or third-hand data or, worse, educated guesses.
For instance, your website traffic data will show your most popular product pages; you can then include more features and content on these pages for even more engagement.
Brands using first-party data for marketing have achieved a 2.9X revenue lift and a 1.5X increase in cost savings, according to a Think With Google and Boston Consulting Group study.
However, first-party data is only beneficial if you know how to organize it (more on that later). But once first-party data is organized enough to take action on, the benefits include:
Precise Segmentation and Ad Targeting
Because first-party data is so reliable, marketers can more confidently segment customers and prospects into groups and create highly targeted campaigns based on how likely someone is to purchase.
Use Case: Amazon
After analyzing customer purchase history and product searches and views, Amazon segments users into different groups based on their preferences. Advertisers on Amazon can then target their ads to specific segments, ensuring their products are shown to users most likely to be interested.
Personalized messages and content
Marketers use first-party data to personalize messages, offers, and content that’s based on specific individual behavior, thus increasing the probability that users will engage and convert.
Consumers very much prefer this approach, with 70% of consumers now expecting brands to personalize ads and product recommendations, and 76% getting frustrated when this doesn’t happen, according to McKinsey research.
Use Case: Spotify
Spotify uses first-party data gathered from users’ listening habits to recommend music and create personalized playlists. By analyzing the genres, artists, and songs users prefer, Spotify improves the user experience and also helps brands looking to reach music — and now podcast — fans with targeted advertising.
Related Article: Using First-Party Data to Build Trust With Your Customers
Customer Trust and Loyalty
When consumers know a brand is handling their data responsibly and using it to offer personalized rewards and incentives, it builds a foundation of trust
Use Case: Starbucks
Starbucks utilizes first-party data for its “My Starbucks Rewards” loyalty program. The coffee giant uses food/drink preference and purchase history data to personalize rewards such as free drinks on birthdays and promotions and recommendations based on past orders.
First-Party Data Challenges
While there are advantages to having first-party data be the basis for marketing and advertising, challenges persist when it comes to integrating data and adhering to privacy regulations.
Integrating and Organizing First-Party Data
Most companies collect first-party data using systems for marketing automation, customer support, web and mobile app analytics, CRM, HR (human resources), and POS (point of sale), to name a few.
Pulling all this siloed data together for a complete view of the customer is the biggest challenge in developing a first-party data strategy. For example, if a customer’s purchase data is stored in one system and his or her browsing behavior is in another, it’s difficult to suggest complementary products effectively.
Centralizing first-party data is also a challenge because it requires collaboration across marketing, sales, customer support and data science teams.
“Most teams using third-party cookie solutions were the internal marketing and advertising teams or their agencies — and those teams don’t work with the sales, service, or commerce teams,” said David Chan, managing director at Deloitte Digital.
“Now with first-party data, ad teams can no longer work on an island, but need to develop relationships with other teams to build rich and reliable first-party data sets.”
A common strategy is implementing a CDP (customer data platform) that uses APIs to ingest data from different systems and bring it into a centralized repository. Here, all data related to the same customer is unified, even if it comes in different formats from different systems.
Marketers then have a complete, up-to-date view of each customer, from which they can build personalized marketing campaign.
Balancing Personalization With Privacy Regulations
As mentioned, consumers prefer personalized ads and product recommendations. But the line between personalization and intrusion can be thin. First-party data loses its value if a customer feels like a brand knows too much about them.
To that end, companies should always have explicit consent from users about data collection and should adhere to the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) in the US.
“Be friends with your legal team,” said Chan. “Brand trust and data privacy are paramount, so it’s of the utmost importance to follow laws and regulations so you can confidently deliver great marketing programs. It’s an investment that will have long-term dividends.”