Data Goldmine: Unlocking Zero-and First-party Insights Through Loyalty Programs
One of the foundations of online advertising and targeted ads is third-party data. Google announced the intention to drop third-party cookies support in Chrome, presumably in 2023. Many experts say that a way out of this mess-to-be is establishing engaging loyalty programs, which will open the gates for companies to start collecting customer data directly and build a zero-party data strategy. But how to use the zero-party data in the cookieless economy?
Since the matter is a bit more complicated than just Google banning cookies and third-party data collection, I decided to dig in and bring you all the information you need about the coming change in the data collection landscape, its predicted consequences, as well as a promising solution.
- What will be the consequences of Google's new approach to customer data?
- What is the definition of zero-, first-, second-, and third-party data collection?
- How does zero-party data differ from first- and third-party data?
- How can loyalty programs help overcome the results of banning third-party cookies?
To understand how to use zero-party data, we should start by putting everything we know about all the other data types in some order.
What is first-party data?
First-party data is the data users leave behind while interacting with websites, mobile apps, and such. For example, if a customer visits your online store and buys a bike, they will provide you with pieces of demographic information, like their name, home, or email address. You can also gather first-party data via online surveys, newsletters, asking for feedback, or other methods.
What is second-party data?
Second-party data gathers all the data collected not by your company directly but by your partners – let's say you've joined forces with influencers, who provide you with leads they acquired among their social media followers. Second-party data won't just appear in your database – it's usually a result of an agreement between two parties.
What is third-party data?
Third-party data are all the pieces of information collected and used not by the owner of a website that users visited but by someone else – most probably some data aggregators. To some extent, it's similar to second-party data, but the parties involved aren't usually trusted partners working together – in most cases, they don't even know each other.
How about some cookies?
One of the most well-known examples of third-party data are cookie files. Users visiting the website for the first time have to agree now to have cookies saved, but it wasn't always like this. For years brands used third-party tracking without people even knowing, but GDPR and California Consumer Privacy Act (along with other data privacy laws) changed the way brands own and share data.
Though cookies are usually harmless and don't affect the way people use the internet directly, they do collect data about users' browsing history. They thus can be sold to other parties as valuable data, which in the age of recurring leaks can be worrying.
No (third-party) cookies allowed – what will it change?
Firefox and Apple had already banned all third-party cookie files from their browsers years ago. From the user's perspective, the change maybe wasn't very noticeable. Still, it truly is a privacy-protection milestone for almost a quarter of internet users worldwide – Safari holds about 19% of browser market share, while Firefox is being used by nearly 4% of users.
Whereas Firefox's and Apple's move was very significant, an even bigger change approaches: Google is about to restrict third-party cookies from Chrome, which is undoubtedly the most significant web browser, accounting for circa 65% of the global web browser market share.
Cookie files are still being used for plenty of advertising-related stuff: targeted ad campaigns, improving UX, and so on. Losing third-party cookies might become a severe problem for advertisers, especially those who still rely primarily on third-party data. Though, nothing like throwing away all the cookies is going to happen. Google announced phasing out only the third-party cookies in their browser, so all the first-party data collecting marketing efforts will work just like they work now.
Coming years will prove the usefulness of first-party data like never before, with a new so-called remedy: zero-party data. So let's dig into it.
What is zero-party data?
Zero-party data refers to all the information handed out voluntarily by the users to your company, such as customer preferences, purchase history, or customer behavior patterns.
The awesome thing about zero-party data collection is that people want to share them – they give your company something hoping that it would lead to them getting a better experience, personalized offers, and a more "local store" approach that will make customers feel valued.
If you need some zero-party data examples, check this out:
In this scenario, MunchPak asks customers directly what their preferences are, so they get products that fit their needs. Sending a clear message lies in both parties' interest – customers will get a more personalized experience, and the company will acquire extremely valuable customer data.
Skiing fans would love to get information about appropriate equipment instead of swimwear or kites from their favorite store. If they also love participating in sports events, they may want to share their location, which allows you to let them know whenever something interesting happens near them. This is why having a zero-party data strategy is key for building strong customer loyalty.
Zero-party data versus first-party data – what's the difference?
The key difference between zero-party data and first-party data lies in the level of user consent and the proactive nature of data sharing. First-party data is collected as users interact with a company's digital properties, while zero-party data is intentionally shared by users themselves, allowing brands to complete the customer profiles with soft data.
If customers are willing to share something extra about themselves, like their expectations and purchasing preferences, it means they are already engaged with your brand. But that's the perfect situation, which most companies have to pursue for months (if not longer) with no success guarantee. So, to properly start with that, you need to learn how to collect and own zero-party data.
And that is when loyalty programs kick in.
How to convince customers to share their data?
We all know that "information is money", but the more important thing is that consumers are also aware of it. They won't share any data without a strong belief that you'd give them personalized experiences in return.
Loyalty programs give you thousands of opportunities to reward users for all sorts of interactions with your brand.
What can you offer in loyalty programs in return for zero-party data?
- Automatic discounts and promo codes.
- Personalized products.
- Free shipping and trials.
- Gifts (material rewards) and gift cards.
- Educational support (webinars, demos, 1-on-1 conversations).
- Early or priority access to new features.
A well-crafted loyalty program creates a win-win environment for both you and your customers and allows you to build more innovative data collection methods.
How to collect zero-party data?
Loyalty programs are highly effective in gathering zero-party data as they establish a mutually beneficial relationship. When customers join a brand's loyalty program, they anticipate receiving value in return. By offering rewards or other advantages for sharing data, both the brand and the customer agree to the value exchange.
Various digital interactions are employed by loyalty programs to encourage the sharing of zero-party data via both loyalty apps and social media platforms, including:
- Preference centers integrated into the onboarding process or at later stages of the customer journey.
- Surveys, social media polls, and quizzes.
- Giveaways and competitions to engage customers.
- Branded digital games that encourage desired behaviors or educate customers about the brand's values, products, or features.
- Forums and communities centered around the brand, fostering engagement and data sharing.
These approaches enable brands to collect and own valuable zero-party data directly from customers, aiding in personalized marketing and enhancing the overall customer experience.
What makes capturing zero-party data important?
- Trust and data privacy concerns – joining a loyalty program gives your customers proof that you're going to at least try to build a relationship with them and that they will get rewarded for their dedication sooner or later (of course, the sooner, the better). A loyalty program also carries a promise that zero-party data they share won't get sold somewhere else – the loyalty works both ways. Consent to data collection is crucial in the age of rising data privacy concerns – according to KPMG, 86% of people stated that they felt growing concerns about their data privacy.
- Personalization and targeting – if users decide to sign up for a loyalty program, they most likely plan on sticking with your brand at least for a little while. It allows you to make the most out of it and win them over. It also shows their interest in your brand, offer, or both. If a new customer joins the loyalty program, they become an instant hot lead!
- Cost-effectiveness – collecting zero-party data eliminates the need for costly third-party data acquisition or data mining techniques. Companies can directly ask customers for the specific information they need, reducing the expenses associated with purchasing or collecting data from external sources.
- Data quality – Since zero-party data is willingly provided by customers, it tends to be more accurate. Customers share their preferences, interests, and intentions directly, ensuring that the data aligns closely with their current behaviors and desires. This accuracy and relevancy result in more personalized campaigns, reducing wasteful spending on irrelevant ads or targeting the wrong audience.
How to use loyalty programs to collect zero-party data?
Loyalty programs are not all about data – it's a crucial part of it, obviously, but they are also helpful in building a friendly user experience and brand loyalty that affects how the customers will feel about your brand and what they will say about it when asked.
You can encourage potential customers to share their zero-party data with your brand in many ways, but remember that each of the activities can and should be adequately rewarded with a bunch of loyalty points:
- Sharing their email addresses.
- Creating an account on your website.
- Following your social media profiles.
- Placing their first order.
- Filling out surveys or quizzes.
- Participating in competitions.
- Giving feedback or reviews.
- Sharing your posts.
- Telling you about their interests and preferences (for example, during onboarding).
- Joining your new communication channels (Slack, Discord, Facebook group).
Members of your loyalty program can get additional opportunities to earn points – as they did in Mizzen and Main. The company sent a quiz to their loyalty program members, asking their weight, height, and wearing preferences. The answers helped the brand in creating spot-on purchasing suggestions for its customers. Of course, all survey participants got their share of loyalty points in return.
How Voucherify integrations with CDPs make you ready to the cookie-less future?
Powerful software solutions are available to collect, cleanse, and unify data seamlessly. These solutions can be integrated with a central Customer Data Platform (CDP), which facilitates the interpretation and activation of customer data.
The adoption of CDPs has witnessed a remarkable surge in recent years, with the CDP industry generating an estimated $1.6 billion in revenue. Marketers are progressively shifting away from data management platforms that heavily rely on third-party data and are instead opting for customer data platforms that enable them to harness the potential of zero-party data more effectively.
Voucherify integrates with the leading CDP providers, such as Segment and mParticle. By sharing crucial data points between your CDP and promotion software, brands can ensure the offer personalization that customers expect from targeted marketing campaigns.
Prepare for privacy changes now and create loyalty programs in Voucherify