First-Party Data: How to Avoid Common Pitfalls

8/10/2023 RRD

With the ongoing demise of third-party cookies and the proliferation of notice- and consent-based privacy laws, many marketers have had to double down on how they use their first-party data. Here, we’re referring to first-party data that companies directly collect from consumers — information about things like purchase intent, browsing behavior, and loyalty-based programs. This differs from “zero-party data,” which a customer intentionally and proactively shares with a brand.

Every company — and every good marketer — wants to deliver a superior experience to their customers. When used properly, first-party data can be the driver of that experience. As brands strive to be more customer-centric, data is central in helping them gain a deeper understanding of each consumer’s wants and needs. The way a company organizes and applies their first-party data can be a key differentiator when it comes to personalizing marketing and improving the overall shopping experience.

Rules regarding use of data

It might seem simple on the surface: When leveraging customer data, it’s important to find a way to delight people by ensuring that everything you do anticipates or fulfills a need they have. Executing this kind of seamless, personalized approach, however, is more difficult than it looks. This is true for how you market as well as how you deliver your products and services to customers.

First-party data comes with restrictions on how brands can use it, including some situations that require explicit permission from consumers. Although some people see the benefit and are willing to share their data, many others remain cautious. More than 80% of consumers say they are concerned about how companies use the data they collect, according to a Pew Research Center survey, and nearly 70% say they have little to no understanding about what companies do with the collected data.

It’s important to keep in mind that every instance of data collection, and especially data sharing, comes with its own set of rules regarding use. Even if your company doesn’t share data with third parties and just keeps it within your organization, there are ways you could potentially misuse that data. What follows are three examples of this misuse.

Legal misuse

Perhaps the most obvious misuse of data is from a legal standpoint — running afoul of the various laws and regulations that come into play when a brand collects data from a customer.

Here’s an example: Let’s say your company is a bank that collects and utilizes credit and income data for a single initial purpose, such as informing underwriting decisions. You decide to use that same data to create a marketing campaign, but you don’t provide notice of that use to your customers when you collect their data. This is an example of legal misuse — the information you collected for one explicit use is now being used for something completely different, for which you did not provide notice.

Another common legal misuse happens when companies sell customer data without having spelled it out in their privacy policy. This occurrence could result in legal exposure.

Relevancy misuse

If you repeatedly purchase dog food and dog supplies from a retailer and then receive marketing messages that feature cats, there’s a relevancy problem — nothing in the data provided to the retailer suggested you own cats. The personalization of the messaging misses the mark and, as a result, you start to slip away as their customer. Personalize the messaging around you being a dog owner, however, and the retailer begins to build your loyalty and strengthens purchase intent.

When a brand fails to effectively personalize, it doesn’t necessarily break trust but it certainly squanders a golden opportunity to build it. The dog/cat disconnect in the example above gives a customer reason to pause and reflect on whether the brand they are buying really knows anything about them. What should be a moment of connection between consumer and brand instead becomes a moment of alienation.

The introduction of data to the brand-customer relationship has in some ways redefined what we mean when we talk about “customer service.” Today’s consumers have higher expectations not only in terms of the traditional definition of customer service but in the broader ways they experience and interact with a brand. Why? Data. They know we know about them, and they expect us to tailor the experience for them. In order to keep up with customers, brands must elevate their own standards for what they deliver.

Experience misuse

Customers are gradually getting more comfortable with their data being “out there” in the world. However, they also have growing expectations that the retailer is going to use their data to inform and improve the experience they have with them. Is your brand using customer data to offer people a better experience? If not, rest assured that they’ll be evaluating if your company truly cares about them and deserves their business.

Another part of that experience is whether a customer has the ability to change and delete their data at will. Consumer control should be absolutely central in any conversation about data, and the “right to be forgotten” via user-based permissions should always be available to them.

More than 70% of consumers believe they have little or no control over what companies do with their data (and that number increases when they’re asked about the government’s use of data). By providing customers with more control over their data, you reinforce with them your company’s reputation for conscientiousness and your privacy values.

Demonstrating clear benefits to your customers

Today’s consumers are not saying they’re unwilling to share their data. Rather, they’re likely to indicate, “I want to control who I share my data with and I don’t want to share it with just anybody.” It’s largely about the terms under which they agree to share. Do it right, do it transparently, do it while demonstrating clear benefits to your customers — they’ll reward you in the end.

Marketers should keep these takeaways in mind:

• First-party data – data that companies collect directly from consumers – matters more now than ever
• When brands leverage first-party data, they must be acutely aware of consumer privacy concerns and regulations if they’re to avoid misuse
• Consumers are gradually becoming more comfortable sharing their data in exchange for value and relevant personalized offers
• Brands should take steps to maintain the health and quality of customer data in order to improve their customers’ overall experience