According to The Economist, the world’s most valuable resource is no longer oil — it’s data. In today’s hyperconnected world, brands can collect consumer data from every touchpoint. They can also purchase data from a wide array of outside brokers. Marketers, in turn, use these insights to serve consumers highly-targeted ads that are more likely to drive conversions.
Is your organization tapping into its full data potential? Do you have the right combination of data to achieve your marketing objectives? Below, we break down the differences between first-, second-, and third-party data, examine the pros and cons of each, and discuss how the right data mix can help your organization meet its goals.
What Is First-Party Data?
First-party data is data that your organization has collected from your audience. This could include data from CRMs, website visitors, social media followers, email subscribers, surveys, transaction records, and phone calls.
What Are the Benefits of First-Party Data?
Since first-party data is your own raw data, you can choose how it’s collected, stored, managed, and secured. By controlling these parameters, you can ensure its accuracy and integrity.
In addition, first-party data gives you a competitive advantage since your company maintains exclusive ownership of it.
Finally, it’s more relevant than third-party data since it provides data about your existing prospects and customers.
What Are the Drawbacks of First-Party Data?
The only drawback to first-party data is that it can be limited in scope. First-party data can help you retarget your existing prospects and customers with ads, but it doesn’t provide much insight into new audiences that haven’t engaged with you online, in person, or over the phone.
What Is Second-Party Data?
Second-party data is another company’s first-party data put up for sale. The seller collects this data directly from their audience and sells it to your organization, without a middleman.
For example, a local auto parts dealer could reach out to a nearby car dealership that has a significant target audience overlap. The car dealership could then arrange to sell its data to the auto parts dealer at an agreed-upon price.
What Are the Benefits of Second-Party Data?
Second-party data can help you gain more insights on your existing prospects and customers, allowing you to form more complete profiles for targeting.
Also, second-party data gives you insights into audiences outside your own. This gives you a valuable opportunity to expand your marketing reach and target new consumers.
Since you’re going directly through a trusted partner and not a third-party data broker, you’ll still have the competitive advantage of being one of the few organizations with access to this data.
What Are the Drawbacks of Second-Party Data?
Companies using second-party data can face migration or integration issues. Every company is unique in how it collects, stores, and manages its data, and it can be difficult to combine data from an outside organization with different standards than your own.
Second-party data can also be limited in availability. Finding organizations willing to trust you with their data can be a challenge, especially in the wake of the Cambridge Analytica scandal, and in light of new internet privacy regulations like GDPR and The California Consumer Privacy Act.
What Is Third-Party Data?
Third-party data is purchased from an outside broker that did not play a role in collecting the data. Third-party data brokers often aggregate large-scale datasets from a variety of websites to create comprehensive consumer profiles. Acxiom, Experian, and Quantium are among the largest and most commonly-used third-party data brokers.
What Are the Benefits of Third-Party Data?
Third-party data is readily available and provides a breadth of insights that cannot be matched by any individual organization.
Third-party data can help you build upon the profiles of your existing prospects and customers and gain intelligence on new audiences outside your own.
The data is often already distilled into audience segments, eliminating your need to sort and analyze it.
What Are the Drawbacks of Third-Party Data?
There primary drawback to third-party data is that its use is often restricted by data privacy laws and the methods used to collect it don’t align with consumers' increasing expectations for privacy. This is particularly true when it comes to third-party browser tracking cookies. Since most browsers now block them by default, even if their use is not restricted by privacy regulations, they’re not of much use now, anyway.
Additionally, there is no transparency into how third-party data has been collected. This can lead to several issues, including:
- Parts of the dataset may be low-quality
- The data may have been poorly aggregated
- You may face difficulties integrating it with your existing data
- Using it may put you at risk of breaching data privacy regulations
In addition, third-party data is not unique — your competitors are free to purchase the same datasets from the broker.
What Type of Data Does My Marketing Team Need?
Organizations’ data needs differ depending on their industry, their marketing objectives, and the tech stack they have in place. However, as an increasing number of data privacy regulations go into effect, we’re seeing a concerted shift in how marketers use data. Rather than relying on third-party brokers who may be breaching data regulations, marketers are tapping into more of their first-party data. In fact, a recent survey found that 82% of marketers plan to increase their use of first-party data.
If you’re planning on tapping into more of your organization’s first-party data, don’t forget about this often-overlooked source of insights: consumer phone calls. In 2019, digital ads alone will drive over 162 billion calls to businesses.
On inbound calls, consumers are literally telling you in their own voice a wealth of first-party data on their intent, their product/service interests, sentiments about your brand, and more that you could use to make smarter marketing decisions. When you turn phone conversations into structured first-party data with Invoca, you can optimize your marketing across channels to drive more high-value sales calls, deliver more personalized online and offline experiences, and convert more callers to customers.