What Marketers Need to Know About 1st, 2nd, and 3rd-Party Data

min read
What Marketers Need to Know About 1st, 2nd, and 3rd-Party Data

According to The Economist, the world’s most valuable resource is no longer oil — it’s data. In today’s hyperconnected world, brands need to collect consumer data from every touchpoint. 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.

First-Party Data

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, 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. 

It’s also more relevant and accurate than third-party data since it provides data that your existing prospects and customers have willingly given directly to you. 

Finally, increased regulations on tracking cookies — and a growing list of big scary acronyms like GDPR, CCPA, IDFA — are making it harder to capture third-party data. First-party data, on the other hand, complies with all of these new privacy regulations, making it more valuable than ever.

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.

First-Party Data Statistics You Need to Know

  • Marketers Are Doubling Down: 2023 revealed that over 2.5 times more US marketers prioritize first-party data transactions compared to 2019. This surge reflects a growing understanding of the value first-party data holds. (Source: Insider Intelligence)
  • First-Party Data Fuels Growth: According to a recent report, 88% of businesses say that first-party data is more important to their organization than it was two years ago. This underscores the urgency marketers feel to build a strong foundation of first-party data. (Source: VentureBeat)
  • Targeting Strategy Shift: Faced with declining third-party cookie usage (54% exploring alternatives), marketers are prioritizing social media for targeted ads and collecting first-party data directly from customers. Many are also tapping into voice of the customer data from phone conversations to fuel personalization. Additionally, some are investigating Google Topics API as a potential solution. (Source: Hubspot)

Second-Party Data

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, an auto parts chain could reach out to a car dealership or service network 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 similar to 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 internet privacy regulations like GDPR and The California Consumer Privacy Act (CCPA).

Third-Party Data

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?

The 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 Are Data Brokers?

Data brokers are organizations that collect information about potential customers in order to resell it to other interested companies. They filter and organize the data based on who they think particular companies are targeting as a way to streamline the lead gathering process. Data brokers gather typical information like your name, address, date of birth, etc. and, depending on the brokerage, have the capabilities of gathering more sensitive information like your income, purchase patterns, and even your hobbies! 

1st-Party vs 2nd-Party vs 3rd-Party Data Differences

First party data is internal information gathered from your own sources. Demographics you’ve gathered about your own customers, data in your own customer relationship management systems, and customer feedback are all examples of first party data. Since it’s all your own information, its integrity and accuracy all depends on the standards your company establishes and maintains. One negative aspect to consider about first party data is its limited range. There are potential customers in untapped markets that have to be taken into account if your company is looking to grow. 

Second party data is information shared with a trusted partner or purchased from a second party marketplace. While it may not be as reliable as first party data, it can give you insight into the new markets we referred to before.

Third party data is purchased and collected from unknown third party brokers and should be utilized as a last resort. It should be scrutinized more to make sure the information is properly processed, cleansed, and complements your own company. Keep in mind that your competitors have access to the same information so be strategic and be sure you can continue to differentiate yourself if you’re going to follow through and use it.

Bonus: Zero-Party Data

What Is Zero-Party Data?

Zero-party data is information that a consumer willingly provides to a company. This could be from a survey, form fill, social media poll, quiz, or another similar format. In return, the consumer receives a better user experience that is tailored to their needs.

What Are the Benefits of Zero-Party Data?

Collecting zero-party data is a transparent process — the user provides the exact information they’re comfortable disclosing. They don’t feel duped or deceived when you, in turn, use that data to improve their experience. 

Zero-party data is also compliant with all the new privacy regulations that governments are enacting, since the information is willingly provided.

In addition, capturing zero-party data gives you richer customer insights than you can capture from other data sources. You can literally ask consumers the exact questions that will help you to personalize their experiences and more effectively market to them.

What Are the Drawbacks of Zero-Party Data?

Zero-party data can be more difficult to capture than the other forms of data listed above, since it requires effort on the part of the consumer. If you’re asking them for their time, they often expect something in return — promising a better experience is sometimes enough, but consumers may want something more, such as a discount or special offer. 

Another disadvantage is that consumers need to trust your brand before they will give you zero-party data. If you haven’t put in the time to build that trust with the consumer then, regardless of what your incentives are, they won’t disclose any information.

How to Collect Zero-Party Data

Here are some great strategies to collect Zero-Party Data: 

  1. Quizzes or Questionnaires will give you immediate insight to what your customers enjoy, what they don’t, or changes they would like to see. 
  2. Post-Purchase Surveys will provide you data on your customer purchasing experiences, user experiences, or opinions about your products or services.
  3. Contests incentivize your customers or potential customers to participate in exchange for some sort of prize. Make sure what they’re winning is worth their time! 
  4. Account Creation, Subscriptions, or Membership Registrations are all low hanging fruit for collecting information about your customers. At the very least you can collect their first/last names and associated emails when they join. 
  5. Loyalty Programs are another great way to incentivize your current customers to provide their information in exchange for some sort of exclusive offer or discount that other customers wouldn't have access to. 

Marketers Embrace First-Party Data as Privacy Tightens

The winds of change are blowing in the data privacy landscape. Regulations like the CCPA in California and the GDPR in Europe have placed stricter controls on how companies collect and use consumer information. This trend is only expected to accelerate.

One major development that's sending shockwaves through the marketing world is Google's decision to phase out third-party cookie tracking in its Chrome browser, the dominant player in the web browsing market. The move this year will significantly limit the ability of marketers to follow consumers across the internet, piecing together a detailed profile based on their online activity. Previously, this data was a cornerstone of targeted advertising, allowing companies to reach specific demographics with laser focus. However, in the cookieless future, these traditional methods are facing obsolescence.

Companies can no longer afford to rely solely on external data sources. To navigate this evolving landscape and maintain a competitive edge, they need to prioritize collecting first-party data directly from their customers. This valuable information includes email addresses, purchase history, website analytics, preferences gleaned from phone conversations, and any other details a customer willingly shares. By building a robust foundation of first-party data with explicit consent, companies can personalize the customer experience to a deeper level. This means sending targeted promotions based on past purchases, offering content relevant to specific interests, and nurturing relationships that foster loyalty.

First-party data empowers marketers to deliver the right message to the right person at the right time, even as the ability to track users across the web diminishes. In this privacy-focused era, first-party data is not just an option — it's the key to unlocking a successful customer-centric marketing strategy.

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 drove 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 a conversation intelligence platform like 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.

5 Tips to Develop a First-Party Data Strategy

As consumer privacy regulations like CCPA and GDPR gain momentum, and third-party cookies crumble under Google's phase-out plan, traditional tracking methods are losing their grip. However, this shift presents a golden opportunity: a renewed focus on first-party data. By collecting valuable information directly from customers, marketers can build stronger relationships, deliver personalized experiences, and thrive in the privacy-focused future. Here are 5 actionable tips to help your marketing team develop a winning first-party data strategy:

1. Get crystal clear on your goals. Before diving headfirst into data collection, take a step back. What are your specific goals for using first-party data? Is it to personalize email campaigns, deliver targeted ads, or gain deeper customer insights? Having a clear roadmap will guide your data collection efforts and ensure you're gathering the right information.

2. Build trust and transparency. Consumers are increasingly wary of how their data is used. To encourage them to share their information, prioritize building trust and transparency. Clearly communicate what data you're collecting, how you'll use it, and most importantly, offer value in return. This can be exclusive content, discounts, or a more personalized experience on your website or app.

3. Leverage the power of opt-in forms. Don't resort to data-grabbing tactics. Instead, create compelling opt-in forms that incentivize customers to share their information. Highlight the benefits they'll receive, like exclusive offers or early access to new products. Make the opt-in process smooth and seamless, ensuring a positive user experience.

4. Think beyond the website. First-party data isn't limited to your website. Integrate data collection across all touchpoints, from social media interactions to phone conversations to in-store purchases. This holistic approach provides a more complete picture of your audience and their preferences.

5. Invest in the right tools. Managing and analyzing first-party data can be complex. Consider investing in a Customer Data Platform (CDP) or other data management tools to help you centralize and organize your information. This will make it easier to extract valuable insights and put your data to work.

How AutoNation Uses First-Party Data from Phone Conversations to Create Seamless Customer Experiences

With over 300 locations, AutoNation is America’s largest and most admired auto retailer. In an average year, they sell over 500,000 new and pre-owned vehicles and service nearly five million customers. Their mission is to deliver the most customer-focused sales and service environment in automotive retail. AutoNation uses Invoca to capture first-party data from phone calls and create seamless digital-to-call experiences. 

When the COVID-19 pandemic began to take hold in the U.S., the vehicle buyer journey changed dramatically. Buyers were shopping online and placing phone calls to dealerships, rather than visiting brick-and-mortar locations. It became more important than ever for AutoNation to understand each customer’s needs and create a unified omnichannel experience for them. To accomplish this, they used Invoca to capture first-party data from phone conversations. They then combined Invoca’s conversation intelligence data with data from their digital channels to get a 360-degree view of every customer.

“The car buyer journey is different for everyone — some people want safety features and others want performance. Invoca has helped us tap into phone conversations so we can understand each buyer’s unique needs,” said Marc Cannon, Executive Vice President and Chief Customer Experience Officer at AutoNation. “As a result, we can deliver a truly peerless car buying experience.” 

With Invoca, AutoNation sends buyers personalized marketing campaigns touting the type of features they mentioned over the phone. AutoNation also gives its sales agents access to those insights, so they can tailor the conversation to win the sale. This creates a seamless omnichannel experience that makes every customer feel acknowledged and valued.

Invoca’s conversation intelligence platform helped AutoNation not only survive the COVID-19 pandemic, but truly thrive. AutoNation had its best quarter in company history in Q2 of 2021, and the company is poised for future growth as it continues to open new locations and increase its used car inventory.

Additional Reading

Want to learn more about how Invoca can help you tap into first-party data from phone conversations? Check out these resources:

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