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What is first party data and how to acquire it?

Data AnalyticsData Science

What is First-Party Data?

First-party data is data you collect across your company’s many touchpoints, including customers, followers, subscribers, website visitors, webinar/event attendees, etc.

This first-party data is valuable because A) your business owns the data, and B) it’s raw, reliable information about people interested in your company’s products or content.

Where does first-party data come from?

First-party data comes from any source your business directly owns, including:

Companies often use data visualisation tools like Google Looker Studio or Microsoft Power BI to aggregate data to a central platform for a holistic view of touchpoints and user journeys.

Benefits of capturing first-party data

First-party data is crucial for learning about your customers and their needs. As the data collector and owner, you know this information is reliable and unique to your business. You can send highly relevant, personalised marketing campaigns, increasing the likelihood of conversions.

Businesses use this information for many purposes, for example:

  • Customer lifecycles: how people go from discovering your brand to converting (leads, customers, etc.)

  • Product development: identify gaps for new products and services based on customer interests and behaviour

  • Marketing campaigns: develop more relevant content and marketing campaigns that connect with your audience

  • Optimise sales funnels: identify dropoffs or roadblocks that adversely impact conversions

  • Identify new markets: use demographic and location data to identify opportunities to expand your business

  • Paid ad campaigns: create highly targeted ads based on customer demographics and retarget visitors with ads, email marketing, cart abandonments, etc.

What is Second-Party Data?

Second-party data is collected by a trusted partner, where you know their collection practices and the information’s quality and accuracy. For example, marketing agencies often use second-party data from clients to create campaigns on their behalf. Conversely, the agency might share data they collect with their client.

Where does second-party data come from?

Most second-party data comes from partnerships. Companies usually have to pay for this data, either through a financial transaction or trade agreement. They may commission an agency to collect specific information or purchase existing records.

When collecting second hand data, it’s crucial to know the source and that the supplier followed privacy regulations (GDPR, CCPA, etc.).

Benefits of second-party data

Second-party data is excellent for identifying new trends or building on existing data models. Some examples include:

  • Creating new or adding depth to existing customer personas

  • Creating lookalike audiences for paid ad campaigns

  • Analysing new markets

  • Developing new marketing strategies

  • Creating new products and services

  • Improving business practices based on competitor/market trends

What is Third-Party Data?

Third-party data are mass-collected databases available for sale on the open market. This data comes from organisations that collect databases and tracking information from multiple sources. These sellers may collect this data using various tools and strategies or purchase databases.

This third-party data is available on the open market, meaning it’s not unique. If your competitors use a third-party data strategy, there’s a high likelihood they have the same data.

For example, you might want an audience interested in oat milk in the United States to sell your new oat milk products. So, you purchase data from a data company. This audience may have visited a store selling oat milk, followed oat milk brands on social media, or completed an oat milk-related survey/competition. It’s impossible to know if these people actually buy oat milk.

Where does third-party data come from?

Third-party data can come from multiple sources, and it’s generally impossible to know if the collector followed ethics or complied with legal requirements—i.e., getting consent to capture and share someone’s data.

Popular sources are surveys, questionnaires, competitions, and other sources where people share their names and contact details and consent to share their data with the company’s “marketing partners.” Some companies use more unscrupulous methods like web/email scraping or purchasing stolen databases. 

Third-party cookies are another source of third-party data which marketers primarily use for ad campaigns. For example, you visit an online shoe store, and minutes later, you see ads for the shoes you were viewing from multiple sellers. The first site you visited had a third-party cookie that sold your browsing history on the open market.

Many browsers now block third-party cookies, and companies like Apple allow people to block tracking, so this strategy is less effective nowadays—placing a greater emphasis on nurturing first-party data like remarketing customers, upselling, and building better customer relationships.

Benefits of third-party data

The primary benefit of third-party data is that it’s cheap compared to first-party and second-party data. Companies can purchase large databases with several data points on a specific target audience.

Third-party data also delivers faster results. Companies can market to a massive audience and gain new customers almost immediately.

The major downside with third-party data is that you’re throwing mud at a wall and seeing what sticks. You don’t know the quality of the information you’re working with or if the audience aligns with your target market.

Why First-Party Data Delivers the Highest ROI

According to a Boston Consulting Group (BCG) report, “Digitally mature brands leveraging first-party data in advanced marketing activations were able to achieve 1.5X – 2.9X higher revenue uplift.”

In 2018, sports retailer Spalding recognised that marketing had lost its way with access to so much cheap third-party data. In an interview with Salesforce, Matt Day, Head of Brand Communications, Digital Marketing, and eCommerce at Spalding, had this to say about third-party data, “…what data did is make a lot of things more about clicks and targeting. It made it easy to lose sight of the core of what you’re trying to do, which is connect with people in a meaningful way.”

In 2018, Spalding launched Spalding MVP to collect more first-party data and invest in the brand’s fans and customers resulting in three consecutive years of triple-digit direct-to-consumer growth.

There are many stories similar to Spalding, where brands have developed strategies to build relationships and increase customer lifetime value.

At Metric Labs, we help companies visualise and understand their data to make better data-driven decisions. Contact us to find out how our data experts can help leverage your first-party data to increase revenue.

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