Digital MarketingA world without third-party data: The end of personalized marketing?

A world without third-party data: The end of personalized marketing?

How marketers must tap into zero-party data in order to remain competitive in a hyper-personalized market with an increased focus on compliance and forthcoming legislation.

30-second summary:

  • Apple Safari just announced it has blocked all third-party cookies as of March 2020, beating Google Chrome’s announcement that it will phase out third-party cookies by 2022.
  • Data collection and use as we know it is changing rapidly, and it behooves savvy marketers to get ahead of the inevitable restricted access to third-party data and find other ways to get the data they need.
  • Companies still have access to first-party data, which is data collected by a company on its website for its own use. The only restriction here is that the company must follow privacy regulations for ensuring transparency, right to correct, delete, etc.
  • Zero-party data is data that a customer voluntarily and knowingly shares with a company. It might include preferences, intent or interest, or self-classification/identification within a particular group.
  • The key to zero-party data is that the consumer has total control over what information he/she/they gives a brand. It is completely transparent and therefore there is no confusion over permission.
  • A more transparent, helpful approach of asking for information to tailor customer experiences (in a user-friendly, conversational manner) will not only result in more accurate data, but potentially in stronger, more trusting and mutually beneficial relationships with customers.

With advances in automation, AI and machine learning, we have officially entered the age of scalable, 1:1 hyper personalized marketing. Simply put, this means using multiple data sources in real time to deliver engaging experiences to a specific person through the right channel at the right time.

B2B and B2C marketers are keen to figure out how to do hyper personalization successfully because it pays – some experts estimate that online personalization can increase marketing ROI by up to eight times and lift sales by 10% or more.

At the same time, marketers are facing increasing privacy regulations that restrict collection and use of data – the lifeblood of online marketing and advertising.

These regulations particularly affect third-party data, which companies have traditionally relied on to find target audiences for campaigns, as well as fill in information gaps about their own customers in order to deliver more personalized experiences.

In this rapidly changing environment, it is no longer “business as usual” for marketers. We need to start thinking about different approaches to how we collect and use data – including “zero-party” data.

Third-party data restrictions

The data privacy crackdown began with the 2018 EU General Data Protection Regulation (GDPR). GDPR is meant to promote transparency around data use as well as give consumers control over their own data.

Fundamentally, it requires businesses to tell consumers what data is being collected, while at the same time enabling consumers to access, correct, delete whatever information companies store about them.

With additional penalties for noncompliance, companies are feeling the pressure to put more comprehensive data management practices in place.

Although there is yet to be an overarching federal U.S. law, some states have enacted privacy laws since GDPR was introduced, including the California Consumer Protection Act (CCPA).

CCPA’s biggest impact will be on companies that “control” data; that is, collect and use data themselves, or sell data as a core part of their business. It gives consumers the option to delete or opt out of the sale of their data, as well as requirements for unambiguous “do not sell my personal information” links on websites and apps.

Although California, Maine and Nevada are the only states to have passed privacy laws so far, approximately nine other states are currently debating proposed legislation around data privacy.

In addition, internet browsers are independently implementing third-party cookie restrictions to block tracking of users as they browse the internet.

Apple Safari just announced it has blocked all third-party cookies as of March 2020, beating Google Chrome’s announcement that it will phase out third-party cookies by 2022.

Without easy access to third-party data, how will brands glean the information about customers and prospects that they need to stay competitive?

Zero-party data provides critical competitive advantage

Companies still have access to first-party data, which is data collected by a company on its website for its own use. The only restriction here is that the company must follow privacy regulations for ensuring transparency, right to correct, delete, etc.

However, the limitation of behavioral first-party data (e.g., purchase or browsing history) is that it’s still used to infer information, like customer intent and preferences, which leaves a lot of room for misinterpretation.

For example, a man shopping for shoes for his elderly aunt could be targeted for months afterwards with promotions for orthotics he does not actually need.

However, zero-party data or declared data, is positioned to become a rich source of accurate data to fuel hyper personalization efforts.

Zero-party data is data that a customer voluntarily and knowingly shares with a company. It might include preferences, intent or interest, or self-classification/identification within a particular group.

Unlike first-party data, it’s not inferred and therefore more precise, contextual and relevant to that specific person and where they are in their customer journey at that moment of interaction.

The key to zero-party data is that the consumer has total control over what information he/she/they gives a brand. It is completely transparent and therefore there is no confusion over permission.

How do you get zero-party data? You ask for it.

Gartner calls this approach “tailored help.” It’s like an ongoing conversation with someone – asking what they want or need, or for demographic information as they interact with your brand. These direct questions to consumers can be delivered many different ways, including chats, surveys, forms, quizzes, and more.

A new approach to data collection

Why would people want to tell a brand about themselves? There has to be a perception of value or benefit for the consumer. This could include more personalized experiences, recommendations, access to premium content or services, discounts, or rewards.

This practice falls well within current regulation, for example, CCPA allows brands to offer incentives to consumers to obtain permission to collect and use their personal information for specific purposes.

Many consumers seem to be on board. In fact, 83% of consumers say they are willing to share their data to enable a personalized experience.

However, other surveys point to a slight decline in the willingness of consumers to reveal their information to brands, and that “personalized experiences” might not be compelling enough. This makes it all the more critical for companies to provide real value for consumers in the exchange.

The key takeaway is that we’re in the midst of an important shift for marketing right now. Data collection and use as we know it is changing rapidly, and it behooves savvy marketers to get ahead of the inevitable restricted access to third-party data and find other ways to get the data they need.

A more transparent, helpful approach of asking for information to tailor customer experiences (in a user-friendly, conversational manner) will not only result in more accurate data, but potentially in stronger, more trusting and mutually beneficial relationships with customers.

Vivek Lakshman is co-founder and VP Product of Reve Marketing, where he leads product management and operations for this growing company focused on data-driven personalized consumer experiences. Reve Marketing offers Mulch.ai to help companies gather zero-party data, the data that consumers are willing to share with brands they trust.

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