Abstract
- Focus on first party. 75% of marketers still rely on third-party cookies, highlighting the need for a strategy based on first-party data.
- Change is inevitable. Nine in 10 marketers agree that first-party data is important, yet many don’t have a company-wide strategy for its use.
- Personalization pays off. Brands using first-party data have seen a 2.9x increase in revenue and a 1.5x decrease in costs, clearly proving its effectiveness.
Editor's note: This article was updated on May 30, 2024 to include new data and information.
While the removal of third-party cookies is undoubtedly a step forward when it comes to data privacy, it also raises concerns for marketing and advertising teams, as research from Adobe shows that 75% of marketers worldwide still rely heavily on third-party cookies to reach their target audiences.
Marketers know that the move away from third-party cookies is inevitable, with 9 in 10 marketers surveyed saying that first-party data is more important than ever. But this approach needs to be adjusted, as leveraging first-party data for marketing requires a company-wide strategy that not all companies have in place.
In this article, we'll take a deep dive into the fundamentals of first-party data, explain its benefits and challenges, and discuss the most effective ways brands can use first-party data for marketing. With real-world examples, we'll learn how first-party data is transforming marketing and highlight the importance of first-party data collection for the modern marketer.
What is first-party data?
If you're wondering what first-party data is in marketing, it's any information collected directly from your audience through their interactions with your brand. First-party data means it's collected directly from your customers, ensuring it's authentic and relevant.
First-party data is collected from customers, site visitors, and social media followers with their permission. First-party data is like getting information directly from your friends, while third-party cookie data is like someone telling you about someone you don't know.
“A company's proprietary data about the actual behavior of its customers and prospects remains the most competitive element in a marketer's arsenal,” says Jim Stern, marketing consultant, author, speaker, and founder of the Marketing Analytics Summit.
For those new to a personalized marketing strategy, learning how to collect first-party data effectively is the first step to realizing its full potential.
Collecting first-party data can take many forms, such as using web analytics tools to track user behavior on your website or deploying customer feedback forms to gather clear insights, making the data collected relevant and actionable, providing a strong foundation for strategic decision-making.
Other sources of first-party data include:
- Your activity across websites, mobile apps and products
- CRM Demographic Data
- Social media comments, likes and shares
- Email and Newsletter Subscribers
- Survey data
- Customer purchase history (products purchased, subscriptions, length of time as a customer)
- Call Center Records
Related article: First-Party Data: Creative Use for Cross-Channel Identification
First-party data: benefits and use cases
To maximize ROI, marketers are increasingly turning to first-party data advertising to target their campaigns more effectively.
First-party data allows you to customize your marketing campaigns based on information revealed directly by your audience, rather than relying on second- or third-party data or even guesswork.
For example, your website traffic data will show you which product pages are the most popular. You can add more features and content to these pages to drive even more engagement. According to a study by Think With Google and Boston Consulting Group, brands that use first-party data for marketing see 2.9x increased revenue and 1.5x increased cost savings.
Benefits include:
- Increase the relevance of your marketing messages: Messages based on first-party data are more likely to resonate with customers because they are crafted based on actual observed behaviors and preferences. As a result, businesses can use first-party data to more meaningfully engage with customers and increase loyalty — making personalization more effective and impactful.
- More efficient budget allocation: With accurate data, businesses can allocate their marketing budgets more effectively and focus resources on the strategies and channels that will deliver the highest returns.
- Increase customer loyalty and retention: Leverage your first-party data to deliver personalized interactions and offers that drive deeper customer relationships and loyalty.
However, even the most valuable first-party data is useful if you know how to organize it (more on that below). But once your first-party data is organized enough to be actionable, the tangible benefits are:
Precise segmentation and ad targeting
The importance of first-party data collection goes beyond basic marketing, it also impacts how businesses anticipate and meet their customers' needs. Because first-party data is reliable, marketers can confidently segment customers and prospects into groups, create highly accurate customer profiles, and then run targeted campaigns based on their likelihood to purchase.
For example, marketers can segment audiences based on specific behaviors, such as past purchase history or engagement with specific content, resulting in more personalized and effective advertising campaigns. Such targeted efforts often result in higher conversion rates and more efficient use of marketing budgets.
Use case: Amazon
After analyzing customers' purchase history and product searches and browsing, Amazon categorizes users into different groups based on their preferences. Amazon advertisers can target their ads to specific segments to ensure that their products are shown to users who are most likely to be interested.
Personalized messaging and content
Marketers use first-party data to personalize messages, offers and content based on specific individual behavior, making users more likely to engage and convert.
According to a McKinsey study, consumers really like this approach: 70% of consumers currently expect brands to personalize ads and product recommendations, and 76% are frustrated when this doesn't happen.
Use case: Spotify
Spotify uses first-party data collected from users' listening habits to recommend music and create personalized playlists. By analyzing the genres, artists, and songs that users love, Spotify can improve the user experience and help brands that want to reach music fans (and now podcast fans) with targeted advertising.
Customer trust and loyalty
When consumers know that a brand is handling their data responsibly and using it to offer personalized rewards and incentives, it builds a foundation of trust.
Use case: Starbucks
Starbucks uses first-party data for its loyalty program, My Starbucks Rewards. The coffee giant uses data about food and beverage preferences and purchase history to personalize rewards, like a free drink on your birthday or promotions and recommendations based on past orders.
Related article: Leverage first-party data to build trusted relationships with your customers
The challenge with first-party data
While there are benefits to basing your marketing and advertising on first-party data, challenges remain when it comes to integrating data and complying with privacy regulations.
Unify and organize your first-party data
Most businesses collect first-party data using systems such as marketing automation, customer support, web and mobile app analytics, CRM, HR (human resources), and POS (point of sale).
Using first-party audience data is essential to improving your marketing tactics and strategies, but getting it right can be tricky. The biggest challenge in developing a first-party data strategy is bringing all of that siloed data together to create a complete view of your customer.
For example, if a customer's purchasing data is stored in one system and their browsing behavior in another, it is difficult to effectively suggest complementary products.
Centralizing first-party data presents challenges because it requires collaboration between marketing, sales, customer support, and data science teams.
“Most of the teams using third-party cookie solutions are in-house marketing and advertising teams, or their agencies, and these teams don't work with sales, service or commerce teams,” said David Chang, managing director at Deloitte Digital.
“First-party data means that advertising teams can no longer work in isolation and must build relationships with other teams to build rich, reliable first-party data sets.”
How it all fits together
First-party data activation involves not only collecting and unifying this data, but also making it available in real time for dynamic marketing campaigns, which can require sophisticated technology platforms and processes that can rapidly interpret and act on data insights to enhance customer interactions.
A common strategy is to implement a CDP (Customer Data Platform) that uses APIs to ingest data from different systems and bring it into a centralized repository, unifying all data related to the same customer, even if it comes from different systems and in different formats.
Marketers have complete and up-to-date information about each customer and can build personalized marketing campaigns based on it.
AI has proven to be the latest and perhaps most powerful tool for consolidating, organizing, and leveraging first-party data to optimize marketing strategies. By applying advanced machine learning techniques to historical first-party data, AI algorithms can identify patterns, trends, and customer preferences, dramatically increasing the effectiveness of more targeted and personalized marketing campaigns.
Balancing personalization and privacy regulations
There's no doubt that consumers love personalized ads and product recommendations, and first-party data allows brands to create personalized experiences while respecting user privacy, helping to maintain and even grow consumer trust.
But because first-party data can include everything from transaction history and website interactions to customer feedback, the line between personalization and infringement is blurred: if customers feel that a brand knows too much about them, first-party data loses value.
As a result, companies must always obtain explicit consent from users before collecting data and must comply with the EU's General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) in the United States.
With tightening privacy regulations and 81% of customers feeling they have little to no control over the data companies collect about them, the ability to use first-party audience data effectively provides a competitive advantage in creating more targeted and meaningful marketing engagements without violating privacy standards.
“Make friends with your legal team,” says Chan. “Brand trust and data privacy are paramount, so it's paramount to follow the laws and regulations so you can deliver great marketing programs with confidence. It's an investment that will pay off in the long run.”
