What is First-Party Data & Why Do Organizations Collect?

No matter where you are, data is all around you and powers everything you do. Estimates suggest that a whopping 25,000 petabytes of data are created every day. By 2025, the amount of data generated daily is expected to reach 463 exabytes globally.

With data being generated at an exponential rate, businesses are increasingly focusing on how to curate and profit from that data to survive in the market, innovate, and increase the profitability of their goods and services.

With technology and digital devices becoming mainstream, the term "data" has been used to describe information that is collected, processed, stored, and shared by computers. In the digital realm, marketers gather first-party data to understand their customers better. So, what is first-party data?

What is First Party Data?

The information businesses own and obtain through myriad digital channels is first-party data, also called 1P data. First-party data refers to all information about customers that comes directly from both online and offline sources, including:

• Company's website
• App behavior
• Surveys
• Social media platforms
• Customer relationship management
• Email and newsletter subscription
• Lead generation campaigns
• Time spent on site
• Customer feedback
• Online chat
• Sales conversations

Why Do Organizations Collect First-Party Data?

Since first-party data is the most reliable source for customer information, it enables organizations to develop highly personalized content, advertising, and experiences tailored to specific individuals (i.e., what customers are interested in, what problems they are facing, what their needs and preferences are, etc.).

First party data enables organizations to monitor users’ behavior on a website or app and the subjects they find interesting (for example, what items they like). An individual’s IP address, preferred language, timestamps, and visited URLs are also considered first-party data.

All of this data is gathered by online businesses and stored in a database (preferably the customer relationship management system) to build a reliable data bank of visitors and their preferences. This helps the organization to develop a unique, reliable profile of an individual over time so that their marketing activities and channels can target the individual with relevant content at different touchpoints accordingly.

How Do Businesses Use First-Party Data?

It's one thing to have first-party data and a completely different thing to be able to use that first-party data to its maximum potential. There are numerous possible avenues where businesses may leverage first-party data. This can be in the form of analytical insights that give the organization a better understanding of its customers' behavioral patterns, preferences, and purchase psychology.

Additionally, this data can be used to tailor marketing content. Not only content but organizations can effectively determine which channels promise the best way to reach their desired audience, simultaneously making their marketing operations more effective and efficient.

Some may argue that this can also be done with third-party data. However, as mentioned earlier, first-party data comes straight from the organization's main customer pool. These individuals know the organization, leading to their data being of higher value owing to the likelihood of actionable insights being drawn from it.

Benefits of First-Party Data

First-party data provides excellent insights into an organization’s audience because it belongs solely to the organization unless they share it with others. When businesses have a complete understanding of their consumers' preferences and actions, it gives them an added advantage over competitors, such as:

• Personalization and Integration
• Target the right customers
• Accuracy and control
• Strengthen customer relationships
• Compliance with privacy laws
• Transparency
• Lower cost

Enables Accuracy and Control

First-party data provides reliable insights and provides organizations added control to process data accurately for targeted, customized campaigns. Since businesses get their data straight from customers who visit their websites, it is also more accurate than information from other sources.

As data gets accumulated from various customer-facing touchpoints, marketers can create distinctive brand experiences tailored to specific interests, tastes, locations, purchase histories, etc.

Builds Trust

By accurately targeting and offering customers a personalized user experience, organizations can build a long-lasting relationship with the customer and ensure they comply with local and international data privacy laws by only obtaining information the customer has willingly consented to provide.

Ensures Compliance

Organizations must be transparent about their data collection, processing, storage, and sharing activities to ensure business continuity, improve brand reputation, and avoid penalties for noncompliance. This enables organizations to target their exact narrowed-down audience with high-quality data insights without incurring added costs.

Difference Between First-Party, Second-Party, & Third-Party Data

First-Party Data

At its core, first-party data is any form of data or information that an organization collects on its users. This can be via offline or online sources such as the organization's website, app, social media, surveys, or CRM.

Such data can include but is not limited to:

• Demographic details;
• Interests;
• Purchase history;
• Time spent on a particular page on a website;
• Visited pages on a website.

Since the organization collects such data on its users, it has tremendous potential and value as it can be used to create better-personalized experiences for users based on their individual interests and preferences.

As explained earlier, first-party data is collected directly via the interactions users have the organization’s app or website. These interactions include consent to receiving marketing emails or additional signup options such as Facebook or Gmail account logins.

Second-Party Data

Second-party data is reasonably easy to understand. It is the first-party data of another organization. Owing to strategic partnerships, agreements, and consent from the users themselves, organizations may choose to share their first-party data with other organizations.

Often, such second-party data is leveraged from other organizations whose users may strongly correlate with an organization's own users, such as a fast food organization partnering up with a food delivery organization to understand how users use the second service to buy their products.

In other words, second-party data is first-party data that belongs to another organization. Such data is shared between organizations as part of any contractual agreement they may have with one another.

Third-Party Data

Third-party data is by far the most readily available data organizations can leverage. More importantly, this category's data scale can be ten-fold or even higher than first-party or second-party data. Essentially, third-party data includes all forms of data, such as their interests, demographics, smartphone model, location, browsing patterns, and purchases.

Most third-party data is collected from data vendors, data marketplaces, and data-as-a-service (DaaS) organizations.

Third-party data has distinct benefits as it lets marketers know which websites their users frequently visit and which ads get the most attention. This can give rare insights into which products will likely yield the best conversions.

The possibilities with third-party data are endless owing to the sheer volume and variety of data that it promises.

Use Cases of First-Party Data with Examples

First-party data carries tremendous benefits. It can be leveraged to deliver insights that can be viral in improving an organization's overall marketing efforts. Some of these ways include:

Precision Marketing

First-party data allows organizations to become as efficient as possible with their marketing efforts. Doing so not only carries the apparent benefit of saving organizations thousands if not millions of dollars in needless expenses on efforts that do not carry the sufficient promise of success but also more accurately identifies how their users behave and react to their marketing efforts across various devices and channels.

As a result, organizations can ensure their marketing efforts are more relevant and tailored to deliver the best ROI.

Personalized Customer Journeys

One of the first-party data's most important benefits is its effectiveness in helping organizations map their customers' journey across the board by discovering various steps a user may take before, during, and after their purchase.

These insights can be leveraged to ensure the user is shown the right message at precisely the right time, place, and manner to increase their chances of conversion.

Omnichannel Measurement

With so much interconnectivity, users are more empowered than ever before. However, for organizations themselves, this can cause issues in terms of measuring their users' overall journey since a user may view the product on one device, add it to their cart on another, and finally choose to checkout on another.

First-party data allows organizations to consolidate the entire omnichannel user journey and measure it both accurately and wholly to aid their strategies leading to better chances of success and conversions.

Relevant Intelligence

Business Intelligence has become an increasingly important tool for organizations. It has evolved from being a support unit into a functional requirement. Effective business intelligence can give organizations a competitive advantage over their direct rivals.

First-party data ensures organizations have the most relevant and accurate information for their messaging and customer experience curation. The better an organization understands its users, the better they'll be able to create customized experiences per their specific purchase patterns, preferences, location, etc.

First-Party Data Amidst Data Privacy Laws Era

First-party data can be gathered without additional cost, and the organization that holds the data obtains this information with the customer’s consent, which is crucial in the age of privacy laws, such as the European Union’s General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA).

First-party data is the easiest data to utilize and demonstrate consent since organizations can explain when and how consumers agreed to have their data collected. Like the GDPR, the CCPA demands that businesses demonstrate that their data collection practices are lawful and transparent. This is made simpler and more visible by using first-party data.

Some data protection laws, like the GDPR, require opt-in consent. It means that GDPR-regulated businesses must first obtain the consent of the users for data collection and processing. More importantly, the updated European Data Protection Board (EDPD) guidelines restrict businesses from using pre-ticked boxes since it is not a valid method to obtain consent.

Some other data privacy laws, such as the CCPA or CPRA, require opt-out consent. Opt-out consent means that businesses can collect data by default, but they must provide visitors with a mechanism to opt-out of data collection, such as by providing an opt-out button at the footer of their website.

Learn more about opt-in consent vs. opt-out consent.

First-party data is one of the most important types of data. Thus, every business should consider gathering it and leveraging it. More importantly, first-party data is now even more critical for businesses as Google declared that third-party cookies would gradually be removed from Chrome browsers by 2022 (delayed to 2024).

Concerns about data security and privacy rank among the principal obstacles marketing faces when trying to improve the effectiveness of advertising. Business and financial hazards emerge with improper handling of user data. When these laws are broken, there are serious repercussions. For instance, fines under the GDPR alone can reach 20 million euros, or 4% of your annual revenue (whichever is higher).

First-party data makes it simpler for businesses to adhere to requirements as users typically consent to the processing of their data when they proceed to browse websites and apps or make transactions.

How is First-Party Data Collected?

Most websites collect data on their users. Any data collected on their own website or app on a PC, mobile, tablet device is considered first-party data. In most cases, this data is collected via the use of cookies. These cookies are smartly designed pieces of code that collect information about each visiting user, such as the language the access the website, the device they use, their region, what OS they have installed, their phone number, IP address, etc.

While data regulations put certain obligations on organizations when collecting this data, any organization can continue to collect it as long as they have the users’ informed consent. This data can then be used to personalize a user’s experience on the site or the app and improve their experience.

Challenges Using First-Party Data

However, first-party data carries its own unique challenges. More often than not, appropriately identifying and prioritizing these challenges is the first step toward leveraging the maximum potential from this data. Some of the most obvious challenges posed by using first-party data include the following:

Data Quality

Data is one of those specific assets where quality matters much more than quantity. This assertion is backed up by IDC Market Research and Gartner's research, which indicate organizations potentially lose 20-30% of their annual revenue due to ineffective data management. Loses that end up costing organizations millions.

This is because, owing to how data is managed internally by an organization, specifically the various units or departments, the collected first-party data may develop discrepancies.
A typical example is the customer data from the sign-up section to the billing systems.

Inefficient management usually compromises the data, and as a result, the customer may not be billed. Imagine that on a scale of thousands of customers or millions.

Data Silos

Organizations need to understand the true extent of this particular challenge. Due to various business units working within an organization and the thousands of interconnected systems, data silos are bound to prop up.

These silos then hinder an organization's ability to drive maximum efficient value and insights from this data as each unit works on its distinct understanding of data. A "single source-of-truth" or centralized data source is the only way to create an ecosystem that can cater to these units' distinct needs without compromising their ability to achieve their goals.

Limited Scale

As a result of stricter data privacy regulations being drafted globally, most organizations may no longer be able to rely on the endless streams of data from multiple sources as before. In such a future, first-party data represents an organization's best chance to assess the best strategies to cater to its customers.

However, it will bring challenges, such as the limit in scale. As mentioned earlier, most modern attribution models rely on excessive data inputs. First-party data brings a significant cap on the scale of data being collected that will require organizations to rethink how they curate customer experiences online and how they evaluate the insights gained from this data.

Cost

Yes, first-party data is an invaluable resource. However, there's a flip side to that coin. Appropriately using and leveraging this resource requires the right technology, processes, and personnel. Technology, processes, and personnel will require a tremendous commitment in terms of resources.

This is one of those problems that may not similarly affect each company owing to a gulf in the resources they can spend on the requirements necessary to leverage first-party data. A multi-billion dollar conglomerate may not have that problem compared to a start-up.
However, organizations that need to consider the potential costs in a slightly more delicate manner must understand that maximizing first-party data is costly, both in terms of time required and resources spent.

What is Zero Party Data, and How is it Different from First-Party Data?

Understanding Zero party data can be complicated owing to just how recent the term is and the slight similarities it may share with first-party data. However, there is a difference, and understanding that difference is critical for organizations hoping for regulatory compliance.
In short, zero-party data is the data that a customer freely and often proactively shares with a website. This can include their preferences or how they wish their interaction with the website to be like.

For example, a customer responding to a question on how often they would like to receive marketing information in their emails or what kind of content they would like to see most. Various websites, be it e-commerce sites or social media usually present customers with such choices immediately after they sign up.

The answers to these questions constitute zero-party data and are used almost exclusively to personalize a user's experience on a particular site right from the start.

Global privacy regulations have created a situation where organizations must proactively approach consent from their users at different phases of their user journey. Appropriate use and collection of zero-party data can help lay a foundation for regulatory-compliant data processing.

Unlike other forms of data, zero-party data is accurate beyond any measurable doubt since its only origin is the user. The simple nature of the data collected, a simple yes or no, makes it easier to use without requiring additional context.

Automate First Party Consent Preferences with Securiti Privacy Center

Making sure data responsibilities are properly carried out can be a time-consuming and labor-intensive task. Automation is, therefore, not only the most effective means to ensure first-party data consent but also the most efficient.

When it comes to offering autonomous business solutions for data privacy, security, governance, and compliance, Securiti has established itself as a revolutionary and a front-runner. Many renowned and reputable businesses rely on Securiti’s array of privacy-focused solutions to guarantee adherence to data regulations worldwide.

With Securiti’s Privacy Center, businesses can eliminate complexities and seamlessly automate all their key privacy functions, such as privacy notices, cookie management, consent preferences, Do Not Sell and Do Not Track signals, and individual privacy rights.

By automating first-party consent preferences, businesses can provide personalized preference experiences to their users and, thus, increase opt-in rates significantly.

Organizations of all sizes can capture and manage real-time consent activity by creating specialized ways to collect consent from various sources, such as websites, online forms, SaaS applications, and consent databases.

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Additionally, intuitive dashboards help visualize consent at the visitor and organizational levels for sheer transparency. Organizations can also record consent information from each location where data is collected, together with the timestamp, the policy, and the source.

The tool enables organizations to organize consent processes at a large scale and increase customer trust throughout the relationship. For a great user experience, rapidly capture queries, honor consent settings, and utilize a streamlined, guided approach to manage consent revocation and automatically preserve a consent compliance audit trail.

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