Zero Party Data: The Ultimate Guide for Ecommerce Brands in 2023
The data foundations that ecommerce marketing has been built on are shifting.
Major changes have arrived on shore (and more are sailing in) as Safari, Chrome, and FireFox begin to block or phase out third-party cookie data collecting. In addition to this seismic shift, GDPR and CCPA regulations have doubled down consumer privacy following widespread outcry for digital privacy protections - further threatening the future viability of established third-party data collection methods.
The new safeguards heavily incentivize collecting data using consensual, transparent techniques and discourage third-party collection strategies that fall below this new standard for privacy. That transition, in a nutshell, is called zero-party data.
Now, ecommerce brands around the globe are grappling with this new (to some) data collection method that allows them to provide personalized customer experiences and product recommendations while refining their marketing efforts.
What is Zero-Party Data?
Zero-party data refers to any type of data captured directly from the source - your customers.
First coined by Forrester Research in 2020, zero-party data hinges on the transparent and willing sharing of information between customers and their favorite brands.
Rather than tracking, collecting, and analyzing third-party data hoping to find actionable, relevant information, zero-party data asks customers about their preferences, intentions, and desires directly to fine-tune their customer experiences and marketing strategies.
One of the major benefits of zero-party data is it empowers brands to gather data without relying on soon-to-be-outdated collection strategies. In fact, Gartner predicts that 75% of the world population will have modern privacy regulations protecting their personal data that will make alternative data collection methods more challenging.
The 3 Principles Involved in Zero-Party Data Collection
Zero-party data is based on three simple principles that make ZPD:
- More trustworthy
- More accurate
- More engaging
- More privacy-conscious
- And better suited for the future of ecommerce marketing and sales than any other form of data.
Let’s explore these three principles together,
Transparent Data Collection
More than 90% of consumers say brand transparency plays a role in their purchasing decisions. Zero-party data emphasizes transparent and consensual data collection.
That means when customers share their contact, preference, or buying intention information they’re doing so with complete knowledge that the post-purchase survey, quiz, or loyalty program sign-up form is being used for data collection.
Transparent Data Use
Despite the widespread popularity of digital privacy regulations, 83% of consumers are still willing to share their personal information - with a catch. Now, consumers are only willing to share their personal information in return for perks, programs, and personalization.
This means that brands can simply be upfront with their customers when gathering zero-party data. As long as your customers understand that their responses will be used to improve their experience, product recommendations, and more, they’ll be more than happy to share accurate, actionable data with your brand.
Allowing Customers to Update Their Data
Giving your customers the power to update their data, unsubscribe with ease, and maintain a strong sense of control over the data they share with you is what zero-party data is all about.
Zero-Party vs First-Party vs Second-Party vs Third-Party Data
Now that we’ve covered the basic principles of zero-party data, let’s dive deeper into the differences between first, second, third, and zero-party data.
Understanding the strengths, weaknesses, and collection strategies for each type of data is crucial for brands preparing to pivot ahead of the upcoming third-party cookie ban.
First-party data, much like zero-party data, gathers data streams directly from a brand's customers.
However, unlike zero-party data (which uses transparent collection methods, like surveys) first-party data collection relies on implanting a pixel designed to record the activity, behaviors, and patterns of visitors to your brand’s site, social media, or product pages.
The internal nature of first-party data makes it more reliable than many third-party options. First-party data can also easily integrate new data sets into your sales CRM, making it a strong tool for marketers and ecommerce brands that want to improve their retargeting.
The major drawback of relying on first-party data for marketing and personalization updates is its long timeline. First-party data takes more time to cultivate than other forms of data and requires large data sets for actionable analysis.
While first-party data is data that you've collected directly from your customers, second-party data offers a unique way to expand your reach and gain new insights.
What is Second-Party Data?
Second-party data is information that is obtained directly from a partner, such as a supplier or vendor. Essentially, this type of data is someone else's first-party data that they have agreed to share with you. It can include a variety of data points, such as purchase history, website behavior, and customer preferences.
An Example of Second-Party Data in Ecommerce
Let's say you're an online fashion retailer, and you're looking to expand your offerings by adding a new line of athletic wear. By partnering with a popular fitness equipment supplier, you can gain access to their customer data, including purchase history and browsing behavior related to workout clothing. This second-party data can provide you with valuable insights into what your customers are looking for and help you make more informed decisions about your product offerings.
Where is the Data From?
As previously mentioned, second-party data comes from a trusted partner. This could be a supplier, vendor, or any other business that you have an established relationship with.
How Data Is Collected
The data is collected by the partner and then shared with you directly. This can be done through a variety of methods, such as a secure data-sharing platform or a direct file transfer.
Where is Data Stored?
The data is typically stored in a secure location by the partner, who is responsible for maintaining the privacy and security of the information. Once the data is shared with you, it is your responsibility to ensure that it is stored securely and in compliance with any relevant data privacy laws.
Advantages of Second-Party Data
- Additional customer insights: Second-party data provides additional information about your customers that you may not have been able to gather on your own. This can include demographic and behavioral data, as well as information about customer preferences and interests.
- Cost-effective: Since the data is already collected and ready to use, it can be a cost-effective way to gain new insights and improve your ecommerce efforts.
- Expanded reach: Second-party data can also help you expand your reach by gaining access to new customer segments that you may not have been targeting before.
Disadvantages of Second-Party Data
While there are many benefits to second-party data, there are also some potential drawbacks to consider.
- Trust: Since the data was not collected by your company, it's important to ensure that you trust the partner who is providing the data. Make sure that you have a clear understanding of how the data was collected and that the partner is compliant with all relevant data protection laws.
- Relevance and accuracy: The partner's data may not be as relevant or accurate as your own first-party data. It's important to evaluate the quality of the data before using it to make business decisions.
- Limited control: Since the data is being provided by a partner, you may have limited control over how the data is collected, analyzed, and used. Make sure that you have a clear understanding of the partner's data usage policies before entering into any agreements.
In conclusion, second-party data can be a valuable tool for ecommerce businesses looking to expand their reach and gain new insights into customer behavior. By understanding the basics of second-party data, where it comes from, and how it can be used, you can make more informed decisions and drive greater success in your ecommerce efforts.
Third-party data is data that's collected by specialized companies that aggregate information from different sources. This information is then sold to businesses that need it.
For e-commerce companies third-party data can provide demographic information such as age, gender, and location data that businesses can use to create targeted advertising campaigns.
Where is the Data From?
It can come from various sources, such as public records, surveys, social media, and others. Once collected, data brokers organize and analyze this data to create customer profiles and segments that can be sold to companies.
How Data Is Collected
Data brokers collect data using various methods, including cookies, online tracking, and public records. They then organize and analyze this data to create customer profiles and segments that can be sold to companies.
Where is Data Stored
Third-party data is typically stored in large databases owned by data brokers. By doing so, they create large databases that can contain billions of pieces of data, including personal and sensitive information.
Advantages of Third-Party Data
- Large scale: Third-party data can be much larger in scale than other types of data, making it useful for targeting specific demographics or conducting large-scale marketing campaigns.
- Cost-effective: Acquiring third-party data can be more cost-effective than collecting it yourself, especially for smaller businesses that may not have the resources to collect large amounts of data.
Disadvantages of Third-Party Data
- Not exclusive: Since third-party data is sold to multiple companies, you would not have exclusive rights to this data if you purchased it.
- Compliance issues: There are many compliance issues that could arise from using third-party data, especially with regards to privacy and data protection laws. This could result in legal issues and damage to your company's reputation if not handled properly.
It's important to weigh the advantages and disadvantages of third-party data before deciding whether or not to use it in your marketing strategy.
Zero-party data is the information that consumers intentionally and proactively share with brands. This can be any information that a customer willingly provides such as their preferences, interests, and purchase intentions. Essentially, zero-party data is data that consumers give you directly, without being prompted.
For example, a customer may provide their email address and preferences for email marketing campaigns in exchange for a discount code on their next purchase. In this case, the customer is giving you zero-party data.
Where is the Data From?
Zero-party data is provided directly by customers. This means that there are no middlemen involved in the collection or selling of this data.
How Data Is Collected?
Zero-party data can be collected through various channels such as online surveys, quizzes, preference centers, feedback forms, and more. It’s essential to make the process of collecting zero-party data easy, fun, and engaging for the customer. The customer should feel like they are getting value out of providing you with their information.
Where is Data Stored?
Zero-party data is typically stored in a customer relationship management (CRM) system or a data management platform (DMP). This information is kept separate from any other types of data you may collect, and it’s usually only accessible to a select few members of your team.
Advantages of Zero-Party Data
Zero-party data has several advantages for ecommerce companies:
- Better quality data at your disposal: Since customers provide you with this information, you can be confident in its accuracy.
- Build personalized campaigns: With zero-party data, you can personalize your campaigns to meet your customers' specific needs and preferences.
- Accurate inventory management & forecasting: By having a clear understanding of what your customers are interested in, you can better forecast inventory needs and avoid waste.
- Lower cost per acquisition (CPA) with personalization: With personalized campaigns, you can reach your ideal customers with less effort and cost.
- It’s accurate: Since it’s provided by the customer, you don’t have to question the source. Additionally, it is freely given to your company so there are no concerns about how the data was acquired.
Disadvantages of Zero-Party Data
Despite its advantages, zero-party data also has its downsides:
- The expectation of a value exchange: Some customers expect something in return for giving up their information.
- A disconnect between what customers think and what they truly want: Some customers may provide you with information that they think they want, but it may not reflect their actual preferences.
As privacy concerns grow, customers are becoming more aware of their rights and are looking for businesses that prioritize transparency in data collection. Ecommerce companies, in particular, are realizing that they need to earn customer trust and loyalty by being mindful of how they collect and use data.
Why Is There a Need for Ecommerce Stores to Adopt Zero-Party Data?
With the rise of privacy concerns and the changing landscape of data collection, ecommerce stores must be more mindful than ever of how they collect and use customer data. This is where zero-party data comes in.
Customers' demand for stricter data privacy
Customers today are becoming increasingly concerned about their data privacy. According to a survey conducted by Pew Research Center, 79% of Americans are concerned about the way their data is being used by companies. By adopting zero-party data collection methods, ecommerce stores can show their customers that they value their privacy and are committed to protecting their data.
Better data quality
One of the biggest advantages of zero-party data is that it is provided directly by the customer, which leads to better data quality. By collecting data directly from customers, ecommerce stores can ensure that the data is accurate and up-to-date, leading to more effective marketing and advertising efforts. This can help reduce wasted ad spend and increase conversion rates.
Improved personalization and segmentation
Zero-party data enables ecommerce stores to create more accurate customer profiles and deliver more personalized experiences, leading to increased customer satisfaction and loyalty. By collecting data directly from customers, ecommerce stores can segment customers for more relevant messaging, which can increase the effectiveness of marketing campaigns and reduce ad fatigue. This can also help improve the customer experience and increase the chances of repeat business.
Long-term customer relationships
By using zero-party data to create personalized experiences and build trust with customers, ecommerce stores can foster long-term customer relationships and increase customer loyalty. By collecting data directly from customers, ecommerce stores can show that they value their customers and are committed to providing them with a personalized and engaging experience. This can help increase customer lifetime value and drive long-term growth for ecommerce stores.
What Data Can You Collect?
By directly asking customers for information, you can gain valuable insights that can help you personalize your marketing campaigns, create better customer experiences, and build long-term relationships. Here are some examples of zero-party customer data that you can collect:
- Personal preferences: Zero-party data collection allows you to ask customers directly about their personal preferences, such as favorite colors, styles, or products.
- Purchase intent: Collecting data on customers' future purchase plans can help ecommerce stores anticipate demand for certain products and create marketing campaigns that target customers who are more likely to make a purchase.
- Feedback and reviews: Gathering feedback and reviews from customers can help ecommerce stores improve their products and services. It also demonstrates to potential customers that the company values their opinions.
- Social media behavior: Asking customers about their social media usage can provide valuable insights into channels and even influencers that can help you reach a similar audience. This can help ecommerce stores create more effective social media campaigns and better engage with their audience.
- Demographic information: Collecting demographic information such as age, gender, and location can help ecommerce stores personalize their marketing campaigns and improve their overall customer experience.
These are just a few examples of the types of data that you can collect through zero-party data collection. By asking the right questions and analyzing the data, you can gain valuable insights into your customers' preferences, behaviors, and needs, which can help you build more effective marketing campaigns and create better customer experiences.
How to Collect Zero-Party Data
Zero-party data is voluntarily given by customers, making it more valuable and accurate than other types of data. Now, the question is, how can ecommerce stores collect this type of data?
Adding a Post-Purchase Survey to Your Ecommerce Store
One way to collect zero-party data is through a Shopify post-purchase survey app. You can ask customers about their preferences, interests, and habits. For example, a clothing store can ask their customers about their favorite colors, styles, and clothing sizes. By doing so, you can create a more personalized experience and improve customer satisfaction.
Hosting Contests and Giveaways
Another way to collect zero-party data is through contests and giveaways. You can ask customers to provide their email addresses, names, and other relevant information in exchange for a chance to win a prize. This strategy can increase customer engagement and help you collect valuable customer information.
Allowing Customers to Manage Their Preferences
Preference centers are another great way to collect zero-party data. These are dedicated pages that allow customers to manage their communication preferences and provide information about their interests and preferences. By creating a preference center, you can collect valuable customer information and improve the effectiveness of your marketing campaigns.
Each method has its advantages and disadvantages, and the key is to find the right balance between collecting valuable customer information and respecting their privacy. By collecting zero-party data ethically and transparently, you can improve the effectiveness of your marketing efforts and build stronger relationships with your customers.
Where Should You Store Zero-Party Data?
When it comes to storing zero-party data, the best approach is to keep it in-house on your own servers.
Storing zero-party data on third-party servers can pose a risk to data privacy, as these servers could be accessed by outside parties. By storing the data in-house, you have complete control over who has access to it and can ensure that it is protected by strong security measures such as firewalls and encryption.
It's also important to regularly backup your zero-party data to ensure that it can be easily restored in the event of a server failure or other issue. By taking the necessary steps to store zero-party data securely, you can maintain the trust of your customers and protect their privacy.
6 Use Cases for Zero-Party Data & How to Interpret Results
Now that you have a good understanding of what zero-party data is, how to collect it, and where to store it, you may be wondering what to do with all of this valuable information. In this section, we'll explore some of the ways you can analyze survey responses and use zero-party data to personalize your customers' experiences and drive engagement.
Personalized Product Suggestions
One of the most effective ways to use zero-party data is to personalize product suggestions. By collecting information about a customer's preferences, interests, and behaviors, ecommerce stores can create targeted product recommendations that are more likely to resonate with customers. For example, if a customer has previously purchased products related to fitness, an ecommerce store could suggest similar items or accessories to complement their existing purchases. To interpret the results, you can track the click-through rates and purchase rates for each product suggestion, and adjust your recommendations accordingly.
Another way to use zero-party data is to personalize newsletters. By collecting information about a customer's interests and preferences, ecommerce stores can tailor their newsletters to provide content that is more relevant to each individual subscriber. For example, if a customer has previously shown an interest in a particular category of products, you can send them a newsletter that focuses on that category. To interpret the results, you can track the open and click-through rates for each newsletter, and adjust your content accordingly.
Zero-party data can also be used to personalize advertising. By collecting information about a customer's browsing and purchase history, ecommerce stores can create targeted advertising campaigns that are more likely to convert. For example, if a customer has previously browsed a certain category of products but didn't make a purchase, you can show them ads for similar products to encourage them to complete their purchase. To interpret the results, you can track the click-through rates and conversion rates for each ad, and adjust your targeting accordingly.
Ecommerce stores can also use zero-party data to personalize promotions. By collecting information about a customer's preferences and behaviors, stores can create targeted promotions that are more likely to drive engagement and sales. For example, if a customer has previously purchased a particular brand or category of products, you can offer them a discount or promotion on similar items. To interpret the results, you can track the redemption rates and revenue generated by each promotion, and adjust your offers accordingly.
Personalized Loyalty Programs
Zero-party data can also be used to personalize loyalty programs. By collecting information about a customer's purchase history and preferences, ecommerce stores can create loyalty programs that are more tailored to each individual customer. For example, you can offer customers rewards based on their past purchases, or provide exclusive discounts or offers for their favorite products. To interpret the results, you can track the participation rates and revenue generated by each loyalty program, and adjust your rewards accordingly.
By collecting information about a customer's interests and preferences, stores can send targeted messages that are more likely to engage and convert. For example, you can send customers personalized emails or push notifications about products they have previously shown an interest in. To interpret the results, you can track the open and click-through rates for each message, and adjust your messaging accordingly.
3 Examples of How Companies Collect Zero-Party Data
Now that you understand the importance of zero-party data and how to collect it, it's time to see some real-life examples of companies that are doing it right.
Netflix Movie Options Customization
Netflix is a perfect example of a company that uses zero-party data to personalize its service. When you sign up for Netflix, you provide your email address, which is first-party data. However, when you tell Netflix what shows you like and dislike, you're providing zero-party data. This information helps Netflix create a personalized movie and TV show selection for you.
Yelp's Food Preferences Questionnaire
Yelp uses zero-party data to provide personalized restaurant recommendations to its users. When you sign up for Yelp, you provide your zip code, which is first-party data. However, when you fill out a questionnaire about your food preferences, you're providing zero-party data. This information helps Yelp recommend the best vegan food options in your area.
Good American's Post-Purchase Survey
Good American is a clothing brand that uses the Fairing Post-Purchase Survey to collect zero-party data from its customers. After making a purchase, customers receive a survey that asks about their style preferences, fit, and other relevant information. This data is then used to create personalized recommendations for the customer's next purchase. By using this approach, Good American can tailor its products and marketing to its customers' unique preferences and needs.
As you can see, there are many different ways to collect zero-party data. By leveraging this data, companies can create more personalized experiences for their customers, which can lead to increased customer satisfaction and loyalty. So, if you're an ecommerce store owner, it's time to start thinking about how you can collect zero-party data from your customers and use it to improve their shopping experience.
FAQs About Zero-Party Data
How can eCommerce brands benefit from zero-party data?
These insights can then be used to guide and improve product recommendations, personalized customer experiences, and digital marketing campaigns.
Many digital privacy advocates are also hailing zero-party data as a step in the right direction compared to conventional third-party data tracking.
Brands that want to build a trustworthy, customer-focused reputation can earn major brownie points with customers by empowering them to make decisions about their data (a full 80% of consumers feel they have no control over their personal data being collected!)
Can zero-party data be first-party or third-party data?
No, zero-party data cannot be first-party or third-party cookies or data. The strategies and techniques used to capture consumer data dictate whether the data is zero, first, or third-party.
This means data cannot be both zero and third-party because their collection methods are mutually exclusive. And whole first-party and zero-party data marketing can appear extremely similar, they both have fundamental differences that make them stand apart.
How to make sure You're not breaching privacy laws when collecting zero-party data?
It might be easier than you think to make sure you’re not breaching privacy laws when collecting zero-party data. If you follow zero-party data collection best practices, which include encouraging the intentional, transparent, and completely consensual sharing of data you should avoid most potential legal issues.
Is there an app to collect zero-party data for Shopify stores?
Yes, there is an app to collect zero-party data marketing for Shopify stores. Zero-party data marketing pioneers Fairing have released an app designed for plug-and-play zero-party data collection on any Shopify store.
Fairing's post-purchase surveys consistently generate response rates north of 50%, providing brands with invaluable data streams.
How to Start Collecting Zero Party Data for Your Ecommerce Store?
Now, it's time to take action and start collecting zero-party data for your own ecommerce store. One easy way to do this is by using Fairing's post-purchase survey. With our tool, you can quickly and easily collect valuable insights from your customers and use them to improve their shopping experience.
Start unlocking the full potential of zero-party data for your ecommerce store today with a free trial of Fairing's post-purchase survey. Visit our free trial page to get started.