Zero Party Data

The 2024 Ecommerce Brand's Guide to Zero-Party Data

by Bryan Teo

In the rapidly growing landscape of ecommerce, it has never been easier for aspiring business owners to open their own shop. However, this also means that competition is fiercer than ever.

The cut-throat nature of ecommerce has led to one universal result: data is king. From being able to understand customer preferences to crafting personalized experiences, ecommerce data analytics plays a pivotal role in the success of merchants trying to thrive and distinguish themselves in this industry.

This isn’t a new occurrence—data has been treasured and used for decades across all industries. In spite of that, this is still a pertinent topic due to how fast technology and big data in ecommerce is evolving, and the privacy regulations and shifting consumer expectations that follow them.

As such, a new player has emerged—zero-party data.

With all that said, welcome to Fairing’s 2024 Ecommerce Brand’s Guide to Zero-Party Data. Whether you're new to the game or an experienced ecommerce merchant with years of experience, this guide serves to help you understand and learn how to utilize zero-party data confidently.

Throughout this post and in following editions to come, we'll uncover what exactly is zero-party data, its purpose in today’s digital landscape, how you can effectively use all this data at your disposal, and a whole lot more. By the end of this guide, you will have a clear understanding of how this resource could be the key to elevating your business to the next level.

Understanding first, second, and third-party data

If you’ve dabbled with data in ecommerce before, you would have heard of first-party, second-party, and third-party data. They have long been the go-to forms of data that businesses access and utilize, and have been the guiding hand for all their marketing and sales efforts.

Each of the three data types manifest in various forms, and can be used independently or in conjunction with one another, all depending on the individual business needs and resources.

So what exactly are first, second, and third-party data?

Let’s start from third-party data, which is data collected by an external information provider who looks across and compiles information from other sources such as websites or apps, and is then bought by companies to learn more about their audiences. The data can come from various sources, such as public records, surveys, social media, or other platforms, apps and websites. Data brokers collect data using various methods, including cookies, online tracking, and public records. They are then aggregated and “packaged up” in data sets.

The nature of the data belies its inherent flaws. It’s not a direct representation of your actual paying customers, it’s also available to your competitors, and it provides only a very general sense of your customers.

Second-party is data not collected by the business itself but rather received from other businesses. This information is typically procured through brand and business partnerships, where they agree to share a plethora of data to gather consumer insights.

First-party data is defined as data one can collect from their own website, application, or other digital platform, which businesses can analyze to gain a better understanding of their own traffic and performance. First-party data has long been regarded as the ideal form of data, being seen as the most accurate and precise given that businesses are able to see the numbers generated directly on their platforms.

The rise of zero-party data

While first, second, and third-party data have been the main data assets that businesses utilize, as with all things technology, society has been progressing at breakneck speeds and zero-party data is rising in prominence.

One question you might have is, “is it zero-party data or zero party data”? While it doesn’t quite matter in the grand scheme of things, at Fairing we call it zero-party data.

So what is zero-party data? It is information that consumers intentionally and proactively share with brands.

It is a relatively new form that has come as a means to address some of the problems the other forms faced: tightening government and business regulations, privacy concerns, and so on. In fact, Gartner predicts that by 2024, 75% of the world population will have modern privacy regulations protecting their personal data that will make alternative data collection methods more challenging.

It empowers brands to gather data without relying on soon-to-be-outdated collection strategies, and can give insight into personal information such as personal preferences or purchase intentions. The term was first coined by Forrester Research in 2020, and zero-party data hinges on the transparent and willing sharing of information between customers and their favorite brands.

The benefits of zero-party data are aplenty as it gives businesses insights directly from consumers, which means that it provides highly accurate data that you know are reliable. Rather than hoping to find relevant information, zero-party data gives you personalized data that you will need to fine-tune customer experiences and marketing strategies. It also eradicates any worry about the violation of data privacy as consumers compliantly provide these insights.

How you can collect each form of data

Third-party data is big data collected by data brokers or external data providers with no direct relationship with the consumers whose data is being collected. These data brokers organize and analyze this data to create customer profiles and segments or simply sell and license them as large sets of data points, which you can purchase to use for your business means.

Second-party data, as mentioned above, is typically procured through brand and business partnerships. As such, it is vital here to establish two-way relationships with other businesses that would be open to share their data with you. This could include other merchants selling items that complement your products or services, merchants on other platforms, and more.

First-party data is data collected from your own consumers. It can be collected with a variety of tools such as through Urchin Tracking Modules (UTMs) or Pixels, or by analyzing data collected in your Shopify or other ecommerce platform’s store and website.

UTMs are a snippet of text added to the end of a URL to track the metrics and performance of specific digital marketing campaigns, such as influencer marketing campaigns.

Pixels are a 1×1 pixel, invisible graphic used to track user behavior, site conversions, web traffic, and other metrics.

Last but definitely not least, there are many examples of zero-party data collection that can be done in various ways, be it by manually emailing your customers or through zero-party data companies that provide post-purchase surveys. What this does mean is that collecting the emails of your customers is of utmost importance, and to be able to access zero-party data, it must be done properly.

While the abundant amount of information and resources about zero-party data may appear daunting, there are tools that make the process of collecting the data significantly easier. One example would be with Fairing, which not only simplifies the process of collecting insights, but also has features such as an integrated Question Bank that provides a curated list of methodologist-recommended questions that are written based on industry best practices and which are still fully customizable upon adding it to your Question Stream.

How should you plan your zero-party data collection strategy?

You now know more about the different forms of data, how to collect them, and how they can help your business. The next step for you is planning out a data collection strategy to maximize the benefits it can bring to you.

For any strategy, it would be best to first evaluate which forms of data collection suit your business and provide the best return on investment (ROI). Some rely on just one while others implement all 4 in their models, and this all depends on your business.

You can utilize frameworks such as the PROFIT framework to do a detailed breakdown of which options to take regardless of the size of your business, and use this information to form your strategy.

Ultimately, the best practice for any data collection strategy that we recommend is to have a mix of different data sources. Think of these data sources as the ink in any printer—cyan, magenta, yellow, and black. Each ink cartridge only has one color, but a mixture of all ink cartridges helps the printer produce clear, beautiful images in full color.

Mixing and matching different data sources gives you that full picture, but also prevents any dependencies on a single source of data. Dependencies would pose a problem as it means that any errors in the data would impact your entire marketing strategy, and leave you with the inability to cross-check it.

Having a mix would greatly prepare your business with in-depth insights that would allow you to have the clearest picture on your potential growth and growth opportunities.

Stay tuned for the upcoming chapters on zero-party data, where we will go through how you can best utilize a mix of data to unleash what the data holds for your business.

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