Segmenting Customers with First Party Data is the Way of the Future

November 28, 2017

First-party data can give marketers incredible power when it comes to making one-to-one connections with customers using market segmentation. Harnessing it is no easy task, however, technology is helping us to simplify usage and, first party data is quickly becoming the way of the future to digital marketing.

It is critical that all marketers obtain a strong understanding of the benefits, opportunities and hurdles to the incorporation of first party data into a broader digital strategy.

Benefits of first party data include:

1. Removing cookie limitations. The data is highly-focused, and pulls information directly from customers using a company’s website or apps. This also includes valuable enterprise data such as customer relationship, call centre, voice of customer and product data.
2. Ensuring data is specific to a company’s target audience only. It’s also free of any possible privacy issues often associated with the gathering of third-party data.
3. It’s highly-customizable, and enables adjustments for perspectives to be made in real-time.
4.  Proprietary data doesn’t cost anything!

First, Second, and Third-Party Data Compared 

Second-party data is first-party data collected by trusted partners that’s been scrubbed of PII (personally identifiable information) and sold to your organization, or vise-versa. It’s particularly useful to brands without competition looking to share their customer data sets.

A word of warning, though: second-party data can create integration issues and partnership complications because it may be limited compared to available first-party data.

Lastly, third-party data is aggregated from outside sources as a “representative” of your consumer base.The information is pre-packaged for anyone to buy, and is available and wide-reaching. The drawback being, the data isn’t unique, can be overly varied and expensive.

But, third-party data has been proven to  be quite helpful.

A large portion of data used by organizations to target their advertisements is of the third-party variety. In fact, Acuity has partnered with many data companies that provide third-party data to its platform, so there is value in using it. It can provide insights into customers on a broader scope than first-party data on its own. Further, third party data is very simple to activate.

While first-party data may be more powerful, when combined with third-party data to hone in on intended audiences, it can really take off and unlock valuable marketing tools, such as lookalike modelling.

Why Marketers Benefit From Growing Their First-Party Data Sets

An Econsultancy report, The Promise of First-Party Data, reveals some promising statistics related to the value of first-party data:

1. First-party data is the top choice among marketers for success across key metrics, with 74% of respondents saying it provides the strongest customers insights. Sixty-four per cent said it provides the highest increase to customer lifetime value, and almost two-thirds (62%) said it provides the highest lift among data sources. Fewer than 10% reported similar benefits from third-party data.
2. Eighty-one percent of marketers that produced the strongest ROI from data used first-person data regularly compared to 61% using the third-party variety.
3. The strongest performing marketers have a ratio of 1.33:1 for using first-party data compared to third-party data. The ratio changed to 1.27:1(2) for the remaining survey respondents (not top performers), which suggests organizations that struggled to produce data ROI were less likely to have used first-party data regularly compared to third-party data.
4. First-party data collected among high-performers was more varied, and adapts more easily with devices and channels beyond the web: 60% collect data from mobile applications versus 41% of their peers; 61% collect data from email/SMS, versus 47%; and 23% collect data from beacons, versus 8%.

The report also suggests the impact of owned customer information is higher than other categories of data, with more than 65% of marketers believing first-party data provides the best path to true customer understanding.

And the majority of respondents say first-party data is how they will win the battle for customer understanding and engagement. Those with high-return data initiatives are more likely to have plotted a long-term strategy with measurement processes in place.

The report should remind marketers that customer verticals are the most profitable, with the most relevant of all revealed in first-party data. Alternatively, it also shows that successful marketers have deployed a combination of first- and third-party data to deploy powerful tools, such as lookalike modelling, to target potential customers.

For example: a clothing retailer could use first-party data from a member of its loyalty club, such as gender and browsing habits, and use it to target other potential customers with similar interests or demographics. Once the advertiser knows what a customer looks like, they can feed that data to their DSP and target people with similar profiles.

Without building customer segments based on first-party data, the available third-party data isn’t as valuable or targeted as it could be.

If possible, start building up your databases! Valuable first-party data is a marketer’s most effective tool to target customers when possible for the future.