There’s a new type of data offering brands an opportunity to build trust and loyalty with consumers: zero-party data.
Brands are facing a privacy and personalization paradox. Consumers want to feel heard by brands, but they’re not always comfortable sharing their data with brands. While 49% of consumers say they’re frustrated by receiving irrelevant content and offers, 45% of consumers aren’t comfortable sharing their personal data in exchange for more personalized experiences.
Zero-party data solves this privacy/personalization paradox. Actively asking consumers about their preferences directly helps brands better understand their customers. Delivering the experiences your customers are looking for comes with a major payoff. 91% of consumers say they’re likely to make a repeat purchase from brands that hear their needs.
Is Zero-Party Data Real?
Ever since Forrester first coined the term a few years ago, marketers have debated whether zero-party really exists, or if it’s just another marketing buzzword.
Marketers have historically lumped first-party data and zero-party data together because both types of data are owned by brands and collected directly from consumers. That assumption misses a key distinction that’s becoming even more important as marketers decrease their overall reliance on third-party data.
What are the differences between zero-party and first-party data?
The distinction between zero-party and first-party data comes down to how it’s collected.
First-party data is information that you as a marketer can collect through your own channels and properties, such as your website, email, and more. You can capture data about what actions consumers have taken on your site and owned channels including the products they browse or messages you send that they open.
First-party data should be an important part of your brand’s data collection and personalization strategy, but your brand also shouldn’t solely rely on it. Why? Because consumers aren’t thinking about what their actions tell brands. First-party data relies on inference and doesn’t give you the full picture of what your audience’s needs and preferences are. But that’s where zero-party data and a robust Customer Data Platform (CDP) like FiO’s Insight Marketing Platform comes in.
Think about the last time you bought an item of clothing online and had to return it. It may be that it was the wrong size, or you weren’t a fan of the color once you saw it in person. If you don’t tell the brand your reasoning directly, they won’t know what didn’t work or be completely sure what to recommend to you in the future.
Putting both first- and zero-party at the center of your marketing strategy and using a comprehensive CDP to both analyze and deploy that intel comes with important benefits:
Direct communication: When shoppers explicitly share their contact information with you, you’re able to communicate directly with them (cutting through the noise). Conversational channels like email, messenger, and SMS are particularly effective when it comes to engaging 1:1 with your shoppers.
Increased accuracy: When you get data directly from your customers, you know your data is accurate. Collecting on-site behavioral data and quiz responses can tell you whether a shopper is interested in a sweater versus shoes. Being able to target your messages with their preferences right off the bat saves you time and money trying to reach the right audience.
Increased loyalty: Shoppers are investing trust in your brand when they share their preferences. Delivering personalized experiences via their preferred channels shows you respect their trust and care about delivering relevant experiences, and helps you build loyalty and grow a more authentic connection with your customers.
Zero-party data isn’t a replacement for first-party data. Both are important parts of a marketing strategy. First-party data gives your brand a foundation for your personalization strategies, while zero-party data opens you up to new opportunities to deliver even more closely personalized experiences.
But if you ask your customer why they returned their item, their response is zero-party data. This type of information comes straight from the consumer. They’re more likely to share their preferences if they believe they’ll get something of value in return, like personalized recommendations or future product improvements.
Zero-party data is all about fair and transparent value exchange
Although consumers are generally cautious about sharing their data, they’re willing to explicitly share their preferences if they feel confident that they’ll immediately get something of value in return like a just-right recommendation or a special offer.
In a recent survey, 86% of consumers said they’ll trade personal and preference data with a brand for early or exclusive access to products and offers. And value doesn’t necessarily have to be tangible. 55% of consumers say they’ll share their data to feel like they’re a part of a brand’s community.
Asking consumers questions directly is a natural and effective way to collect zero-party data. Product-finder quizzes, in particular, are a great example of taking it one step further to save your customers time and help them find exactly what they want (while having some fun along the way.) Gamification is also a fresh, modern way to enhance the customer experience and build customer loyalty in the process.
Conversations naturally lend themselves to zero-party data collection
When you go back and forth in conversation with someone, you expect that what you hear back is going to be relevant to you. And when your subscribers are sending and receiving emails, texts, or direct messages from your brand, they expect that same level of personalization.
This 1:1 exchange defines conversational commerce. When a consumer tells you something via text messaging or through a quiz, they’re expecting follow-up questions or responses, and they’re looking to get something from you—whether that’s a personalized recommendation or more information about a product.
Two-way conversations ultimately drive more engagement, too: 63% of consumers say they’re more likely to engage and respond to interactive, personalized messaging vs. static messaging. As a result, brands are leaning even further into conversational commerce to reframe the entire shopping experience with the goal of creating exceptionally personalized experiences and building lasting relationships with customers.
Conversational commerce in a privacy-centric world
Conversational commerce sits at the intersection of shopping and conversations, and it’s essential for removing friction from the shopping journey. Brands are having conversations with consumers at every step of the customer journey, from answering questions to resolving pain points. But, just as brands can’t rely on the old ways of collecting data or gathering information from their customers, brands can’t rely on the old ways of having 1:1 conversations.
Traditionally, brands have used website-based chatbots to have these conversations. Chatbots, however, often rely on third-party data to get the context they need to answer consumers’ questions. Without a full picture of consumers’ needs and preferences, chatbots aren’t able to deliver the level of personalization and convenience that shoppers expect.
Two-way conversations are meant to happen over text messaging
As marketers rely less on third-party data, they have an opportunity to rethink how they can invest further in their conversational marketing channels. Increasingly, brands are turning to conversational SMS marketing tactics to collect and personalize shoppers’ experiences with zero- and first-party data.
Text message marketing stands out for two core reasons. First, our mobile phone numbers are great identity markers. We usually only have one phone number, and we’ve probably had it forever. And, increasingly, we’re sharing our phone numbers during the discovery and checkout experiences, helping marketers tie behavior and actions to individual consumers. Second, we’re used to having back-and-forth conversations and sharing information over SMS. It feels natural (and more convenient) to answer brands’ questions about our preferences and ask questions of our own via text messaging.
Using two-way text messaging, brands are supplementing AI with real people to have hyper-personalized conversations with subscribers. Brands can automatically start conversations based on zero- and first-party data (including purchase history, loyalty status, on-site behavior, preference selection, and conversational responses), and introduce AI-powered capabilities to have complex conversations in real-time. These interactions are key to bringing shoppers back to your site, building loyalty, and driving repeat purchases.
The gravitational center of customer relationship management is shifting
When given the choice between actively sharing information with brands they trust or having data on their behaviors passively collected, consumers prefer deciding what brands know about them. This proves that while consumers do want to build a trusting relationship with brands, they want be in control of it and not have it used against them or without their permission.
Alongside evolving sentiments on privacy, the ways consumers and brands engage are changing as well. Interactions that have traditionally taken place over email or phone call are starting to take place via SMS, too, pushing marketers to rethink their approach to identity management and first-party data collection.
What does this look like in the real world? When a shopper signs up for updates, emails, or texts, you’re able to add fields to the sign-up units to collect valuable zero-party data like gender, content, and shopping preferences. You can then engage them with relevant content and offers based on their initial responses. As they click on and respond to your messages if you have a comprehensive Customer Data Platform in place like FiO’s Insight Marketing Platform you can build a more robust profile of what they’re most interested in, how often they want to engage with you, what will encourage them to convert, and more. With FiO’s Insight Marketing Platform, if that customer reaches out with a question, you’re able to refer to a single 360-degree profile to get a further hone a better understanding of their needs.
Personalization is a balancing act: you need to make consumers feel heard while also respecting their preferences around privacy. Zero-party data lets consumers remain in control over what information to provide while simultaneously allowing brands to collect and use accurate information. The resulting personalized experiences help brands build loyalty with consumers. And when brands put customer needs first, everyone wins.
At Group FiO, we realize that delving into zero-party data can seem overwhelming and like a huge undertaking, particularly when you’re first starting out. We are here to help! Click here to find out more about how to begin your zero-party data marketing strategy now!