Trust, transparency and ROI: the benefits of zero-party data for business

This article appeared originally on The Drum and was Guest Authored by Permission’s Chief Technology Officer, Hunter Jensen. Click here for the original article.

With the death of the third-party cookie rapidly approaching, businesses are scrambling for more privacy-safe, effective means by which to access consumer data. But first-party data isn’t the only option, writes Permission.io’s Hunter Jensen as part of The Drum’s Data Deep Dive. A new kind of information — zero-party data — could be the answer.

“Personalization and privacy can only co-exist in the future with a zero-party data strategy.” — Scott McNealy, founder at Sun Microsystems

There’s a groundswell of dissatisfaction and distrust of corporate data collection practices. According to data from Pew Research Center, people don’t feel in control of their data. In fact, 79% of Americans question how companies use their data. Firms paying attention to this shift in consumer sentiment need to change their practices to stay in compliance with ongoing global regulatory changes and to stay within their customers’ good graces.

Brands need to move from traditional data collection strategies to receiving zero-party data from the only party that matters: the consumer.

Originally coined by Forrester Research, zero-party data is “… that which a customer intentionally and proactively shares with a brand. It can include preference center data, purchase intentions, personal context and how the individual wants the brand to recognize [them].”

Zero-party data is different from first-party and third-party data in multiple respects. First-party data is data collected via a user’s behaviors and actions, including site navigation, purchase or subscription actions, while third-party data collection occurs through a separate entity. Third-party data comes from information bought or obtained from outside sources. This might include demographics, intention information (someone is in the market for a given product or service) and data from contact centers, CRM platforms and other sources. Third-party cookies track a user’s actions, capture this data and provide it to outside sources. While marketers have relied on third-party data for years, regulatory and consumer pressure have led to Google’s decision to eliminate them in 2023.

In the absence of the cookie, many businesses are aiming to build up their stores of first-party data. But this isn’t the only path forward. Best practices for zero-party data collection ensure a quality customer experience, keep brands within privacy regulations and provide them with actionable insights.

Putting zero-party data collection into action

First assess your current zero-party data model. How does your firm collect this data? Through surveys, preference requests or other methods? Do you gather customer’s goals and stated interests, and are these short or long-term goals? Marketing teams and other departments can determine the most important data points for the particular business and how they can best use that data for optimizing customer journeys.

A next step is leveraging current processes and systems to pull zero-party data and merge it together from disparate sources — and then finding new ways to acquire valuable data through building digital experiences that offer tangible value to the customer. This can be a microsite, survey on Instagram or myriad other ways to acquire a handful of data points in exchange for an upgrade, discount, promotion or an engaging experience. Marketing can conduct A/B testing with different values tied to permissions, whether it’s access to special features, a micro experience or other offer that’s valuable to the brand’s users. Some of this data collection can come through more static means such as quizzes about product features found on a website, or more dynamic delivery through targeted Facebook campaigns. For an example of a simple product quiz, there’s Arm & Hammer’s site that offers a ‘purrsonality’ quiz to learn more about cat owners’ preferences. The quiz prompts an offer suggestion, a coupon and a way to share survey results through social channels. Arm & Hammer clearly marks a product offer opt-in box to stay within compliance and maintain transparency. It’s a solid example of a brand blending humor with clear data collection and tangible benefits for the participating consumer.

Users change their information and preferences over time, whether it’s a new email or that they now like Chinese food instead of Italian. Capturing those changes through zero-party data collection often requires a customer self-service portal. A portal that makes it simple to adjust or remove data at their convenience gives the users a greater sense of control, and provides brands with fresher, more valuable data.

Asking for permission

As leaders in big tech shift to a permission-based model (namely, Apple’s recent implementation of App Tracking Transparency and Adobe’s Real Time Customer Data Platform), we see obtaining consent and zero-party data as core to success in the next area of digital advertising.

Structure a permission-based marketing arrangement so consumers receive rewards for their engagement. Give them ownership over their information when they proactively choose to share (or not share) their information. They deserve compensation for their data sharing because it holds measurable value. Companies can no longer buy and sell valuable personal information for targeted advertising without some form of compensation.

To collect zero-party data, add value-exchange ads to your marketing strategies. Work with partners to offer extensions to a free trial after they complete a survey or watch a video. Perhaps there’s additional premium content or offers the team can attach to the customer sharing more information. Another possible outlet is value-based ads in mobile gaming, where users eagerly take rewards such as in-game currency in exchange.

Create more opportunities for conversation starters with the customer through website questions for new visitors or quizzes that help customers find the ideal product for their needs. Ask shoppers to customize their clothing fit by providing height, weight, color and style preferences. Introduce customization and personalization to products and services as a way to ask for preferences and then leverage zero-party data. This data informs product offers and also the brand can build tailored profiles for future visits or engagements. When aggregated, use this information to shape marketing budgets or refocus R&D efforts.

Yelp asks users their preferences, including their favorite cuisines, price ranges and other parameters. The firm uses this data to personalize the experience, and users have ‘bought into’ this experience because the data came from their willing participation. According to research from Cheetah Digital, 52% of consumers would share personal data in exchange for product recommendations. They’re savvy enough to understand the trade-off between data sharing and how quickly and seamlessly they can interact with a brand.

Intent is the goal. With zero-party collection practices, create processes that make it easy for customers to intentionally share information. Use clear and transparent language stating you’re collecting data for an express purpose. It’s the best way to build customer trust and acquire clean data. Accenture notes that 83% of surveyed customers are more willing to share data when brands act transparently. When there’s trust, customers might not submit fictitious (XYZYZY@gmail.com) email addresses and instead offer their own primary email or other truthful data, which holds much more value.

Leveraging data for optimal ROI

A caveat for firms asking their customers to offer information is to proceed slowly and ask for additional information over time. Customers might lose interest in a brand if they’re inundated with lengthy surveys and requests early in the customer journey. Brands need to engage with the customers at intervals to encourage sharing of data, while also providing tangible incentives for those actions.

Leveraging best practices for zero-party data collection and permission marketing can put firms at a market advantage and ahead of regulatory requirements. By stating intentions for data usage, brands can build trust, encourage further sharing and reciprocate with meaningful compensation for a user’s willingness to participate.