Zero-, First-, Second-, and Third-Party Customer Data: What You Need to Know

Gathering and protecting customer data is paramount to a successful business. Customer data can come in many forms, from personal, demographic, and geographic information to transaction histories, communication preferences and behavioral data, among many more. With so much data from so many sources, it can become difficult to parse accuracy and reliability. Data is of no use to us if we cannot validate and use it.

Which leads us to ask: How do we categorize customer data and what is the difference between zero-, first-, second-, and third-party customer data?

Follow along below to learn about the four main types of customer data and how they are sourced, used, and validated for accuracy.

Zero-Party Data

Zero-party data is information that is intentionally and voluntarily shared with a business. This includes any type of identifying information that is willingly volunteered, such as:

Names
Birthdates
Addresses
Phone numbers
Email addresses

This information can be gathered in many ways, with the most common zero-party data acquisition occurring during the customer sign-up stage.

Forrester Research, which coined the term, defines zero-party data as "… data [in] 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 benefits from high accuracy as it is provided directly from a customer or potential customer with their express consent. If the only data you have is zero-party data, do not be discouraged – you are off to a great start to understanding your customers and providing a personalized and customized experience. Knowing who your customers are is the first step to understanding their habits and preferences.

First-Party Data

First-party data is collected from customer interactions on a business website or app. It sheds light on their behavior as a customer, but it does not necessarily identify or segment them.

This information is shared with permission, often by accepting website cookies or other permissions. It reflects buying behavior, preferences, and other metrics that identify the present and future needs of a customer.

First-party data is instrumental in understanding customer trends and preferences, which can influence campaign and promotion decisions. It is as valuable as zero-party data because it is obtained firsthand and is more accurate than second- and third-party data.

Some examples of first-party data include identifying information, such as:

Names
Birthdates
Addresses
Phone numbers
Email addresses

And going further, first-party data can shed light on:

Behavior on websites, apps, and emails, including what sections and pages users visited and how long they spent on each section or page.
Purchase history, including frequency and average transaction value.
User preferences, including communication, product, and service preferences.
Location data for geographic marketing.
Loyalty program data linking purchase history to programs and tracking earned and burned points.

As such, businesses can use this data to learn more about their customers and make informed decisions on personalized marketing efforts, product or service improvements, and enhanced customer service.

Second-Party Data

Second-party data is gathered by someone else other than the business website or app. Fundamentally, the data is another business’s first-party data. Second-party data is shared from a trusted partner and represents audience insights that can mutually benefit both parties.

Second-party data is central to creating a 360-customer view. This data can streamline the process of identifying and targeting customer needs and interests by offering insights and patterns that were not included in a business's initial search.

Why share second-party data? There are plenty of ways two parties can benefit from sharing, some of which are:

Collaborations or research efforts between two businesses that share a similar target audience and wish to exchange relevant data to obtain a comprehensive view of markets and trends.
Partnerships between businesses in related industries, such as between a retailer and manufacturer.
Affiliate programs between multiple companies that share data to optimize marketing strategies and promotions.

Because second-party data is not gathered by the business using it, it is important to verify its accuracy. This can be achieved by setting extra validation measures and comparing benchmark results to identify inconsistencies or anomalies.

Third-Party Data

Third-party data is collected by someone who has no direct connection or relationship to the user providing the data or the business acquiring it. This data can be gathered from many sources, including:

Data brokers who specialize in collecting and aggregating data from multiple sources.
Market research firms that conduct research and survey about consumer preferences, trends, and habits.
Social media platforms that collect anonymized data for targeted advertising.
Government agencies that share publicly available information.

The accuracy of third-party data depends heavily on how it is sourced, as well as who sourced it. Importantly, it is also available to competitors. Nonetheless, like second-party data, it can be an asset to learn more about customers.

Third-party data can complement business research and zero- and first-party data by informing the metrics that can determine trends and patterns in customer behavior. This is critical to the 360-degree experience, which aggregates data from all sources.

Data Protection

Data is the backbone of your loyalty program, and with data protection laws such as those outlined in the General Data Protection Regulation (GDPR), it is critical to be transparent about what you collect and store.