What is Zero-Party Data (and why you need it)

If you’re looking for the short answer, here it is: Zero-Party Data is personal information shared voluntarily, transparently, and directly by its source.

This might sound simple, but there is a lot to unpack here, so read on.

It’s all about Online Privacy

Customers are increasingly concerned about their online privacies. To be precise, around three quarters of north-americans say they are “very concerned” or “extremely concerned” about it. And it’s no wonder, with data breaches and data misuse making frequent appearances on the news.

The public sector, albeit slowly, is responding to this increased demand for online privacy regulations in several countries. The European Union’s General Data Protection Regulation (GDPR) is a prime example, and there are many others around the world.

Meanwhile, tech companies are constantly rolling out new security measures with each product update. The global data privacy software industry moved around U$ 1.12 billion in 2020, and projections point towards a U$ 17.7 billion market by 2028.

As you can see, data is a big deal. Why is that?

Why is everyone so obsessed with data?

You might have seen the phrase “Data is the new oil”, popularized by a The Economist article from 2017. This is a poignant analogy not only because it reflects the massive scale of the so-called “Data Economy” but also because, like oil, raw data is pretty much useless unless it is processed.

Processed data is valuable because it produces actionable information that helps companies improve their products, understand their customers better and optimize investments – especially in advertising. Data processing can be as simple as calculating the average value of a list of numbers on a spreadsheet, or as complex as using Artificial Intelligence to make a computer understand language.

Now consider the sheer amount of data being generated every day. It’s difficult to wrap our minds around extremely large numbers, so let’s just say that, in 2020, every human being on Earth has created an average of 1.7 MB of data every second. Google expects to process an average of 6 billion searches per day in 2021. Oil might be a finite resource, but data is pretty close to infinite.

Using the edrone eCRM platform, for example, online stores are able to collect a ton of customer data: which products were viewed, added to cart and purchased, how much was spent and how often, how many customers are new and how many are frequent buyers… the list goes on. By extracting useful insights from this data using Customer Intelligence, these stores are able to sell more to existing customers and consistently find new ones.

As with any other technology, there’s nothing inherently wrong or bad about collecting data. It’s what you do with it that matters.

But not every piece of data is the same. Sometimes it is willingly shared, sometimes it is provided out of necessity, and it can even be extracted from us without our knowledge. It might be used exclusively by the entity we gave it to, or shared with other agents we might not even know about.

Let’s take a brief look at all these different data types to understand what makes Zero-Party Data so special.

First-Party Data

First-party data is information collected and processed by the same entity. For example, when you create an account on a website, you will usually provide personal information such as your name, email address and phone number. This information will be entered into a database owned by that website and will most likely be used to improve your experience (e.g. remembering your preferences so you don’t have to set everything up again) and, of course, to send you marketing messages (e.g. email, SMS).

However, First-Party data is not always transparent. First-party cookies, for example, are used to track your interactions with the website “behind the scenes”. Consciously or not, you allow websites to do that every time you click “accept” on those cookie notices. There’s no denying that they are quite useful, so first-party data collection is not exactly bad – Google even says it is vital to a privacy-first online world –, it’s just not entirely transparent.

Second-Party Data

This is not as well known as the other types, probably because of the ubiquitous first-party and third-party cookies. In a few words, second-party data is first-party data that was transferred or sold by the entity that collected it to another entity. For example, if company A shares their customers’ data with a partner company B (e.g. a sponsor or a marketing agency), that data is first-party to company A, and second-party to company B.

The main difference between second-party and third-party data is that, with second-party data, only two entities are involved: the seller and the buyer. Third-party data is gathered from several different sources and processed by an entity unrelated to the sources of that data.

Third-Party Data

As mentioned above, third-party data is information processed by other entities than the one that collected it. This is the kind of data that draws the most attention from regulators and privacy-oriented users, because there’s no control over how that data will be processed, and by whom. Online ad platforms, especially those that work with retargeting and behavioral targeting ads, have always relied heavily on third-party data, such as information gathered by third-party cookies and data aggregators.

However, these companies are being forced to figure out alternatives, as third-party cookies will be just about extinct by 2022.

Zero-Party Data

Then there is Zero-Party Data. This is a relatively new concept in the digital world, although it has been practiced since time immemorial in traditional retail: it is basically getting customer data straight from the source in a transparent and direct way, free of tracking technologies or intermediaries.

So, if it’s not exactly groundbreaking, why has Zero-Party Data suddenly become so important?

Why you should collect Zero-Party Data

Well, for starters, it’s an incredibly valuable type of data. Yet, it is largely underexplored by most companies.

Why go through all the trouble of sneaking behind your customers’ backs to learn about their interests and behaviors, when they can just tell you? If you ask for it the right way, they’ll even be glad to give you this information, as it will likely result in more personalized experiences and access to better content.

Another crucial advantage of Zero-Party Data is its complete transparency, which not only is seen in a positive light by customers, but also by data privacy regulations such as the GDPR. However, it is worth clarifying that, since we’re still talking about processing personal data, all measures determined by regulations still apply.

So how do we go about collecting it?

How to collect Zero-Party Data

One thing is important to keep in mind right off the bat: the purpose of collecting Zero-Party Data is to improve the user’s experience through personalization, both of content as well as product recommendations.

One way to collect it is when someone subscribes to your newsletter. While they’re filling out a form with their name and email address, why not include some other questions that could help you give them a better experience when interacting with your brand? For example, if you have an online store selling clothes, you could add a gender field on your subscription form which would allow to give that user better content and product recommendations.

You can also collect Zero-Party Data from your content. Interactive quizzes are a perfect way to learn more about your customers’ interests and behaviors while giving them a fun and rewarding experience. This is a possibility not only for your blog, but also on your social media (Instagram Stories has a built-in quiz feature, and this concept could certainly be applied to other platforms as well).

Forms are also a great way to collect Zero-Party Data. Okay, it is an old-school solution to a modern problem, but it just works. The great thing about forms is that you can choose how much information you want to collect, and it can provide a lot of insight not only about individual customers, but about your audience in general. It can be an effective way to gauge demand for new products, and even to learn why your store is performing the way it is.

Another great way to collect Zero-Party Data is allowing your customers to “filter” your product catalog on their first visit to your website. In edrone, this is easily accomplished with the Marketing Machine feature. For example, if you run a games shop, you could show a pop-up to every new visitor asking them to choose what type of game they are more interested in: board games, console games, or PC games? Depending on each user’s answer, your website will morph to show different product recommendations. This is a great example of how Zero-Party Data can not only improve your customer’s experience, but also increase your conversion rates.

Finally, there are the search bars. Most of the time, search bars in online stores are of little help for customers who have some idea of what they are looking for, but are struggling to find it. Just think about it: your customers are typing in exactly what they want in these search bars! That’s why, here at edrone, we believe that search bars are a precious source of online shopping data, and it is the key to the future of online personalization. So much so, that we have recently added a new feature on our Instant ROI Platform: the Search Dashboard.

From behavior-based to search-based personalization

This confidence in the power of search-based personalization has led us to invest strongly in R&D for an AI-powered Autonomous Voice Assistant – AVA.

Voice Commerce will be the next breakthrough in online shopping, and processing natural language search queries will be at its core. Instead of going through endless product categories and filter options, or worse, typing in a few keywords on a search engine in the hopes of finding a specific product, users will be able to ask AVA for what they want:

“Do you have dog diapers that will fit a big male dog?”

“I want to know what’s the status of the order that I placed about two weeks ago.”

“I’m looking for a scooter for kids that is non-electric, it would be nice if it had a handbrake and in white color.”

This will make online shopping as simple as enjoyable as buying something from a brick-and-mortar store, with all the convenience and other advantages of online commerce – one of them being: gathering extremely valuable customer data in a transparent and positive way.

Join us in the Zero-Party Data and Voice Commerce revolution!