Why Zero-Party Data is the New Secret Weapon for Brands
Sep 14, 2022
Editorial Content Writer
7 minutes to read
Customers love personalized promotions — but are increasingly scared of sharing data with third parties. A recent consumer privacy survey by Cisco demonstrates that nearly half of the respondents have switched companies or providers over their data policies or data sharing practices.
A Google survey found similar results, showing 48 percent of people worldwide halted their interaction with a company due to privacy concerns from 2019 to 2020.
With this ‘ick’ factor as a real risk, how do you enable consumers to share their data willingly and voluntarily?
And an effective way to get zero-party data is using loyalty programs.
Successful brands like Ulta Beauty turn zero-party data derived from their loyalty programs into a key success factor – in Ulta’s case 95% of sales are to loyalty members, giving them a competitive edge.
In this blogpost, we will see what zero-party data is, how it’s different from other types of customer data and how loyalty programs help businesses capture valuable zero-party data.
What is zero-party data?
Zero-party data is defined as the information that a customer intentionally and proactively shares with a business.
You can use website forms, polls, and surveys, to collect zero-party data. Most companies, however, try to incentivize the process, offering a reward like a discount code in return for the data they receive from their customers.
One of the most popular pieces of zero-party data among businesses is a valid customer email address which can be used for email marketing purposes. To ensure that you get quality zero-party data (here, a valid email address), you can use something like a double opt-in.
In this method, you rely on the user clicking a confirmation link in their email, to confirm that they are a real person and wish to receive marketing communications. To help improve your conversion rates, you can send an email containing an offer with a coupon code that gets redeemed when your customer confirms their email, or offer loyalty points for confirming their email. Using this method, you verify the validity of your data and at the same time promote your offering.
Such validation checks help you acquire accurate and reliable information that increase your customer engagement and reduce your customer acquisition costs.
Zero-party vs. first-party vs. third-party data
Zaro-party data is sometimes used as a synonym for ‘first-party data.’ However, they’re not technically the same.
Zero-party data is the info that customers voluntarily share with a business. First-party data is the behavioral info that brands track and collect as customers interact with their app, website or social media platforms. Businesses usually use on-site tracking or product analytics to help them determine what engages website/app visitors the most. Such first-party data gives them the ability to provide tailored experiences to customers.
The most important difference between zero-party and first-party data is that the former is more accurate because customers themselves explicitly express their preference. This means every piece of zero-party data is already a customer insight. First-party data, however, needs to be analyzed to deliver customer insights.
Think about it this way — if someone is browsing for a vacuum cleaner, you can serve them more recommendations for vacuum cleaners. But vacuum cleaners are not everyday purchases, you only buy one every few years.
Without the correct analysis, you could be serving ads for vacuum cleaners to someone who just bought a vacuum cleaner and won’t be ready to buy again for 36 months. But if you ask them in a survey, “do you have pets?” or “how big is your house?” you can suggest ancillary or complementary products that will be useful and appreciated by your user.
What zero-party and first-party data have in common is that they are less likely to raise privacy concerns among users. Unlike these two types of data, third-party data gives customers minimal control over their personal data. Third-party data is the information that your business gets from outside sources.
EU’s General Data Protection Regulation (GDPR) as well as other initiatives such as Apple’s iOS privacy updates have nudged marketers toward minimizing their reliance on third-party data.
For example, imagine you want to promote your new product, running shoes, to three customers (A, B and C) using zero-party, first-party and third-party data collection methods respectively.
Customer A completes a quiz about their shoe preferences. They give information that they want running shoes, care about brand names and are highly active. The quiz recommends an Adidas running shoe, gives them a 10% coupon for the recommended shoe and deeplinks the user to the checkout page.
Customer B visits your website, browsing different pages including your running shoes category. You may then track and analyze their browsing behavior to get insights about their preferences and send them relevant recommendations.
Customer C has visited the websites of some gyms and sport clubs. When they want to watch a video on YouTube, your running shoes ad pops up before the video they actually aim to watch.
As this example shows, Customer A has full control over the data they share with you. Customer C, however, may be surprised or even angry to find out that their browning history has been tracked.
Why is zero-party data important?
Although the use of third-party data won’t stop overnight, many businesses have already started to realize the positive impact of zero-party data on creating sustainable interactions with consumers. That’s why Forbes refers to zero-party data as The New Oil.
Zero-party data is gaining popularity among businesses because:
It allows businesses to personalize their offerings and at the same time respect customers’ data privacy concerns.
It is the most accurate type of data as customers explicitly and willingly share it with brands.
Businesses need minimum investment to translate zero-party data into customer insights.
It creates value for both the brand and its customers.
It supercharges a business by increasing its customer retention rate and reducing churn rate.
It enables a business to manage their inventory more efficiently and make more accurate inventory predictions.
It shows a brand is transparent and trustworthy in treating the data of its customers.
How to collect zero-party data
Businesses are finding that the best way to get consumer data is to simply ask for it. The method you use to ask for it, however, defines your success rate. Some of the common ways to collect zero-party data are:
Quizzes: Quizzes usually have a high participation rate.
Post-purchase surveys: You can ask your customers to spend a few minutes answering some questions about their shopping experience.
Games: Using Gamification is a super effective way to encourage costumes to share their data such as their product preferences with you.
Creating an account: This works best when you couple it with a tempting incentive such as a coupon or discount code.
Product recommendation: You can directly ask your customers to help you better serve them by sharing their preferences. This is what baby food and baby products brand Gerber does very well. They ask parents to provide them with the most accurate info about their baby needs to help the brand offer the most relevant solutions.
All these methods are very effective in helping you collect zero-party customer data. There’s yet a more comprehensive way to collect and leverage zero-party data to build lasting relationships with your customers – loyalty programs.
Your loyalty program is a gold mine of zero-party data
If you have a loyalty program, you’re sitting on a gold mine of zero-party data. You can use your loyalty scheme as a platform to get customers’ data in exchange for the value you create for them.
According to Statista, the global loyalty market is worth nearly 6 billion U.S. dollars in 2022, projected to surpass 24 billion U.S. dollars by the end of 2029.
Businesses have realized the importance of this thriving market, adding effective loyalty programs to their promotion marketing efforts.
In today’s inflationary environment, loyalty programs find more importance because consumers are more likely to share insights with brands in exchange for valuable incentives and rewards that alleviate the pain of rising prices.
Loyalty programs are valuable tools to collect zero-party data because they incentivize customers’ actions during every step of their journey:
Acquisition: Free sign-up loyalty schemes encourage new customers to join your program and benefit from exclusive offers. Sephora’s loyalty program, Beauty Insider, for instance is a free-to-join scheme without any minimum spending requirement for new members.
Retention: You can use personalized rewards to get your loyal customers to volunteer information as part of a loyalty campaign. 83% of consumers say they’re OK with data collection as long as brands are using it to personalize their shopping experience.
Activation: To re-engage your members, you can use in-program push notifications to invite them to members-only events or encourage them to buy exclusive products. The exclusivity of your rewards play a key role in convincing your customers to provide you with quality data.
Zero-party data is the new secret weapon for brands because it helps them build meaningful relationships with customers based on trust and respect for privacy.
Loyalty programs are golden tools to collect zero-party data because:
They bolster the customer community. Every loyalty program has the potential to inspire a community among your customers. People feel more comfortable to share their insights when they see themselves in a community of their peers.
They can be used in your omnichannel environment. You can use your loyalty scheme seamlessly in your digital and physical platforms, removing any friction for customers to share their data.
You can use them to give customers personalized incentives for sharing their data. Tier-based loyalty programs enable you to match your incentives with the degree of customer engagement.
You can incorporate other zero-party data collection methods in your loyalty scheme. For example, you can encourage your members to take part in a game or do a quiz/survey and receive certain loyalty points.
To discover more about the key role of loyalty programs in enhancing your interactions with your customers, check out our ‘Definitive Guide to Customer Loyalty.’
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