Feature
The Gist
- First-party focus. 75% of marketers still rely on third-party cookies, highlighting the need for strategies based on first-party data.
- Inevitable shift. 9 out of 10 marketers agree first-party data is crucial, yet many lack a company-wide strategy for its use.
- Personalization pays. Brands using first-party data see a 2.9X revenue increase and 1.5X cost savings, clearly demonstrating its effectiveness.
Editor's Note: This article has been updated on May 30, 2024 to include new data and information.
Although the demise of third-party cookies is definitely a step forward when it comes to data privacy, it can also be anxiety-inducing for marketing and advertising teams. That’s because according to one Adobe survey, 75% of marketers worldwide still rely heavily on third-party cookies to reach target audiences.
Marketers know that moving away from third-party cookies is inevitable, with 9 out of 10 marketers surveyed saying first-party data is more important than ever. Yet this approach will be an adjustment because harnessing first-party data for marketing requires a company-wide strategy that not all companies have in place.
In this article, we’ll look closely into the fundamentals of first-party data, describe its benefits and challenges and discuss the most effective ways brands can use it for marketing. Learn how first-party data is changing marketing with real-world examples, underscoring the first-party data collection importance for modern marketers.
What Is First-Party Data?
If you're wondering what is first-party data in marketing, it refers to any information gathered firsthand from your audience through interactions with your brand. The first-party data meaning lies in its direct collection from customers, ensuring its reliability and relevance.
First-party data is gathered from customers, site visitors and social media followers with their permission. Think of first-party data as the equivalent of getting information directly from a friend, while third-party cookie data is like someone telling you about a person you don't know.
“A company’s own data about its customers' and prospects' actual behaviors remains the most competitive-edge component in a marketer's arsenal,” said Jim Sterne, a marketing consultant, author, speaker and founder of the Marketing Analytics Summit.
For those new to personalized marketing strategies, learning how to collect first-party data effectively is the first step toward unlocking its full potential.
First-party data collection can take many forms, such as using web analytics tools to track user behavior on websites or deploying customer feedback forms to gather explicit insights. These ensure that the data collected is both relevant and actionable, providing a robust foundation for strategic decision-making.
Other sources of first-party data include:
- Activity across a website, mobile app and product
- Demographic data in your CRM
- Social media comments, likes, shares
- Email and newsletter subscribers
- Survey data
- Customer purchase history (products purchased, subscriptions, length of time as a customer)
- Call center transcripts
Related Article: First-Party Data: Getting Creative for Cross-Channel Identification
First-Party Data: Benefits and Use Cases
To maximize ROI, marketers are increasingly turning to first-party data advertising to target their campaigns more effectively.
With first-party data, you can tailor marketing campaigns based on what your audience has revealed to you directly rather than relying on second- or third-hand data or, worse, educated guesses.
For example, your website traffic data will show your most popular product pages. You can then include more features and content on these pages for even more engagement. Brands using first-party data for marketing have achieved a 2.9X revenue lift and a 1.5X increase in cost savings, according to a Think With Google and Boston Consulting Group study.
Here are some benefits:
- Increased relevance of marketing messages: Messages based on first-party data resonate more with customers because they are developed from real, observed behaviors and preferences. As a result, businesses can engage customers more meaningfully and enhance loyalty with first-party data, meaning personalization is both effective and impactful.
- More efficient budget allocation: With accurate data, businesses can allocate their marketing budgets more effectively, focusing resources on strategies and channels that deliver the best returns.
- Enhanced customer loyalty and retention: Personalized interactions and offers, powered by first-party data, foster deeper customer relationships and loyalty.
However, even the most valuable first-party data is only beneficial if you know how to organize it (more on that later). But once first-party data is organized enough to take action on, the specific benefits include:
Precise Segmentation and Ad Targeting
The first-party data collection importance extends beyond basic marketing — it also impacts how companies predict and respond to customer needs. Because first-party data is so reliable, marketers can more confidently segment customers and prospects into groups and create highly precise customer profiles and, as a result, highly targeted campaigns based on how likely someone is to purchase.
For example, marketers can segment audiences based on specific actions like past purchases or engagement with certain content, leading to more personalized and effective advertising campaigns. Outcomes of such targeted efforts often result in higher conversion rates and more efficient use of marketing budgets.
Use Case: Amazon
After analyzing customer purchase history and product searches and views, Amazon segments users into different groups based on their preferences. Advertisers on Amazon can then target their ads to specific segments, ensuring their products are shown to users most likely to be interested.
Personalized Messages and Content
Marketers use first-party data to personalize messages, offers and content based on specific individual behavior, which in turn increases the probability that users will engage and convert.
According to McKinsey research, consumers very much prefer this approach. Seventy percent of consumers now expect brands to personalize ads and product recommendations, and 76% get frustrated when this doesn’t happen.
Use Case: Spotify
Spotify uses first-party data gathered from users’ listening habits to recommend music and create personalized playlists. By analyzing the genres, artists and songs users prefer, Spotify improves the user experience and also helps brands looking to reach music — and now podcast — fans with targeted advertising.
Customer Trust and Loyalty
When consumers know a brand is handling their data responsibly and using it to offer personalized rewards and incentives, it builds a foundation of trust.
Use Case: Starbucks
Starbucks takes advantage of first-party data for its “My Starbucks Rewards” loyalty program. The coffee giant uses food/drink preference and purchase history data to personalize rewards such as free drinks on birthdays and promotions and recommendations based on past orders.
Related Article: Using First-Party Data to Build Trust With Your Customers
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First-Party Data Challenges
While there are advantages to having first-party data be the basis for marketing and advertising, challenges persist when it comes to integrating data and adhering to privacy regulations.
Integrating and Organizing First-Party Data
Most companies collect first-party data using systems for marketing automation, customer support, web and mobile app analytics, CRM, HR (human resources) and POS (point of sale), to name a few.
Using first-party audience data is essential for refining marketing tactics and strategies, but its proper setup can be challenging. The biggest challenge in developing a first-party data strategy is pulling all this siloed data together to create a complete view of the customer.
For example, if a customer's purchase data is stored in one system and his or her browsing behavior is in another, it’s difficult to suggest complementary products effectively.
Centralizing first-party data is also a challenge because it requires collaboration across marketing, sales, customer support and data science teams.
“Most teams using third-party cookie solutions were the internal marketing and advertising teams or their agencies — and those teams don’t work with the sales, service, or commerce teams,” said David Chan, managing director at Deloitte Digital.
“Now with first-party data, ad teams can no longer work on an island, but need to develop relationships with other teams to build rich and reliable first-party data sets.”
How It All Comes Together
First-party data activation involves not just collecting and unifying this data but also enabling its use in real-time for dynamic marketing campaigns. This sometimes requires sophisticated technology platforms and processes that can interpret and act on data insights quickly to enhance customer interactions.
A common strategy is implementing a CDP (customer data platform) that uses APIs to ingest data from different systems and bring it into a centralized repository. Here, all data related to the same customer is unified, even if it comes in different formats from different systems.
Marketers then have a complete, up-to-date view of each customer, from which they can build personalized marketing campaigns.
AI is proving to be the latest, perhaps most powerful tool for integrating, organizing, and leveraging first-party data to optimize marketing strategies. By applying advanced machine learning techniques to historical first-party data, AI algorithms can identify patterns, trends and customer preferences that substantially enhance the effectiveness of more targeted and personalized marketing campaigns.
Balancing Personalization With Privacy Regulations
There’s no doubt that consumers prefer personalized ads and product recommendations. First-party data allows brands to craft those personalized experiences in a way that respects the user’s privacy, helping to maintain and even boost consumer trust.
But the line between personalization and intrusion can be thin, as first-party data includes everything from transaction history and website interactions to customer feedback. First-party data loses its value if a customer feels like a brand knows too much about them.
To that end, companies should always obtain explicit consent from users before collecting data and should adhere to the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) in the US.
As privacy regulations become more stringent, with 81% of customers feeling they have little to no control over the data collected about them by companies, the ability to use first-party audience data effectively provides a competitive edge in creating more targeted and meaningful marketing engagements without breaching privacy norms.
“Be friends with your legal team,” said Chan. “Brand trust and data privacy are paramount, so it’s of the utmost importance to follow laws and regulations so you can confidently deliver great marketing programs. It’s an investment that will have long-term dividends.”
