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Jun

The Future is First-Party Data: Why Third Party Data Is Limiting for Marketers

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FM Engage

For the modern marketer, cookies have been a way of life. But those days are numbered. So what’s next?

The cookie was invented in the 1990s as a unique internet user identifier. In the early 2000s, they were widely adopted as a data source for advertising. While third-party cookies weren’t the first form of third-party advertising data, they did bring rise to the idea of shared consumer data tracked and used across multiple mediums. Thus, the era of digital marketing was born and boomed.

However, there has been a massive shift in the marketing data landscape since the dawn of cookies. In 2020, data privacy regulations took center stage in mainstream media and questions about how marketers collect user data came to the forefront. Everyday consumers started asking more questions about their online data and how that data was used—and they often didn’t like the answers.

Since then, large data collectors and legislators have taken massive steps to better protect internet users from unsolicited data collection. Businesses like Google, Apple, Facebook (Meta) and others have all promised to do away with the tracking and selling of third-party cookies. So, what does that mean for marketers?

How Data Privacy Laws Affect Today’s Marketers

Any marketer brought up in the industry during the last two decades has utilized data from a third-party data provider. The data can come from a range of sources, from a credit card company to social media platforms. Marketers could then use the data to create robust audience segments based on previous purchase intentions, customer behavior and communication preferences.

These custom segments set the stage for refined and highly targeted marketing campaigns across multiple channels, and opened up a new era for attribution modeling and data analytics. Tools like Google Analytics, which tracks website and audience data, became a marketer’s best friend.

And while all these tactics and tools are still in play, the ‘death of the cookie,’ is near.

No one knows for sure whether the next era of marketing will include more secure third-party data. But in the meantime, companies that have invested in first-party data collection will be able to continue marketing with effective accuracy and ROI.

First let’s define what the different types of customer data sources are.

Defining Customer Data: Why Origin Matters

Where a business collects its customer data matters. The data source and data quality can determine the success (or failure) of digital ads before a campaign is even launched.

So, what are those sources?

First-Party Data

First-party data is the information a company collects from its own data sources. Collection can happen both online and offline through software (like a customer data platform) or customer interaction. Common first-party data includes:

  • Digital interactions
  • Website visitors
  • Purchase history
  • Customer feedback
  • And more

Once it has the first-party data, the company can then use its collection to create ads, audience insights and catered experiences on both its own channels and others. For example, a company might use email addresses it has collected in-person to retarget those users online and encourage them to become social media followers

Second-Party Data

Second-party data is simply someone else’s first-party data. Second-party data is highly valuable because it comes from a trusted partner and isn’t openly sold, meaning it has an element of exclusivity.

First-party data is typically the most accurate, so access to another company’s first-party data can be a valuable asset.

Here’s an example of second-party data in use: A grocery store collects purchase history and customer experience data for its own customers. In addition to using the data for its marketing, the grocery store sells its data set to a company that designs point-of-sale collateral. That company can use the second-party data to understand how actual customers interact with the products and create strong point-of-sale displays.

Third-Party Data

Third-party data, on the other hand, isn’t derived from a direct relationship between a brand and a customer. Instead, third-party data comes from a wide variety of sources and is sold to businesses for their own marketing use.

Google Ads, Facebook Ads and other major advertising platforms are all examples of third-party data sources. Those companies purchase data from an infinite amount of other sources, aggregate it and make it accessible for marketers to use as audience segments or customer profiles.

Third-Party Problems

While third-party data gives marketers access to a wide range of consumer data they otherwise wouldn’t have access to, it doesn’t mean third-party data is without its problems.

Third-party data sources have access to a wider reach of databut with increased risk of data inaccuracies. Marketers are at the mercy of the perceived accuracy of third-party data sources.Integrating low-quality data into actual strategies can produce lackluster results. This is especially true with increases in data privacy and various platforms blocking third-party cookie data.

Marketers are also at the mercy of the data management platform they partner with. Many data management platforms collect and hash data to remove any personal identifiers within the data points, but only give marketers access to select attributes with which they can target potential customers.

This process can create negative experiences for both marketers and consumers.

Back to the Future of Customer Data

Before the world went digital, marketers would collect first-party data to help them understand audiences and purchase intentions and drive new customers. While data types varied, this drove advertising teams to think deeply about identifying their audiences and properly collecting needed information to make educated market moves.

The value of first-party consumer data lives in its accuracy and relevancy. When collecting demographics or user data on people who have already purchased a company’s goods or services, the audience segments derived from the data are incredibly accurate. It also gives businesses the opportunity to reconnect with individuals who have already expressed interest in the business.

With limitations in third-party data collection, companies will need to shift back to first-party data collection and usage. We believe this will be better for businesses and consumers alike.

Let us explain.

High-Quality Data Helps

The main benefit of first-party data is simple: it’s cost effective. Because targeting is more accurate and budgets aren’t wasted on the wrong audiences, using first-party data in advertising yields the highest return on investment.

The other benefit of first-party data is exclusivity.

Third-party data platforms share their data with any businesses willing to pay the right price.That means the data isn’t unique, and competitors within the same market could all be using it to try to gain new clients. Conversely, first-party data that a company has collected is unique and can’t be used by the competition.

Relevant Audiences Wanted

When it comes to relevancy, first-party data is supreme. First-party data is collected based on actual interactions with a brand, its website and marketing materials, or even offline datasources. It’s also the only data that gives deep, actionable insight into how consumers engage and interact with the brand, compared to contextual or lookalike audience data.

Marketing tactics derived from first-party data are best for building brand loyalty and creating repeat customers because they engage people who have already expressed interest in the brand.

First-Party Data Sources

Identifying where and what first-party data to collect can be tough. With consumers using multiple channels, both online and off, it’s not always clear where or how to start.

In order to properly collect usable data, companies should focus on mediums that are primed for collection and that the brand performs well on. The goal is to create quality experiences for customers that keep them coming back. The more customers going through a data collection medium, the deeper and more robust your data becomes.

Here are places your business can start:

  • Website – A company’s website acts as its digital storefront. It’s also usually the biggest opportunity to collect first-party data. Companies can collect a wide range of data from site visitors, including name, email addresses, phone numbers, website behavior and purchase intentions.
  • Mobile apps – Similar to a website, mobile apps can collect user data such as contact information and behavior. App users tend to be a brand’s biggest brand evangelists, so understanding these individuals is incredibly advantageous.
  • Email – Email campaigns offer important insights into marketing efforts as they can be used as a cold or warm marketing tactic. Unlike other brand awareness or top-of-funnel tactics, companies can glean insights into how users interact with the email through metrics like open rates, downloads and click-through rates. This helps guide audience refinement and accurately prevents wasteful distribution in the future.
  • CRMs – Customer relationship management (or CRM) software is another useful tool for data collection. CRMs help teams manage prospects during the sales cycle and those at a point-of-sale. Online, CRMs accurately tell the story of how users interact with your digital assets prior to converting. Offline, CRMs and point-of-sale systems build customer profiles based on which customers purchase what.
  • Sales teams – The most accurate first-party data often comes directly from sales teams reporting on the people they engage. Pain points, goals, demographics, business background and more are all excellent data points that can give your data a competitive advantage.

Preparing for the Future

While marketers today still have access to data from a variety of sources, those days are dwindling. We’re entering the era of walled gardens and wide-ranging third-party data is becoming less and less accessible for advertisers.

Instead, advertisers need to be thinking about how they can collect as much first-party data as possible, or partner with other businesses that have access to robust and relevant first-party data.

That’s where FM Engage comes in.

FM Engage has been building propriety insurance industry audience data for over 50 years—data that gives unparalleled access and insights into the insurance industry.

If you’re an insurance provider that can see what’s on the horizon, don’t worry. We can help.

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