Know Your Data Types: From Zero-Party to Third-Party Data

December 6, 2023

The Australian government’s review of 1998’s Privacy Act should make one thing clear to businesses: where you get your data—and how you handle it—matters more than ever. 

But although much of the Privacy Act Review coverage paints “consumer data” with a broad brush, there are several distinct types of data your business may be collecting and using. Understanding the distinctions between these types is critical to forming a data strategy that’s secure and compliant—and that meets your customers’ demand for personalised experiences.

The Four Main Data Types

Whilst you may be familiar with the difference between first-party and third-party data, there are actually four major data types you may encounter.

Zero-Party Data

Zero-party data encompasses the data points customers give you voluntarily in order to improve their experience with your brand. Common types include:

  • Personal information (such as home addresses, phone numbers, and email addresses)
  • Preference data (including product types, brands, sizes, etc.)
  • Sensitive information (such as political opinions or religious beliefs)
  • Feedback, satisfaction, or NPS ratings
  • Loyalty program participation data

Even though customers offer this information, your company is still responsible for ensuring it’s collected and stored in a compliant way. For example, depending on country-specific regulations that apply to your business, you may need to proactively capture customers’ consent to store this information, prove that it’s being stored in a secure manner, and offer a mechanism for customers to request that it be deleted.

First-Party Data

Compared to zero-party data, first-party data includes the data points you can glean from your brand’s interactions with a customer. Popular sources of first-party data used by marketers include:

  • Purchase history (including the specific items and quantities purchased)
  • Website activities (including the individual pages visited, the number of times they were visited, and the average time spent on each page)
  • Email and SMS interactions (such as open rates, link clicks, and any subsequent purchase actions)
  • Interactions with your company’s app or gated member areas, if applicable

First-party data can be used on an individual level to personalise customer experience, but it can also be interpreted in aggregate to support business decision-making. That said, most privacy regulations require that users be notified that this information is being collected, which is often achieved through cookie notifications and privacy policies.

Second-Party Data

Second-party data is essentially first-party data, but in the specific instance that the company gathering the data has shared it with another business (or sold it to them). This may occur in business partnerships, in specific industries (car dealerships are a common use case), or through events like trade shows where attendee information is collected and sold to sponsors or exhibitors.

Second-party data can help companies to understand more about the customers they share with another entity, giving it slightly more value than indirect third-party data. However, the sharing of first-party data in this manner can be subject to privacy regulations—even if it’s only shared, not sold. As a result, customers should be asked to consent to their information being shared in this way.

Third-Party Data

Finally, there’s third-party data. Until recently, marketers and salespeople have relied heavily on third-party data, which is gathered by entities with no direct relationship to the customer. Common forms of third-party data include:

  • Demographic and psychographic profiles
  • Behavioural trends
  • Contextual or background data

Third-party data isn’t as accurate as zero, first, or second-party data, since it isn’t gathered directly from customers. However, before the recent proliferation of affordable data collection and analysis tools, this was often the only real source of customer data, at scale, many companies had access to.

Changes to privacy regulations and the phasing out of third-party cookies on platforms like Google Chrome has made third-party data harder to come by—and, consequently, more expensive. Third-party data may still play a role in your company’s marketing operations, but amidst these changes, it’s a good idea to pair it with a strong focus on capturing your own proprietary data.

Building a Data Strategy

With all of that said, how do you bring these different types of data together into a cohesive strategy that both meets your legal requirements and allows you to drive exceptional experiences for your customers? The following are a few tips for elevating your brand experience through the use of data.

  • Start small. While zero and first-party data are exceptionally valuable, collecting them may require you to implement new processes and technologies. But you don’t have to do it all overnight—look for a few concrete steps you can take now and increase the scope and scale of your program as your data maturity deepens.
  • As you increase your collection of zero and first-party data, prioritise implementing solutions like AdFixus that allow you to automate the completion of your compliance requirements.
  • Communicate clearly to your customers what information you collect, how you handle it, and how they can request its deletion to build trust.
  • If you plan to continue using third-party data, ensure the way you structure and handle data keeps it anonymous and de-aggregated.
  • If you intend to sell your proprietary data as second-party data, ensure you’re in compliance with the specific privacy regulations in your country. 

Above all, prioritise consumer consent as you grow your data supply chain, whether through customer authentication, opt-ins, cookies, or any other mechanisms that are appropriate to your country and data collection methodology. This will increase the accuracy and completeness of your data, further improving your ability to use it to deliver highly personalised customer experiences.

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