Why there’s a need to segment, manage and monitor your first-party data

May 2022
Kevin Hewitt
Read time:
6 minutes
Why there’s a need to segment, manage and monitor your first-party data

The quality and quantity of first-party data will be vital to brands' future marketing strategies. But how do you define and, more importantly, manage first (and second) party data?

As brands plan for the effective demise of third-party cookies and the consequent loss of third-party data, attention is returning to the data they own.

This data will become critically important. It's estimated that brands that don't develop a strategy to maintain and grow their first-party data will spend 10 - 20% more on marketing and sales to generate the same returns as when they could rely on cookies. 

There are good reasons for a renewed focus on owned data. Using a data-driven approach to customer experience, firms have seen a reduction in churn of up to 60%. Other research shows that Consumer-Packaged-Goods (CPGs) companies can deliver 3 to 5% growth in net sales from data-driven marketing.

First-party data is clearly important, but it needs to be managed well. So, where should marketers start?

First, second, third? Whose party is it?

The terms get twisted but, simply,…

Third-party data is "theirs". It is data collected by organisations that have no direct relationship with the customer or the data user. It can often result from amalgamating other data sets and is frequently bought and sold on data exchanges and marketplaces.

Second-party data is "yours". It's other people's first-party data. Typically, second-party data is held by enterprises with a wealth of valuable customer data, such as Tesco, NBCUniversal, Walmart etc., who are creating so-called walled gardens and selling access to their data.

First-party data is "mine". It's data I own, collected by my systems and/or voluntarily provided by my customers. Examples include CRM data, website and app activity, transaction data from point-of-sale or finance systems, subscription data or data from direct social media interactions.

To create a strategy for first-party data, we think it's useful to break it down into three grades:

  • Unknown – this is data that doesn't identify individual customers. Examples include web traffic, in-store behaviour data and even cash sales.
  • Known – this is customer data that identifies individuals but which you can't use. Examples include "guest" checkouts from your eCommerce site (you have their name, address and purchase information, but you have no explicit permission to use that for marketing) and interactions with your customer support team.
  • Known with Opt-in – here, customers have explicitly opted-in, given their permission for their data to be used in marketing or for other purposes outlined in the permission statement. Examples here include customers who have clicked the consent box when they download a white paper or purchase goods and services from you. Others may have ticked their consent preferences when visiting your website.

Opt-in data – also sometimes referred to as "zero-party data" – is the most valuable. With an opt-in, brands can begin to develop a direct relationship with those customers, enhancing loyalty and growing customer lifetime value (CLV).

So how do you manage, monitor, build and use your segmented first-party data?

Developing a first-party data strategy

Gaining holistic oversight

One of the biggest challenges with first-party data is that it often exists within organisational siloes – web sign-ins here, email marketing there, transaction history somewhere else. The underlying problem is that marketing systems evolve over time and often become a collection of poorly connected point solutions. In fact, Adobe's 2022 Digital Trends Report notes that four out of ten marketers use multiple solutions or vendors to manage customer experience without any unifying platform.

One in three (37%) client-side marketers think that the most significant barrier to great customer experience is "poor integration between tech systems".

To extract the greatest value, these data siloes will need to be broken down and tagged so that the entire customer journey and experience can be seen, along with associated permissions.

As you break down siloes to understand customer profiles, be sure that you will also be able to see campaign results in a similarly holistic way. This will allow better optimisation of journeys and experiences for consumers and enable your team to see what's working and where the gaps are.

With an understanding of the current state, brands can develop strategies to measure the health and increase the quality and quantity of their first-party data.

Set up targets and benchmark performance

How do you help this growth? By setting KPIs and targets for generating new ways to collect first-party data and understanding progression and the ratio of data in each segment, month-on-month and year-on-year. For example, setting a goal of increasing opt-ins by 12%, by the end of Q1, by adding an additional value exchange such as a larger discount when signing up to the company's newsletter.

Despite customers' mixed feelings about collecting personal data, two-thirds say they would at least consider (50%) or be happy to (16%) share personal information if they received something of value in return. This suggests that the shift to first-party data will enable greater consumer benefits and richer experiences … if it's taken seriously and done smartly and respectfully.

How can second-party data help?

Despite the obvious advantages of first-party data, you may need to diversify your approach to get scalable marketing.

The answer for many will be to work with holders of second-party data, buying access to their walled gardens of customer data to create and target lookalike audiences.

Retailers (Walmart, Tesco etc.) and publishers (NBCUniversal, Hearst etc.) will be important partners. As Permutive's Elizabeth Brennan recently said, "Publishers are going to become the guardians of targetable, scalable data in the new privacy-first way of working."

Already, leading brands are connecting data from different sources to enhance their first-party data with demographic and psychographic data and behavioural identifiers such as consumer engagement across media platforms, general consumer sentiment, channel preferences and sales data.

There will be a continuum of first-party versus second-party data. At one end of the scale, second-party data will be a valuable enhancement to existing owned data and activities.

At the other end, if brands have not invested sufficiently in their own data, second-party data will be an expensive and necessary augmentation to inadequate first-party data.

In all cases, it will be important to have adequate tools to support this data consolidation in order to maximise return on investment. It will be important to track both spend and ROI on second-party data to ensure it is being used effectively to create a combined target dataset that is both richer and larger.

Before purchasing second-party data, it will be vital to consider exactly how it will be used and create value, for example, by benchmarking against competitors and the broader market.

The first-party imperative

The move to first-party data holds the promise of richer, deeper and more valuable customer relationships that will deliver greater CLV and business growth: one in three want a more personalised ad experience (rising to 45% in younger demographics).

But it's a promise that needs to be grasped and worked.

Brands that under-invest will pay dearly for second-party supplements. Brands that are too slow risk losing out to faster competitors who may build unassailably valuable customer experiences. Marketers should begin by assessing the state of their existing owned data and developing strategies to enhance and leverage it with the segments and measurement funnels outlined above.

10th Man works with some of the world's biggest brands enabling dynamic data conversations grounded in objective, best-practice metrics. As a result, 10th Man delivers actionable insights that optimise decision-making, accelerate change and help clients to out-perform their markets. If you'd like to discuss how we can help develop a greater understanding of your data-driven marketing, don't hesitate to get in touch with us at team@10thMan.media.