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Marketers are under enormous pressure to turn data into customer knowledge, competitive advantage and ultimately profit.

Our brand new report The Promise of First-Party Data examines the opportunities in the proprietary data they already have (or should have).

For years, third-party data has been the mainstay of digital marketing. It’s easy to use, plentiful and can be effective.

That’s not enough anymore.

The drive to create better customer experiences demands better data. Brands have new and wide-ranging responsibilities to understand what customers want and when they want it.

The central lesson of the report, is that brands’ owned, first-party data is the shortest and best path to superior results. The Promise of First-Party Data is available free with registration for a limited period thanks to our partnership with Signal.

Let's start with a quick primer on the three categories of data from the advertiser/marketer point of view: 

  • First-party data (FPD): this is the data that is produced by brands and their customers. Some examples include the data from marketing campaigns, behavioral analysis, websites/apps, offline/POS, call centers and email… everything that brands can record and measure from any internal source.
  • Second-party data (SPD): is someone else’s first-party data.  It’s unique, like a brand’s own FPD, but is collected by another company and shared under a proprietary, defined arrangement. For example, an airline and hotel chain work together to target the same business travellers with the benefit of both data sets.
  • Third-party data (TPD): aggregated data that doesn’t come from direct customer relationships. Usually TPD comes from multiple sites or sources, and represents huge numbers of records that can provide depth and breadth to advertiser/marketer data. 

Each data type plays a part in the larger ad-tech system, but there are shifts taking place. Our research suggests that the roles of first and second-party data will become significantly more important in the next twelve to eighteen months.

In planning the study, we wanted to explore how effective each kind of data is for different purposes. We were also interested in what types of data within each category are most useful and to look at what marketers are planning in the near-term.

The study collected over 300 responses from senior marketers at companies with at least $100m in revenues and using at least two of the three categories of data

Making the case and getting things done

Companies have been investing heavily in data as its role in digital marketing grows. Looking back on those investments, respondents were able to compare how different categories of data perform for various goals. 

First-party data garners the highest return on investment of any data type, with the potential to do more.

Two-thirds of marketers (or more) believe that first-party data provides the best path to true customer understanding and therefore to better performance.

Direct customer information is clearly more powerful for campaign lift, with 92% choosing first or second-party data. Taking a longer view, marketers also look to first and second-party data (95%) to increase customer lifetime value.

Putting these results together, it’s not surprising that marketers say that it’s easiest to make the financial case for first-party data. Of course, it’s 'free' in the sense that there’s no fee to use the data brands already own, but that’s not the most compelling part of the ROI equation. FPD is powerful, unique and useful for both short-term optimization and long-term analysis and benchmarking.

The issue, then, is availability. Many companies are pursuing second-party data relationships to amplify what they already know, but that’s in its early stages at most organizations and doesn’t scale quickly or easily.

These factors leave third-party data as a necessity to fill in gaps in what brands know about the customer today. The secret for high-performing companies is a model that takes advantage of all three categories of data, while working to maximize the owned and shared components.

First-party data and the marketer’s imperative

The argument for using data to drive customer relationships is a simple one, even if the industry keeps having it. Everyone wants faster, easier, better service, whether they’re buying a box fan or industrial HVAC system.

Faster, easier and better service mean knowing what the customer wants well enough to serve them. Ironically, the only way to provide a personalized, more human experience is by using technology to identify how to add value to a customer.

The majority of survey respondents believe that first-party data is how they will win that battle for customer understanding and engagement.

Eighty-two percent agree or strongly agree that they will increase their use of first-party data over the next year.

To complement their own data, 60% agree or strongly agree that they will be looking to close partners and their second-party data.

These attitudes are in contrast with marketers’ plans for third-party data, where there is significant ambiguity and a minority (44%) predict an increase in their spending.

Learning from high performing companies

To help marketers plot their course, The Promise of First-Party Data looks at differences in investment and outlook between mainstream companies and those with high-return data initiatives.

Most striking is how those with high-ROI initiatives organize their data practices. They are much more likely to have plotted a long-term data strategy (44% vs. 16%) with measurement processes agreed upon and in place (44% vs. 16%).

High-performers are also significantly more likely (37% vs. 11%) to match their data strategy with sufficient staffing to power it.

The key message from leaders is that they’re listening to their customers by collecting first-party data wherever they can and putting it to work.

More in The Promise of First-Party Data…

  • What are the competitive advantages for companies that are more adept at using their owned data?
  • Where do high performers collect their first-party data and how does that differ from the mainstream?
  • What are the first steps for organizations trying to take better advantage of their first-party data?
  • What specific data types are rated highest for accuracy and usefulness? 

Thanks to our partnership with Signal, The Promise of First-Party Data is available free with registration until the 23rd of July 2015. Econsultancy subscribers can instantly download the report. 

Stefan Tornquist

Published 23 June, 2015 by Stefan Tornquist @ Econsultancy

Stefan is Vice President of Research (US) for Econsultancy. You can follow him @SKTornquist
and connect via LinkedIn.

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