Why brands and marketers are investing in zero-party data strategies – Modern Retail

Zero-party data is the new first-party data, according to marketers.

As data collection becomes a more important area of focus for brands and retailers, more and more digital ad consultants are urging companies to collect what they call zero-party data.

The term zero-party data, popularized by Forrester in 2017, refers to entirely voluntary data that consumers hand over even before making a purchase. It’s become increasingly popular among e-commerce brands as they try to decrease their reliance on third-party data. The zero-party data trend is gaining steam amid privacy policy changes, including recent iOS updates and the incoming death of Google’s third-party cookie later this year.

Data collection stages: demystified

Marketers have different terms for various methods of data collection, depending on at what stage of the customer journey the information is collected, and who is collecting it. First-party data refers to information that a company collects through its own website or app, typically when a customer places an order or signs up for a loyalty program. Third-party data refers to information that is collected by another company, rather than the company the customer transacts with and is often stitched together from various sources. If a user allows Facebook, for example, to track what websites they visit outside of Facebook, and a company then uses that information to target ads to that user, that’s an example of third-party data collection.

The most prominent way that retailers collect data on their customers is when a customer buys something from them; at that point, the retailer not only knows what a customer buys, but also their current mailing address, email address and their phone numbers. But as data collection has become a more important tool for retailers, they are increasingly looking for other ways to get more granular information from customers, such as by serving them quizzes on what products they are interested in. That’s where zero-party data comes in.

Forrester analyst Stephanie Liu told Modern Retail that unlike first- or third-party data collection, “zero-party data is generated before any transaction and can be revoked by the customer at any time.” One prominent example of this is beauty retailers asking for customers’ skin tone during cosmetic product shopping. “It’s also usually specific data that marketers cannot buy from third-party sources,” Liu said.

Indeed, zero-party data focuses on the customer’s journey before they settle on which product to order. Footwear brand Asics is one company trying to collect zero-party information, mainly by asking its site visitors about their workout habits or interest in running. 

Preparing for privacy shifts

Calla Murphy, vp of digital strategy and integrated marketing at ad agency Belardi Wong, said she expects zero-party data to grow in popularity when Google’s third-party cookie death arrives. 

The death of the third-party cookie, set to take place by the end of 2023, has brands and retailers concerned due to Google’s Chrome browser accounting for over 65% of the web browser market. Taking away third-party cookies limits the way brands can track what websites customers visit — information that, up until now, has been critical in brands’ ad retargeting efforts.

In its initial January 2020 announcement, Google said it’s getting rid of the third-party cookie to prompt advertisers to use more privacy-conscious ad retargeting tools. As of this year, Google’s replacement plan is to offer advertisers access to its Privacy Sandbox suite, which features a number of first-party API and insight tools.

“In a way, it will be an extension of the iOS changes by also impacting Android users,” Murphy said. 

That’s a major reason why digitally-native brands are jumping on the zero-party data bandwagon.  

Chip Overstreet, CEO of seasoning brand Spiceology, said that zero-party data is especially important for food businesses trying to grow their online presence. 

Spiceology, founded in 2013, has primarily grown by selling products to chefs and restaurants over the years. However, since the pandemic began in 2020, Spiceology has started marketing more to home cooks. This led the company to get serious about figuring out who those consumers are. 

“When it comes to customer insight, we have a ‘more is better’ approach,” Overstreet explained.  Currently, one-third of the brand’s shoppers are Chrome users who have already disabled third-party cookies, he explained. This has pushed the brand toward procuring more first- and zero-party data to grow its DTC channels. 

First, Spiceology started focusing on collecting the most basic data: emails, phone numbers and zip codes, Overstreet said. The company recently started experimenting with building out an SMS customer list. These pieces of information are collected as part of Spiceology’s first-party data customer profiles, which can be captured during the sign-up welcome email or after a purchase.

But eventually, the brand wants to have access to visitors’ granular taste profiles via quizzes and questionnaires, such as the cuisine and seasoning preferences of everyone who visits the Spiceology site and is interested in placing an order. The company is starting to build this out by creating a separate website for its chef and restaurant customers, set to debut this month. Meanwhile, the current site will focus on asking at-home cooks when and how often they plan to use Spiceology products as they browse different pages.

Grasping for data

For companies that have many SKUs, data collection is not only becoming important to assist in future marketing efforts, but to help them figure out what products different types of customers want.

This means using campaigns like quiz and survey pop-ups to gauge the customer’s personality traits, said Jillian Tate, senior vp at media consulting agency Bounteous. Bounteous works with companies like DTC soap brand Dr. Squatch and kombucha brand GT’s Living Foods on how to better target their wide demographics.   

“Some brands are seeking seemingly unrelated info that could help them curate customers’ future content,” Tate said. “We encourage clients to extract personality traits via BuzzFeed-esque personality quizzes on their sites.” For example, in an effort to collect zero-party data, Dr. Squatch is asking customers what their favorite cocktails or outdoor activities are. “So someone who likes Scotch and camping is then served woodsy soaps.”

On the other hand, Tate noted that GT’s Living Foods is approaching zero-party data by running product sweepstakes. Earlier this year, the brand offered an entry to win a year’s supply of its Synergy kombucha line in exchange for the user’s flavor preferences and email. 

Early days

Still, zero-party data is still in its early stages of application. 

Benji Joachim, director of analytics and insights at marketing agency AudienceX, which works with 1-800-Flowers and John Hardy, said that “zero-party data collection is not a perfect fit for every client.”

“The concept is still getting fleshed out among marketers,” Joachim noted. He went on to say that because zero-party data doesn’t immediately generate revenue, investing in collecting it may not make sense for every consumer brand or service. “For some brands, focusing on first-party data may be a better fit for the time being.” 

Indeed, zero-party information collection is still in its infancy, and marketers are gauging how to best apply it to brands’ strategies. 

The trick to executing the zero-party data strategy, Forrester’s Liu said, is to be “very transparent with the customer about the value exchange.” For instance, she said brands should be explicit that they’re asking about the customer’s activity preferences in order to serve them more accurate product recommendations. This is especially true due to global privacy laws continuing to change. “Because the exchange is not transactional, the key is to not treat it like a data fishing expedition.” 

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