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May 27, 2021

First-Party Customer Data: The Healthy Alternative to Cookies

The value and importance of first-party customer data has always been key to smart marketers, and recently the rest of the pack has been catching on, in large part because of the phasing out of the third-party cookie. Without the tracking device that follows prospects and their devices around the internet – which brands use to serve up targeted advertisements – companies that rely on it to infer knowledge about a customer are left wondering how to replace it.

Google has said Chrome will end support for third-party cookies in 2022, joining Firefox and Safari, which started blocking them by default in 2019. The erosion of consumer trust and the risks of data collection were cited in a recent Google blog as two primary reasons for the change. Consumers, quite simply, are annoyed by the privacy intrusion, the ‘Big Brother’ aspect of being served an impression only because a device you may have used visited a certain website. The “creep factor” aside, consumers are turned off by the often irrelevant content, which happens for a variety of reasons. It is easy for the badly targeted behavioral segmentation to associate cookie profiles with inappropriate products. An advertisement or impression may be served for a product a customer has already purchased. Or a customer may mistakenly visit a website, which is then compounded by a seemingly endless string of irrelevant ads.

The shortcomings of the third-party cookie accentuate the contrast with using first-party customer data to build a long-lasting (read: loyal) relationship with a customer based on trust and a personalized, relevant experience at the precise moment of every interaction with a brand, across every channel.

But because so many brands are invested in using tracking cookies as a staple of digital advertising campaigns, they’ve lost sight of the power of using first-party customer data to shape a personalized customer experience. They question how relying on first-party data can make up for an inability to track an online experience spanning multiple websites.

First Party vs. Third Party

To highlight the difference between using a third-party cookie and first-party customer data to craft a personalized customer experience, I like to think of a customer in a neighborhood hardware store. A third-party cookie equivalent would be the shopkeeper perhaps a week or two earlier having surreptitiously followed the customer into a competitor’s store and watched as they browsed the aisles. Based on that stealth encounter, the shopkeeper may think they have an idea of what the customer might be looking for – even though it’s really little more than a shot in the dark. But even if the shopkeeper does offer the right product, the customer is a little off-put wondering how the shopkeeper acquired the information.

However, an interaction that is derived from first-party customer data would be the shopkeeper welcoming the customer, and intuitively knowing why the customer came in because there’s a history – and not just transactional. The shopkeeper knows what projects the customer is working on, what tools might need to be replaced, and which projects are upcoming. The unfolding interaction feels natural and unforced, flowing from a personal understanding developed over time.

In exchange for receiving such a personalized experience, the customer willingly offers more information – here’s what I might be starting on next, I’m curious about wiring lights in a drop ceiling, etc. – because he or she trusts the shopkeeper always has the right answer.

What is Zero-Party (Declared) Data?

First-party data isn’t to be confused with what some refer to as zero party data, a distinction that can be understood as data that is inferred (first-party) vs. declared (zero-party).

In our hardware store, inferred data is collected based on a customer’s behaviors, preferences or transactions. Perhaps prior to coming into the store, the customer browsed the website and searched for a particular product, leading the shopkeeper to infer customer intent. Or the shopkeeper sees that once a year the customer purchases deck stain, and infers that they have a natural wood deck that might need to be treated for termites. Maybe the customer would be interested in a discount on a pest control solution.

Declared data, by contrast, would be if the customer actively volunteers information – they sign up for a class on electrical wiring, or they download a pamphlet on wood rot. If they’re loyal to the neighborhood store, the customer offers their contact information so the shopkeeper can text or call when a certain product is in stock (rather than buy it from a competitor).

The Give and the Get

Zero-party data or declared data can be thought of as the culmination of what a customer may see as a value exchange with a trusted brand. The customer is willing to sign up for that newsletter, or provide contact information, because they know that in return they will receive relevant information that will contribute to an exceptional customer experience.

The experience, not necessarily the product itself, keeps the customer coming back for more. If price was the lone consideration, the customer may tolerate being bombarded with endless irrelevant digital advertisements to find the cheapest product. The internet tends to commoditize all consumer goods, as there’s seemingly always someone, somewhere, willing to manufacture and sell a product for less.

But that’s not what customers want, which brings us back to why third-party cookies are being phased out to begin with. In a recent Dynata survey, commissioned by Redpoint, 70 percent of customers said that they will only shop with a brand that understands them personally.

The third-party cookie was never intended to achieve a deep personal understanding, which is why using it as a poor approximation for first-party customer data often creates a fractured, inconsistent and irrelevant customer experience. There is very little value, if any, to the customer.

The calculation brands must make is whether to find alternatives to the third-party cookie to drive an advert impression (and some of the vendors of those impressions are already launching platforms) – versus the value of forming a relationship with a customer derived from a personal understanding. Only one of the two will drive customer loyalty, lifetime value and a differentiated customer experience that is proven to drive value for the brand and the customer.

Related Content

Cadence of the Customer and the Corner Store Experience

The Elevation of Experience: Why a Deep Customer Experience Matters Even More

There are No Third-Party Shortcuts to Understanding Customers

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Steve Zisk 2022 Scaled

Mike Ferguson

Vice President Global Services & General Manager EMEA at Redpoint Global

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