First-party data isn’t enough, here is why

Few discussions are more prominent across our industry in recent months than the one surrounding third-party data and first-party data.

The slow death of third-party cookies has led many marketers to reconsider not just how, but why they’re acquiring data and how they put that data to use.

While it’s (Read more...) for savvy marketers to always be assessing their approach to data-driven marketing, it’s also worth acknowledging that the current conversation is powered in part by some understandable confusion.

Here are three things you need to know:

1) Third-party cookies and third-party data are NOT the same things

First, let’s get one thing straight. Third-party cookies are most likely going away, but that doesn’t mean that third-party data is a thing of the past. A third-party cookie is a tool placed on a user’s device by a website other than your own.

The cookie stores information like personalization preferences and tracking information. The third-party designation refers to the fact that the cookie didn’t originate from your own domain.

By contrast, third-party data is just data you acquire from a third-party source, meaning that neither the buyer nor the seller originated that data.

Third-party cookies do play a role in on-boarding and syncing new data, but a replacement in these areas is expected soon. The end of the third-party cookie in no way means that third-party data is going away, or that marketers will be able to make less use of it than they can today.

Third-party data will still play a vital role in building great personalized customer experiences, developing insights to help you better understand your customer, and scaling activation.

2) First-party data is critical, but it’s not enough on its own

There’s been a lot of discussion of marketers “turning to first-party data” in response to the loss of the third-party cookie. Make no mistake, first-party data will play a critical role in the future of your marketing, but that has always been the case.

Marketers have leveraged their own data to build hypotheses, communicate with customers, and better understand the needs of their consumers.

None of that is going to change, but first-party data alone simply isn’t enough to do the kind of intensely personalized marketing that today’s savviest consumers expect.

First of all, not every brand has the ability to scale their first-party data. For instance, CPG brands reach huge customer audiences, but they do it primarily through retailers shelves giving them very limited opportunities to collect data via their own websites.

Combine that with the fact that customers are increasingly wary of sharing first-party data unless they see a direct value exchange, and it’s easy to see why even many major brands would struggle to gather enough data using only first-party sources.

Even when you do have quality first-party data, assumptions about your best customers can be wrong. We worked with a client that had a defined customer profile in terms of gender, interests and HHI.

They got a lot of it spot-on, but the HHI was wildly off. In fact, those with a lower HHI were crazy for this brand, which was a surprising learning for all of us — and one we wouldn’t have been privy too with first-party data alone.

What a disservice to that client and to those customers if we had ignored a revenue-generating fan base.

More importantly, while first-party data tells an important story about the customer, it’s rarely the whole story. Even if your customer is willing to tell you their name, age, gender, and location, there’s a limit to how deep you can go.

Very few customers are going to fill in a form that discloses the size of their household, whether they’re expecting a child, or if they’re cord-cutters or cable subscribers, let alone if they’re in-market for a car, a rake, or an in-ground pool.

3) Third-party data still has a major role to play with or without third-party cookies

Even if you could collect that data, it’s nearly impossible to keep it current. The benefit of using third-party data is that you can tell when people’s circumstances change without directly asking them on a rotating basis.

This is doubly true in the world of COVID-19. Even if you were able to collect an incredibly detailed customer profile back in January, you can be almost certain that your customers’ needs, daily habits, and circumstances have changed dramatically in the last six months as a result of the ongoing pandemic.

None of those changes will be reflected in the data you’ve collected, and as a marketer, you’ll be left guessing at just exactly how the picture has changed. It’s not enough to simply capture a new consumer; you need constantly updated information that reflects the “now consumer.”

The best way to achieve that is still first-party data enrichment.

First-party customer data will always be the foundation of your marketing efforts, but enhancing that data with third-party data will allow you to answer the questions first-party cannot, and make sure that your customer profiles stay current instead of falling behind every time the world, or just your customer’s life, changes.

Here’s another advantage to third-party data that flies under the radar. Third-party data can tell you who isn’t your customer during the crucial persona development process.

I deployed this advanced data work for a client to lower CPAs by 200%. It wasn’t a fluke. We saved the clients significant media spend from wasted impressions while lead quality went way up.

Unlocking these insights requires constantly updated data that only a DMP can provide, allowing you to combine existing customer data with data from a diverse array of branded providers that see your customer from angles your brand doesn’t.

This will open the door to new opportunities and a closer understanding of your audience than you could achieve through first-party data alone.

Feliks Malts is VP Decision Sciences at 3Q Digital. Prior to joining 3Q in December 2015, Feliks served as the Group Director of Analytics with R/GA, where he led Commerce, Personalization, Audience Development, Tag Management, and Automation initiatives. His experience spans the Publishing, CPG, Commerce, Telecom, Entertainment, Finance, Travel, Luxury, and Healthcare verticals for brands including Godiva, Samsung, L’Oréal, Verizon, TD, Fossil, Life Reimagined by AARP, Lincoln Center, Bank of America, Hilton, P&G, and Panasonic.