When it comes to collecting data, we’ve definitely entered a more customer-centric era. An essential milestone in this transition was the implementation of the GDPR back in 2018. In combination with the CAN-SPAM Act and the Canadian Anti-Spam Law, retailers need to move toward a more transparent approach to compiling user data.
Despite the fact that these consumer privacy legislations are enforced by means of hefty penalties, we’re confident that this transition to a predominantly first-party data collection will prove to be beneficial to companies in the long run.
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So what’s the difference?
User data can be split into three categories based on their source. If you’re getting it from an intermediary — it’s third-party. This type of data is abundant, and it’s for sale. However, there is one central caveat — it’s very imprecise. Furthermore, since there is a middle person involved, companies often don’t even know where it’s coming from.
To be able to eliminate this uncertainty, businesses need to purchase data from second-party vendors like Google and Facebook. Second-party data has its benefits and limitations. Companies pay vendors to use their data, but don’t actually own it. At the same time, the buyers can actually vet the data they receive, which makes it a more effective and cost-efficient approach.
First-party data, on the other hand, is raw and unedited. It comes directly from the user. It provides marketers with a more extensive range of benefits, compared to the other two.
Why focus on first-party data?
Clean and compliant first-party data has a broad spectrum of benefits like:
- Better targeting.
- A bigger picture on the customer lifetime value.
- A better understanding of customer intent and their location in the funnel.
- A more curated brand experience for consumers.
- Potential for ROI-busting marketing campaigns.
It calls for a more profound and long-lasting relationship with your audience, prospects, and existing customers. In contrast, companies that rely on third-party data are prone to a more spray-and-pray approach, which results in a poor experience for the user and hurts your brand in the long run.
The adverse effects of inaccuracy.
Before these regulations were introduced, there was an incentive to buy data from third-party sources. Businesses were looking to improve their customers’ experience, but as a result, they’ve alienated many of their potential customers, due to irrelevant information, collected from dubious sources.
While this type of data hasn’t yet experienced a dramatic decrease, companies are slowly starting to invest less money in it.
Empowering and motivating
Businesses must now be more thoughtful about how they collect their customer data. We’ve now shifted from just buying information behind the curtains to having a meaningful conversation about it with our potential and existing customers.
Here are a few ways how we should incentivize our users to share their data:
- Provide them with a detailed description of the benefits they’ll receive.
- Mention that they have total control over the types of data they choose to share.
- Make the editing of privacy preferences intuitive and straightforward.
- Promote consumer privacy and data stewardship.
As a result, this approach will motivate people to build longer, more meaningful relationships with the brands they take their business to.
Read more about the Top 5 campaigns to fill your customer database!
Wrapping things up…
Things have changed dramatically in the last year or so. The latest data privacy regulations have made it harder for brands and marketers to collect and use data. However, through these trials, we’re heading toward a more consumer-focused and sustainable way of conducting business and having meaningful relationships with our customers.
And we’re here to help you with that.