Customer data is the lifeblood of businesses today. It fuels plenty of actions and backs corporate decision-making, from marketing to budgeting, customer retention, email communication, and many, many more. However, the rising number of privacy laws and the crackdown on third-party cookies has forced companies to rethink their data strategy. Although third-party data tracking won’t ever disappear entirely, companies will eventually have to change course and find new ways to obtain zero- and first-party data — and next-gen loyalty programs might be the ideal way to do it.
What Is First-Party Data & Zero-Party Data?
Before we dive into the current landscape of customer data, privacy and the abandonment of cookies, it’s worth defining the types of online data currently being used.
- Zero-party data is information that customers willingly or proactively share with you. This kind of data is explicit and covers a wide range of topics that would be difficult to predict, such as product preferences, favorite brands, plans for future purchases, and satisfaction with products and services.
- First-party data is information that you collect through your own channels, including your website, mobile app, POS, etc. It’s considered to be the most trustworthy and accurate type of data out there, and there are minimal privacy concerns involved.
- Second-party data is another company’s first-party data that you may purchase directly, without a middleman. Combining both first-and second-party data allows machine learning algorithms to build more comprehensive customer segments, and accurately predict customer behavior.
- Third-party data is information acquired through large data aggregators. The source and accuracy of this data are often questionable, but the sheer volume of the information allows companies to discover new audiences and target customers in a completely different way.
The Landscape of Data Capturing Changes
The way businesses collect and leverage data has been severely impacted by a rising number of privacy concerns. The European Union has introduced a series of data protection acts, such as the ePrivacy Directive and the General Data Protection Regulation (GDPR), letting website visitors pick their preferences for on-site data tracking.
On top of that, browsers have been steadily phasing out third-party cookies, putting an end to the dubious practice of tracking user activity after users have left the original website. Google has recently spearheaded this battle by not only deciding to abandon third-party cookies, but also swearing not to provide any alternatives. According to Deloitte’s report marketers expect a large increase in first-party data usage over the next two years (75% will increase use) that far exceeds use of second-party (46%) and third-party data (39%).
Marketers Need to Innovate
As the above-mentioned initiatives take shape, companies around the world worry that their current data strategies will be in danger. According to a survey by GetApp, 41% of marketers believe their biggest challenge will be their inability to track the right data. This sentiment is backed up by Antavo’s Customer Loyalty Report 2022, in which respondents ranked customer data collection as one of the top three most influential trends for the coming years.
A survey by Gartner shows that 54% of business decisions are influenced by marketing analysis — meaning that the stakes are too high to bet on unreliable data. Instead, companies should switch gears and accelerate first- and zero-party data collection, then find new avenues to leverage the information they gather in more powerful ways.
Capturing Zero-Party Data Through Loyalty Programs
Loyalty programs offer one big benefit in that they change customer behavior by rewarding desirable interactions. And incentivization is the keyword when it comes to capturing zero-party data.
In short, this type of data is collected via surveys, questionnaires, feedback forms, customer profiles, and other data collection methods. But customers generally skip these, either because they dislike the idea of sharing their information, or just don’t want to spend the time doing so. Let’s see how you can incentivize their participation:
1. Zero-Party Data Is Key to a More Relevant Experience
This attitude can be changed by putting a reward on the line. But not just any reward, mind you. According to Accenture, 54% of shoppers said they are open to sharing personal information and shopping preferences with retailers in order to receive personalized offers.
Their preferred incentive speaks volumes about modern customer expectations. Customers are looking for meaningful rewards that are relevant to them and are no longer satisfied with generic discounts.
Delivering personalized loyalty offers takes time, as you need to properly evaluate the data — something that’s even more difficult when your loyalty program has just launched. As an alternative, grant loyalty points for the zero-party data, but make sure members can spend their points on something thrilling and meaningful: experiential rewards. Even though the direct reward for completing a survey is unremarkable, the prospect of getting closer to a desirable benefit — such as early access, members-only products, VIP rewards, or NFTs — makes the engagement worthwhile for modern customers.
2. Incentivized Profile Completion: Gather New Data & Boost Enrollment
One of the main ways companies collect zero-party data is during registration, and, potentially, in the user profile area, once enrollment is finished. The rule of thumb is to ask as few questions as possible on the registration form, so that the initial experience doesn’t turn people away. By getting only the essentials (name, email address, location), you can prevent impatient customers from leaving, ensuring higher enrollment rates.
Don’t worry, shortening the enrollment form won’t deprive you of valuable zero-party data, as all remaining questions can be asked in the user profile. The best way to ensure that new customers make the effort to share their data is to offer bonus points (or other personal bonus) when they reach 100% profile completion.
This is also a great call to action: a loyalty program welcome email can be much more relevant and actionable, if you tell new members that they’re at 20%, and will receive ‘free’ benefits for answering all the questions.
3. Surveys: a Fun, Gamified Way to Learn About Customers
Modern customers love gamification because it breaks up the monotony of the digital experience they’ve come to know. Instead of asking a list of bland questions, gamified surveys present the questions in a more engaging manner, using visuals, sliders, and a more personal tone.
These kinds of surveys (which should also come with a reward) are essential for cracking a new layer of customer information and collecting valuable data, including product preferences, hobbies, opinions about the brand, lifestyle, favorite brands, and so on. They also deliver direct feedback from the customers, which can be combined with first-party data for better personalization.
Leverage Loyalty-Enhanced First-Party Data Better for More Personalized Communication
Loyalty is encouraging, embracing, and allowing customers to love the brand. Having a loyalty program in itself provides more touchpoints and a greater amount of first-party data to collect and then leverage. For instance, if a customer is in a mid-level tier of your loyalty program, you know they are a loyal, returning customer. Also, if a customer is at risk of churning, you can look up their coupon history to know whether a low-value coupon will be enough to reactivate them.
Loyalty programs are a great source of first- and zero-party data as Brian Walker, Chief Strategy Officer at Bloomreach said during our North America Customer Loyalty Report 2022 webinar. Businesses are recognizing that, in the context of data privacy changes, they’re able to gather very good data from their customers based on what they’re responding to and how they’re interacting with loyalty programs. It’s a great way to create a very strong data foundation with your existing customers.
This rich layer of loyalty data can be infused with your marketing activities in a number of ways. Cost-effective churn prediction is just the beginning, as first-party loyalty data also unlocks new possibilities for personalized emails and provides a great way to improve your customer service (where customer service software can help you as well, like HelpCrunch), as it’s one of the most important features outside of the actual product.
Having data available and accessible in one place helps you create a holistic program by allowing you to have lifecycle engagement with your customers at all points in time. It’s understanding your customers and picking up cues along the way about that customer to target them.
Here are a few examples of how marketers can connect with their customer base:
- Surprise & delight birthday emails, where the reward is determined by the customer’s tier or overall purchase volume
- Reminder emails for customers who are close to reaching a new tier, recommending that they make a purchase to move up
- Friendly notification emails when points or tier membership are about to expire
- Monthly summaries of the progress members have made
Maintain Your Data Strategy With a Loyalty Program
In the face of online privacy laws and shifting data tracking trends, zero- and first-party data are your only source of reliable information. Loyalty programs not only help to capture that information, but also leverage it. You just need to ensure there is proper motivation and communication behind it, so customers will be happy to tell your organization even more.
If you’re interested in discussing the capabilities of a next-gen loyalty program in more detail, our experts are more than happy to help. Book a demo now or send us an RFP.
For more insight about the kinds of rewards to offer as part of your loyalty program, download our ebook.
Tamas is a Senior Loyalty Program Specialist at Antavo and a Certified Loyalty Marketing Professional - CLMP. Tamas is known for having a keen eye for loyalty and customer retention research and trends. Tamas is also a true gamer at heart and has an impressive collection of cyberpunk books.