The quick guide to zero-party data for e-commerce

How much do you know about your customers? And how much do they know that you know?

That might sound like a tongue-twister, but it’s actually a hot topic for e-commerce. Where your data comes from, how you collect it, and how you use it are all at the heart of the switch to zero-party data.

We’re taking a look at what zero-party data means: how it works, why it matters right now, and how e-commerce brands and retailers are responding.

What is zero-party data?

In the last few years, marketers have mostly used third-party data. That’s information about potential customers which is collected and then sold on to advertisers to target their messages.

We’ve also seen second-party data – which is collected by one company and then shared with another. And first-party data, where you draw conclusions from your own customers’ behaviour and brand interactions.

Zero-party data goes one step further. It’s information which customers freely, actively, and intentionally choose to share with you.

This solves a lot of the problems associated with other data types. Zero-party data is lower cost (because you’re not buying it from a third party), direct (instead of being based on interpretation of behaviour), and specifically connected to your customers.

Why it matters right now

What’s guiding the shift from third-party to zero-party data?

New legislation has had a big impact. In 2018, the GDPR and the CCPA introduced restrictions on data collection and tracking in the EU and California respectively. More laws have quickly followed. Last year, there were over 160 consumer privacy bills introduced across 38 states in the US. And online advertisers have responded: Apple now blocks all third-party cookies in its Safari browser, with Google Chrome set to follow by the end of 2023.

But let’s face it: these changes have only happened because consumers and retailers wanted them.

79% of Americans say that they’re worried about how companies use their data. Rising numbers of people are using adblockers and deleting cookies to protect their privacy.

At the same time, there’s an issue of data quality. E-commerce retailers have long recognized that third-party data can be unreliable. Customers know it too: 49% say they’re frustrated by irrelevant content and offers. Most people say they would happily share zero-party data if it gave them better personalization, exclusive access to e-commerce products, or simply the chance to be part of a community.

The shift to zero-party data comes down to two things:

• Customers and retailers want better, safer data.
• Customers and retailers want more effective personalization.

Zero-party data and e-commerce

Zero-party data is an opportunity to get to know your e-commerce customers better. Yes, it’s a big shift from the old way of doing things, when we based ad targeting on third-party data and social media demographics. But it has huge potential to increase customer satisfaction, repeat purchases, and overall lifetime value.

However, you will have to do things a bit differently. Here are some of our key recommendations for using zero-party data for e-commerce…

• Start small. If you ask people for too much information, too soon, then they’ll back away. Start with essential customer information and build up a profile slowly.
• Stay focused. You should only collect data which will be used for personalization and targeted rewards. People are happy to share if they can see a direct connection between what they share and the benefits they receive. But if they share data and don’t see any rewards, they’ll feel like their time has been wasted.
• Keep communicating. Zero-party data is for the long haul. You can’t collect all the data you need before check-out, and then abandon the customer. Instead, you should keep talking to them throughout the post-purchase stages of the buyer’s journey, using each touchpoint to learn more.
• Be transparent. Let customers know exactly what data you need, why you’re collecting it, and how you’ll keep it safe. Being clear and open goes a long way towards building consumer trust.
• Offer instant rewards. The ultimate reward of zero-party data is a better, more personalized customer experience. But you can also motivate people with short-term rewards such as discounts, sweepstakes, and early product access. Let customers know that you appreciate their confidence.

When it’s done right, zero-party data creates a positive feedback loop. You communicate better, so you learn more about your customers, so that you can keep sending them the right messages. It’s what we’re all about at parcelLab.