Zero-Party Data: What it is and How to Use it to Personalize Marketing

Over the past five years, privacy legislation and technology changes have pushed marketers to find new ways to leverage data-driven approaches to marketing. The shift to opt-in or privacy-first marketing is culminating this year with the death of third-party cookies.

These changes, expedited by consumers’ changing sentiment towards privacy and personalization, are impacting the way businesses need to approach marketing. Managing ad spend is more complex than ever. Gathering consent is paramount. Spending marketing budget efficiently is more difficult with rising customer acquisition costs (or CAC). And last but not least, collecting and accessing the data marketers need to reach customers with personalized messages on the right channels is becoming more challenging.

So how can marketers respect their customers’ privacy, and still collect data to inform marketing campaigns, ad targeting, and personalization? One answer to this question is zero-party data.

In this post, I’ll define the different types of data, including zero-party data, share example campaigns to collect zero-party data, and explore different ways zero-party data can be used to drive personalized messaging across omni-channel campaigns.

Wait, what is zero-party data?

Zero-party data is data your customers explicitly share with you. This could include data from surveys, product quizzes, preference centers, and requests for updates (such as back-in-stock reminders). Before we dive too deep into zero-party data, let’s review the other sources of data:

• Third-party data: Third-party data is data collected by a third-party (not your company) that generally doesn’t have a direct relationship with your customer. This data – frequently collected by a DMP, or Data Management Platform – can then be purchased in aggregate to enrich your understanding of a customer.
• Second-party data: Second-party data is purchased from a trusted partner. One example of this is publishers selling data to advertisers.
• First-party data: First-party data is data your company directly collects from customers on your own channels and owns. This could include things like purchase history. In Twilio’s 2022 State of Customer Engagement Report, 85% of consumers said they want brands to only use this type of data when creating personalized services.

Zero-party data comes with its own set of pros and cons. On the one hand, a customer has expressly told you they are interested in something. This makes it much easier for marketing teams to drive revenue with highly targeted campaigns.

However, collecting zero-party data can be difficult. Email surveys have a 6% response rate on average and customers likely only take product quizzes or style quizzes once, even though consumer preferences and interests change over time.

Creating a rich and evolving customer profile with zero-party data

One solution to increase the amount of zero-party data available to you is leveraging a wide variety of channels to solicit customer feedback. You can combine the data from responses across channels with a Customer Data Platform (CDP) (such as Twilio Segment) to manage your customers’ data profiles. One channel to consider is texting. SMS has a 98% open rate and a 45% response rate. This means you have the opportunity to collect zero-party data from nearly half of the customers you text (with consent, of course) and combine it with other zero-party data sources to build better pictures of your customers. And unlike product quizzes, consumers are actively opting-in to receive up to 10-12 messages per month. This means you can build an evolving customer profile.

For example, as a retailer, you may be launching your summer or fall clothes. However, clothing lines often have accessories, pants, sweaters, tops, dresses, etc.

In order to deliver a personalized message to your customers you can quickly collect zero-party data using SMS. Take a look at this example campaign:

In the example campaign, a retailer sends a prompt to the customer asking them what they are most interested in. Is this customer looking for a particular type of clothing or accessories? When a customer responds, the retailer can deliver a link to a curated offering for each individual customer based on their explicit preferences (or the zero-party data). It also allows the retailer to capture that response, in this case accessories, and use it to enrich their customer profile within their CDP. The CDP then empowers you to activate this data by launching targeted ad and email campaigns for more accessories or even items commonly purchased alongside accessories in order to drive up order values.

Ultimately, this tailored messaging drives increased growth and revenue by improving conversion rate and increasing loyalty through personalized content.

5 Ways to leverage zero-party data

This zero-party data can be collected and stored in your CDP to power a myriad of personalization efforts. Once the data is collected as a user attribute or as an event, you can create custom audiences with tools like Twilio Segment’s Personas. These audiences can then be used to personalize future communications. For example:

• Create an audience retargeting ad-campaign based on consumer preferences
• Send a user trait to your email marketing tool to help personalize future marketing campaigns
• Create cohorts in A/B testing platforms to understand which consumer preferences correlate with higher LTV or average order size
• Understand how specific audiences differ in propensity to churn
• Deliver personalized web experiences

Zero-party data also helps analytics and data teams make better demand forecasting decisions, build predictive models, and curate product insights.

Thriving in a cookieless world

As privacy changes continue to impact marketers, owning your data becomes the only way to create the personalized experience your customers want.

Now that you’ve learned a little bit more about zero-party data, and how to capture and activate it, it’s important to think about the technology that allows you to make the most of all your data. For more advice on preparing yourself for the end of third-party cookies, reach out to our data experts at Twilio Segment or check out this webinar on preparing for a privacy-first future.

Taylor Udell is a Sr. Product Marketing Manager at Twilio. She focuses on helping businesses create engaging communication strategies while building trust and loyalty with their customers. She can be reached at tudell [at] twilio.com