Is Zero-Party Data The Way Forward For Personalized Marketing?

Mike Rowan, President, Founder @KPItarget 

This article originally appeared on Forbes.com.

These days, it’s nearly impossible to escape the buzz around personalized marketing. First, the good: personalization works. You’ve seen statistics that show how powerful personalization can be.

Customers don’t just appreciate personalization — they’ve come to expect it and feel disappointed when a brand falls short of serving up recommendations and offers curated to their personal tastes.

But have marketers pushed personalization too far?

Too Close For Comfort

Many consumers are growing uneasy with how their personal information is being collected and used. A recent study by Accenture Interactive found that 30% of consumers feel that a brand has become “too personal,” and among them, 69% would stop doing business with a brand they feel has crossed the line.

Consumers are especially on edge about feeling spied on or listened to. So how much personalization is too much? Where does a targeted ad cross the line and invade a customer’s privacy? And are your customers getting creeped out by your personalization efforts?

The 2018 Cambridge Analytica scandal put many people on high alert, and increased regulations soon followed, including the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) implemented earlier this year.

From growing customer discomfort to the rise of regulations, personalization is starting to feel like a minefield for many marketers. How are you supposed to balance customer expectations for a personalized experience with their growing concern for privacy?

In a word: transparency. While personalized marketing presents growing challenges, zero-party data may be the solution that balances consumer wants with marketer needs.

What Is Zero-Party Data?

Zero-party data provides a transparent approach to data collection. Unlike first-party data, in which you collect information about your audience (purchase history, mailing address, etc.) or second- or third-party data, which someone else collects and sells to you, zero-party data is voluntary.

According to a Forrester report on zero-party data, (paywall): “While first-party data is rich with behavioral data and implied interest, zero-party provides explicit interest and preferences — and you must use it to improve the value you provide to consumers. Firms collect first-party data through interactions with customers. This differs from zero-party data, which consumers give you in exchange for benefits from your firm.”

In other words, zero-party data is information your customers knowingly and willingly share with your brand in exchange for something of value, like personalized offers and recommendations. It’s that simple: you ask, they answer. It’s more of a conversation with your customers and less of a process of sleuthing around in an attempt to figure out what makes them tick.

This type of open dialogue allows customers to open up to you about their wants, needs and preferences — willingly, and with the expectation of getting something in return. You can learn everything from a customer’s purchase intentions to how they would prefer to be communicated with through zero-party data.

How To Collect Zero-Party Data

So how do you successfully start a voluntary conversation with your customers? There are several straightforward, effective ways to gather valuable data, including social interactions, surveys, polls or customer service interactions. Your customers’ willingness to provide information will depend upon how much they trust and value your brand.

A few things to keep in mind when you question your customers: First, keep it short. Your customers are unlikely to take the time to fill out a 20-question survey, no matter what they get out of it. A question or two about preferences added to the checkout process or during a customer service call is more likely to get a good response. You also have a better chance of enticing your customers to answer a few questions if you can manage to engage and entertain them. How? Interactive plays like polls, quizzes and even fun social stories are a great way to open up a dialogue and gather information from a large number of customers in a short time — and maybe even acquire some opt-ins while you’re at it.

Giveaways and contests are another great way to collect personal information. You could offer a freebie (perhaps an e-book or app download) or enter customers into a prize drawing in exchange for answering a few questions.

How To Use Zero-Party Data

Remember, zero-party data is all about a value exchange. Customers expect something in return for providing personal information and weighing in on their preferences.

It’s also built on trust. Protect your customers’ information, treat it with respect and confidentiality, and use it judiciously. It goes without saying that zero-party data is not something that should ever be sold.

While third-party data may give you some vague ideas about your customers’ preferences, it requires you to make some pretty big assumptions. Zero-party data, on the other hand, allows for personalization at an individual level — no guesswork required.

Not only is zero-party data more direct, but it’s also more accurate than its first-, second- or third-party counterparts. And because it’s collected in a transparent manner, there’s less to keep you up at night when it comes to data compliance regulations.

Balancing Personalization And Privacy

In the ever-shifting landscape of personalized marketing, zero-party data offers a way forward that both marketers and consumers can be comfortable with. It allows marketers to respect their customers’ privacy while providing the personalized experience they expect. The future of personalized marketing is a balancing act, and it’s time to start thinking of zero-party data as the sweet spot.

According to another recent Forrester report (paywall), 15% of brands will collect zero-party data this year. “Say goodbye to third-party data and hello to zero-party data — data customers own and willingly provide to brands,” writes Forrester. Built upon trust and transparency, zero-party data can be an invaluable relationship builder for customers and brands. As more information is collected, these relationships will organically grow and change over time.

Use the precious data your customers willingly hand over as a blueprint for your personalization efforts, and you have the opportunity to meet and even exceed customer expectations while honoring their privacy concerns.

If you’d like to chat about using zero-party data for personalized marketing, contact me at mike@kpitarget.com.