The difference between first, second & third-party data and how to use them

Our society today is generating an enormous amount of data on a daily basis.

The source of this data generation includes the internet, social media, services, communication channels and so on.

Proper data analysis using the right systems can be used to improve a variety of processes involved in healthcare, energy production & distribution, finance, communication, marketing, etc

Data is an extremely valuable resource that can be fed into advanced systems and used to address a lot of societal issues.

In digital marketing, customer data can provide high quality and in-depth information about changing consumer behavior, needs and interests.

These distinct pieces of information can then be used by marketers to develop and implement an effective and efficient marketing strategy.

The primary aim of data-driven digital marketing is to utilize consumer insights to develop personalized content that will prompt conversions and sales.

In this article, we are going through the difference between first, second and third-party data and how to use them.

First-Party Data.

First-party data refers to information your brand obtains on your audience and customers.

First-party data plays a major role in site and customer relationship management (CRM) retargeting efforts because it provides you with insights about your existing customers.

This makes the information obtained reliable for making forecasts on future user behaviors and patterns.

With first-party data, you can target your customers by capitalizing on previous actions they have taken on your brand’s website.

First-party data include information collected from users’ behavior on your website or mobile application, surveys, customer relationship management (CRM) platform, customer feedback, point of purchase, etc.

How To Use First-Party Data.

The high quality, accuracy, and in-depth nature of first-party data increases its value and relevance in enriching your digital marketing efforts.

First-party data is also associated with minimal privacy risk as you are required to seek the consent of your customers before collection.

During the process, you are expected to comply with all the rules and regulations surrounding consumer data protection and privacy.

As the marketer who collects and manages this data, you have direct control and outright ownership over it.

Here are​ three ways you as a marketer can use first-party data:

1. Personalize customer experience:

The data you collect can give in-depth knowledge of your visitor’s needs and interests. You can then use these insights to create personalized content and advertisements. Meeting the needs and satisfying the interest of your audience is one way to stimulate repeat purchases.

2. Predict trends:

First-party data can provide you with valuable insights into your customer’s behavior. With this information, you can predict how they will respond to your marketing strategy or product offerings.

3. Improve Audience segmentation:

You can use the rich insight first-party data generates about your audience to organize them into different groups with similar behavioral patterns, preferences, and interests. This increases your chances of success with personalized user experience.

Second Party Data.

Second-party data is information that a company collects from its audience and trades with another company in a mutual agreement.

This data is from a different audience other than your own with whom you do not have any connection with.

Second-party data is basically a second-hand data because it is the first-party data of another company.

It typically includes information gotten from surveys, customer feedback, past purchases, product interests, digital interactions and so on.

For you to drive up sales and improve overall growth, you cannot rely solely on data gotten from your audience. Therefore, the need for second-party data from a trusted partner with a demographic that is favorable to your business interest.

Second-party data plays a pivotal role in helping you to expand your reach, target a new audience and possibly capture new high paying customers.

How to use second-party data.

There has been a rapid increase in the number of participants leveraging second-party data. This massive surge in its use can be attributed to more companies recognizing it’s value.

The use of second-party data provides you with similar benefits of first-party data but also gives you the ability to gain a broader understanding of different consumer needs and interests.

Below are some ways for you to use second-party data:

1. Enhance your marketing campaigns:

Second-party data can provide you with deeper insights to improve your marketing strategy and targeting tactics.

2. Enrich your database:

First-party data is of high quality but limited in its scale. This is because it consists only of data gotten from your existing customers. Enriching your database would require additional data from a trusted second party. An increase in your database will allow you to expand your digital marketing campaigns.

3. Reach new audiences:

First-party data limits your marketing campaigns to only your existing customers. You cannot rely on this for sustainable and effective business growth. You can use the information gotten from second-party data to expand your reach and generate more exposure from a new market that will be beneficial to your business interests.

Third-Party Data.

Third-Party Data is data that you purchase from external sources who did not collect the data directly. These external sources are companies or entities referred to as Data aggregators.

Data aggregators obtain the data they sell from other brands, businesses, and organizations. They pay the initial data collectors a certain fee in exchange for the data. These data are managed and stored in a central database as third party data.

A significant number of companies sell their first-party data to data aggregators which makes them accessible through different mediums.

After collecting large amounts of data from different publishers, the data collectors categorize them into different segments.

These include but are not limited to psycho-graphic factors (like audience behavior, user preferences, interests, etc), demographic factors (like age, gender, occupation, income level, etc), industry and so on.

The categories can further be broken down into specific sections from which the buyer can pick. These sections usually align with their business interest or marketing tactic.

Some benefits of third party data is access to a large pool of user data and its extensive coverage.

However, since this data is not collected directly from your existing customers, it is not exclusive and available to your competitors.

How to use third party data.

1. Discover new audiences:

The broad scope of third party data can help you identify a new demographic that might have an interest in your products or services. This allows you to expand your reach, make more sales and grow your business. You can also study user data to identify common preferences and use that information to improve a new product you might be developing, to make it more appealing.

2. Increase the accuracy of your targeting:

The proper analysis of third-party data can help to increase the precision with which you target specific sections of your audience.

3. Complement your first-party data:

While first-party data provides you with high quality and quality information on your existing customers, it might be lacking in volume. This is especially true for small to medium scale businesses.

Third-party data helps to provide you with the scale first-party data usually lacks. Using third party data gives you an ability to reach a wider volume of users who might be interested in your products and target them with personalized advertisements.