The rise of second-party data and how to maximize the value of partnership data
Accurate, meaningful consumer data can help marketers reach prospective customers with personalized messages that increase engagement and result in higher conversions. But not all data is reliable or effective, so it’s important to know where it’s coming from. And the increasing number of consumer data privacy laws, such as Europe’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), threaten to limit how it can be used.
This is why second-party data has seen renewed interest by marketers who want to bolster their first-party collection efforts with relevant and usable data from trustworthy partners. That doesn’t mean they’re abandoning other types of data. In fact, the most successful marketers realize that a diversified portfolio of data sources is critical. But because second-party data offers valuable benefits along with comparatively less risk, it has become an increasingly attractive option to find relevant potential buyers and add to the data-driven equation.
At Infutor, a consumer identity management provider, we are seeing an increased demand for second-party data with brands, but they often struggle to adequately identify, resolve and match consumer records leading to sub-optimal scale and reach.
Where is your data coming from?
There are many different ways data is collected for use in marketing initiatives. Most data-driven marketers agree on the definitions of first-, second- and third-party data, while zero-party was more recently defined by Forrester Research:
• Zero-party data is collected directly from the source. It’s given willingly and proactively by the consumer for the purpose of brand experience, not as a requirement for a sale.
• First-party data is also collected directly from the consumer, but it is collected as a transaction or through website visits or social media interactions.
• Second-party data is another company’s first-party data and is typically purchased or exchanged in a partnership capacity to help marketers complement their existing first-party data sets.
• Third-party data is data that’s been collected from various sources, such as data compilers and aggregators, and is typically used to achieve scale and depth. Compilers collect identity data directly from authoritative sources, while aggregators often pull from a variety of resellers, sometimes resulting in a mishmash of older, unverifiable data.
The critical aspects of second-party data
While most marketers acknowledge that zero- and first-party data is ideal because it comes directly from the consumer source, the same qualities also limit its scale.
Clear advantages of second-party data have come into focus. Second-party data can offer brands access to a partner’s first-party data, so the marketer has the ability to home in on relevant attributes and customize segmentation to build lookalike personas. These consumers are generally more relevant to the brand’s core offerings and closer to the source than third-party data, giving marketers a greater ability to connect and create more meaningful one-to-one engagements.
As an example, a sporting retailer looking to maximize sales of its new golf equipment might be interested in partnering with a sports entertainment company to target golf enthusiasts. Or a large grocery store chain looking to increase share of wallet in new regions may partner with a regional gas station chain to expand its footprint. The shared interests among the consumer data set offer opportunities for both brands to extend their reach with a higher probability of conversions.
Second-party data also gives marketers an increased view of how customers are engaging with their partners to ensure richer experiences and set expectations on how the data will be used. It gives marketers the ability to personalize and tailor messages and promotions for a particular loyalty program or other offering.
Setting the ground rules for second-party data partnerships
With all of the benefits that second-party data has to offer, there are also important best practices to consider to optimize scale and ensure proper use. Before entering a data partnership with another company, marketers need to take into account a few key considerations:
• Shared privacy and data standards viewpoints: When using another entity’s first-party data, it is important to understand that brand’s privacy and data standards. Has the brand set forth a proactive compliance strategy that verifies the identity of the consumer and enables opt-out options? Has it established a system for ongoing and routine reporting? Ensuring the potential partner maintains and consistently updates documentation on consumer data policies and practices is an essential safeguard.
• Ethical sourcing of data: To help confirm the brand’s data is in agreement with consumer data collection rules and regulations and to protect both brands’ customer relationships and honor consumer data trust, it’s important to verify that the data you are exchanging or purchasing is of high quality and integrity. With identity resolution, marketers can ensure the data is cleansed and verified, and that it properly matches different consumer identity marker information such as name, phone, email, etc.
• The data's credibility: Regardless of how the data is collected, data begins to decay nearly the second it is gathered -- even in the best circumstances. At any given time, more than a quarter of brands’ customer identities and attributes are incorrect or omit critical identifiers (e.g., phone numbers, mobile IDs, demographics, lifestyle preferences). Consumer identity management is the underpinning for accurate, high-quality data, which can join records together through a process of data cleansing, identity completion and linking.
• A healthy mix of data: Depending on the type of data a marketer is seeking, there should be an inherent understanding that all types of data have limitations. Successful campaigns that can expand target audiences and create scale will need to include a combination of data. The key is ensuring that data is properly sourced, cleansed and verified.
Trust should underpin every data partnership you enter -- your customer relationships depend on it. As second-party data relationships are coming back into fashion, marketers who take proactive steps to ensure privacy and ethical use, and that the data can be confidently matched at the highest rate possible through identity resolution, will reach the highest number of receptive customers, which is what second-party data relationships are all about in the first place.