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Zero-party data: What is it? Why is it the key to unlocking an entirely new model for marketers? Hint: it’s not just the actual data that’s valuable; it’s also a way businesses can fulfill the promise of true personalization and building long-term customer relationships.

So, what is zero-party data?

It is NOT:

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  • Third-party data — data from vendors that don’t necessarily have a relationship with the customer, including third-party cookies
  • Second-party data — information from partners with whom customers interact, like web content publishers or sites that sell related products
  • First-party data — data that a brand collects from customers on its own site, such as browsing habits and purchase history

Zero-party data is defined as information that customers actively, intentionally and directly share with a brand. Examples include communication preferences, survey responses, products in a wish list, personal goals, occupational verification and requests for updates on new products.

Arguably, there is overlap between first-party and zero-party data, as both are collected or captured from an individual customer. However, zero-party data merits a separate category due to the nature of how it’s conveyed. Zero-party data is information that customers openly and affirmatively share with brands rather than data they passively provide while online.

Marketers know zero-party data is valuable, but most brands aren’t using it as effectively as they could. When customers share zero-party data, it’s an invitation to personalize their experience on their terms. That’s a gift from the consumer to the brand, and it’s an opportunity for a paradigm shift to a fair value exchange model.

A fair value exchange between brands and consumers

It’s well established that consumers are willing to share information with brands if they get something they value in return, such as special offers. That’s the idea behind loyalty programs. The consumer signs up, sharing personal data such as their mobile number, email or home address in exchange for discounts or other rewards, like a heads-up about sales.

In too many cases, brands don’t take full advantage of this opportunity. They might offer coupons customers don’t use (providing no value) or gamify a complex points system that the customer has to manage in order to take advantage of discounts (adding yet another task to actualize value). Sometimes, brands provide electronic swag that is meaningless to the consumer, like a non-exclusive digital badge when customers provide product reviews.

These are all missed opportunities to learn what the customer really wants from the brand. More importantly, it’s a missed opportunity to build a long-term relationship. For example, if you sign up for a big-box computer store’s loyalty program, you’ll probably get bombarded with texts or emails about equipment you’re not interested in and unsubscribe.

What if, instead, the retailer gave you an opportunity to tell them exactly what you’re interested in and how often you want to hear from them, such as: “Send me emails once a month and only about new gaming laptops”? That’s valuable information for the brand because the specificity (gaming laptops only) displays high intent, and it’s an invitation to provide high-quality content and value you, the customer, want. In other words, it’s a fair value exchange. With zero-party data, brands move beyond a transaction-based relationship to create a trust-based relationship with their customers.

Reward trust, not just loyalty

Third-party cookies are going away because, while consumers are okay with sharing data if they get something of value in return, they don’t necessarily trust digital platforms to use the passively acquired information for the consumer’s benefit. It’s time for marketers to take that distinction to heart: The data consumers actively share is far more valuable than consumer data that is passively provided or collected.

So, reward trust, not just loyalty, and approach a zero-party data strategy cautiously and with good intent, knowing that trust takes time to build but can be destroyed in an instant. Approach it as a long-term play rather than an emerging tactic. Creating a fair value exchange is, in a sense, building a partnership with consumers, and in return for their voluntarily shared data, the brand must respect their choices on communication preferences and data privacy — or risk losing the consumers’ trust.

How the fair value exchange plays out will differ across brand types and consumer groups. Some people appreciate the gamification aspect of rewards programs, so it can be effective if brands make it easy to accumulate points and frictionless to use them. Others favor experiences, whether virtual or otherwise, so experiential marketing or customized virtual goods can work in this context. Exclusivity and scarcity are powerful; brands can offer select groups of customers unique products or limited-edition swag for actively exchanging specific information.

Don’t miss out on the zero-party data opportunity

Brands that reward customers who actively share their data can neutralize one of the greatest threats to any marketing campaign: An inability to break through the noise. Customers are inundated with choices in a crowded marketplace, so brands must maximize retention and re-engagement.

A non-exclusive badge on an app isn’t enough. Neither is a program that awards points without making it clear what the reward will be, or how to use the points. A program that starts a conversation with customers about what they want and how they want to be engaged allows consumers to define the terms of the value exchange. This nascent partnership can be incredibly beneficial for both customers and brands.

Don’t miss out on the zero-party data opportunity. Consider it a long-term proposition that creates trust over time, and approach it with good intentions; create a fair value exchange. Brands that fully embrace this model and provide proportionate value to the data their customers share can fundamentally transform their customer relationships into customer partnerships.

Christian Jones is head of marketing at Hawthorne Advertising.

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