Loyalty360 Digital Roundtable: First-and Zero-Party Data and Impacts on Customer Loyalty

Mark Johnson, Loyalty 360, October 31, 2022 / –For Immediate Release

Showing Customers the Value in Providing First- and Zero-Party Data
As privacy laws continue to change and the use of third-party data and brokerage declines, businesses need to look for alternative ways to learn about their customers and customers’ interests. One of the most reliable ways is through the collection of first- and zero-party data. But what are some of the ways brands can entice their customers to share this information? What are some of the challenges they face, and most importantly, what are brands to do with the data once it’s collected?

Loyalty360 spoke with supplier members for their insights and perspectives on how brands should best incorporate first- and zero-party into their loyalty programs and ways to overcome the challenges involved.

Show Customers the Benefits of Sharing Data
With the end of the cookie and privacy laws changing, brands have been moving toward collecting more first- and zero-party data. There are several ways for brands to encourage their customers to share this data, but some strategies work better than others.

“In order to get customers comfortable with sharing their information, you have to show them that there is a benefit for them,” explains Nancy Gordon at Bakkt. “If it means that customers can get access to exclusive offers, discounts or early access, it can be more enticing to share information.”

Group FiO’s Ravi Srinivasan agrees, stating, “Today’s consumers are very savvy, and they will typically only provide data on themselves if they think it will be worth their while to do so. Having a robust customer loyalty strategy is a great way to get the customer data you want and need to successfully market but also assure your customers that there will be a benefit to them giving you that information.”

By having a loyalty program that rewards customers with frequent discounts and features like points accumulation for free or discounted items, it demonstrates that the brand values them as a customer. Furthermore, a customer loyalty incentive program that is quid pro quo helps obtain more personalized customer data.

“If a customer can see that the more data they share with you means they will get more personalized offers and rewards in return, they will be much more willing to give you the zero-party data you want,” adds Srinivasan. “And to maximize engagement, you want to make sure it’s an enjoyable experience for them. Therefore, we tell our customers that features like gamification and interactive content are essential components in any successful customer loyalty program.”

Cassie Preston at Baesman defines first-party data as data collected from consumers in various brand-owned sources.

“Your existing channels and marketing mix are your oyster when it comes to collecting first-party data,” she says. “Leverage your owned channels and marketing efforts to create an experience for consumers that makes them want to engage with you. Anything from a simply, yet creatively, designed pop-up form on your website to collect basic contact details, to a gamified, fun experience for customers to provide product and channel preferences, can be great ways to tune into what your customers want and need from your brand. It’s important to tell customers how you plan to use the data if you want them to buy into the experience of providing their information to your brand.”

Nancy Gordon at Bakkt describes a market trend whereby consumers became increasingly aware of their personal data and concerned about their privacy. She says, “A lot of that concern centered around lack of control or visibility into what was being collected, how it was being used, and if their data was secure.”

Moving forward into the cookie-less era, companies must reassure customers and instill confidence with transparency about how their data is being used, stored, etc. Aside from transparency and reassurance, companies should look to make the collection process seamless while providing immediate value with personalized experiences and bespoke offers.

Ken Kaufmann at Untie Nots states, “The starting point for customer data collection should always begin with answering two questions. ‘What value will we deliver to customers who provide the data?’ and ‘What is the least amount of data we need to accomplish this?’ Maintaining this discipline, combined with making the customer experience easy and rapidly delivering the value after the data is provided, will build the trust needed with customers to collect more data in the future.”

Gordon adds that since the privacy laws have changed, consumers are worried about their privacy. It is extremely important to make it transparent that a customer’s data is secure. She says, “In addition, in a time where everything is fast-paced, pointing out that consumers will receive a more personalized e-commerce experience could also have them share data.”  

Attila Kecsmar at Antavo encourages brands to use surveys that are both gamified and incentivized. He explains that the former means the survey needs to be designed in a way that answering the questions is fun and engaging, “like a Tinder-style mechanic, where customers can agree/disagree with statements or like/dislike product categories by swiping either left or right.” This allows customers to answer a large number of questions with minimal effort – even on mobile devices.

“As for the latter,” he says, “loyalty programs can provide the perfect, and cost-effective, way to encourage customers to engage with the aforementioned surveys (after all, many people only fill out surveys if they get something in exchange). For instance: without a loyalty program, a business needs to use a direct $10 coupon as a reward, but if you have a loyalty program, you can offer 100 points. But because a $10 coupon would cost 200 points, you incentivized a survey completion without fully giving away a coupon.”

Sue Frech, Founder & CEO of Vesta clarifies that amassing zero-party data should be a delicate dance of asking and receiving, and it only works when engaging digital touchpoints are used to ask consumers directly for further information. This could be in the form of an interactive game or quiz, an online brand community, customer feedback surveys and polls, or loyalty programs.

She adds, “With the right technology, this highly valuable data should append to a customer’s profile and be used to deliver relevant and dynamic offers. When it comes to a zero-party data strategy, marketers should do more showing and less telling. This creates a powerful feedback loop between the data shared and the value received.”

Don’t Bite Off More Data Than You Can Chew
Of course, collecting zero-party data is not without its challenges, and it is easy for brands to make certain mistakes, especially during the initial stages of changing privacy regulations.

Kaufmann has seen the most common mistake in brands asking for more data than they are going to immediately use. He explains, “Asking for a bunch of communication preferences or personal interests before having the ability to act on the data to deliver value to the customer erodes trust and will make it more difficult to collect additional data in the future.”

Preston agrees that one of the most common mistakes is collecting data brands don’t intend to use to personalize their customer’s experience. She says, “Analysis paralysis is a real thing, and brand over-collection of data they don’t intend to use can really add confusion to the understanding of customer behaviors with your brand. Make sure if you’re collecting data on your customer that you’ll use it to personalize their experience with your brand. Not how you think they should experience your brand.”

Gordon is also onboard, adding that brands can sometimes ask for too much personal information, but customers may not want to provide every detail about themselves. “It is important to only ask for information that will be key indicators in a personalized experience for the consumer,” she says. “Likewise, when asking for information, it is important to ask the consumer the right questions. If not, it may steer them away. For example, if they placed an order, you can ask if they’d be interested in similar categories and related products.”

Vesta agrees with asking for too much data, but they cite two additional errors. Says Frech, “There are three big mistakes brands make when collecting zero-party data: asking for too much too soon, having disconnected data between channels, and poor data ethics.”

She explains that with data that is intentionally shared, it’s important to remember there is an extra workload on the consumer. Asking for too much could lead to them abandoning the brand entirely. And while disconnected data has been a long-standing challenge in marketing, nothing will frustrate a consumer more than this kind of data being ignored.

Lastly, it’s important to be transparent with consumers regarding data ethics. Consumers want to know not just what data is being collected but also why. Why does the brand believe certain data is helpful? How does the data collected fit in with the brand’s unique value proposition?

Gordon also cites transparency as a key to collecting customer data. She says, “Nothing will turn a customer off faster than using data that was voluntarily shared in a way that does not align with your stated purpose upon collection or their expectations. Companies that utilize best practices will explain why they’re collecting the data, how they’re using it, and will not stray from those use cases. Then it comes down to delivering immediate value. If a customer does not see a benefit to sharing their data, they will be less likely to do so in the future.”

Kecsmar says a big mistake he sees is brands trying to harvest all the personal data during the enrollment phase. “The registration form should be as brief as possible so that fresh members aren’t scared away,” he says, adding, “All the info you wish to know about the customer should be put into the profile section or a survey. Then, to ensure members don’t skip it, use bonus points or one-time loyalty program benefits, to entice customers to answer them.”

Srinivasan urges brands to demonstrate that they value their customers by giving them robust encouragement to share their data with the brand, to make it clear that the more data a customer shares, the more customized rewards they will receive on their journey.

Incorporating Loyalty Platform Technology
Loyalty suppliers and platforms have ways to support their clients in this struggle and assist with the collection of zero- and first-party data with a myriad of tools, structures, and strategies.

Vesta believes in empowering brands to take back their consumer relationships from third-party sites. Its customizable solution allows brands to capture and harness zero-party data to drive new customer acquisition, spark authentic brand advocacy, and engage consumers between purchases to supercharge loyalty efforts.

Frech says, “Our all-in-one, online brand community platform secures your consumer relationships, mobilizes your brand advocates, and captures zero-party data to accelerate the speed to ROI of all your marketing efforts.”

At Group FiO, they focus on the importance of building a robust Customer Loyalty Platform and strategy. Says Srinivasan, “This allows the brand to engage the customers and collect first-party data on purchases and engagement. For zero-party data, we design and implement engaging forms and build rewards to increase declaration of zero-party data. We also ensure that zero-party collection is at the point of interaction, so it is more meaningful.”

Untie Nots is a white label solution, and with the adoption of GDPR and CCPA, the group has had to shift its approach. Kaufmann explains, “Several years ago we could collect zero-party data, such as email addresses, on behalf of our client. Now we use the client’s real-time APIs so that the customer-provided data never hits our platform and is instead written directly into the client’s systems. What’s important to us and the client is delivering the data request at the right time within the user journey. Context is king.”

Antavo’s platform supports incentivized profiling via a dedicated module, allowing businesses to set up a variety of survey questions, including like/dislike, image option or free text-style questions. Once the survey is ready, clients can use the back-office to assign a corresponding reward, based on its unique loyalty program logic.

Baesman offers a full suite technology solution that is part loyalty platform and part customer database platform (CDP). Preston emphasizes, “All of our services are centralized around one thing – and that is that data should drive business, marketing and program decisions for optimal ROI.”

Collecting Zero-Party Data at Scale
Collecting zero-party data is one thing but collecting it at scale is another challenge altogether.

Srinivasan offers this advice. “In order to scale zero-party data acquisition, your customers need to be engaged and entertained. This means offering something in return for their attention or preference data. So, marketers might consider a few different options. This could look like offering interactive experiences that encourage interaction, simultaneously collect research, and accrue an explicit opt-in.”

She recommends features like questionnaires, polls, quizzes, contests, or social stories to utilize mechanics that are appealing for customers and give them a reason to engage and, as a result, provide their zero-party data. The reward can be a discount or free shipping.

“Customers these days are all about content, so giving access to exclusive content and social media recognition are both strong and useful motivators,” she adds. “Capturing consumer motivations, behaviors, interests, intentions, and preferences at scale means you provide a truly personalized experience. By offering a value exchange, establishing a true quid pro quo relationship, will result in your customers providing their data without feeling they’ve provided more than they’re getting back.”

Gordon explains that zero-party data collection centers around meaningful, empathetic, and frictionless interaction. She says, “Online, this can be achieved by surveys, polls, forms, or quizzes and questionnaires. These modes of communication can be a/b tested, and/or differentiated by cohort, to determine which form-factor speaks to each unique customer. Ultimately, the method is less important than the process. The focus should be on the interaction being brief, of minimal inconvenience, and non-disruptive to the user journey.”

Vesta suggests that some of the best ways to collect zero-party data at scale are through interactive engagement that is continuously personalized and “learns” as the consumer engages more with your brand.

Frech expounds, stating, “Interactive engagement can be lifestyle and product quizzes, augmented reality filters, or an online brand community. An online brand community is a dedicated destination for consumers to connect with your brand and other like-minded people, but also it is a perfect place for collecting and acting upon zero-party data. Additionally, because online communities are about connection and conversation, consumers are more willing to share broader, value-based information like personal interests, hobbies, and lifestyle behaviors. This information can be a goldmine if you use it correctly.”

Preston suggests organizing the data that you already have to find that one customer view. “Not sure if you have the right knowledge base internally or the right tools?” she asks. “Reach out to a partner to help. Baesman offers end-to-end support from a data perspective, from data hygiene to analytics and predictive modeling and more. Call us, we’re happy to help.”

Gordon has found that the highest success rate for collecting zero-party data from customers is when the customer does not spend a lot of time providing that information. “Best practices are usually when a customer creates an account on your website, they provide their email,” she says. “Once you have that information and consent you can start to figure out ways to capture the data without having the customer spend too much time on the questions.”

Showing the Customer the Immediate Value
Once a brand has successfully collected first- and zero-party data, it is in its best interest to use that data in a timely fashion, and in a manner in which customers can see an immediate value.

Untie Nots cites the importance of brands to clearly and quickly connect the act of providing the data with the resulting benefit or value the customer receives from the brand based on the provided data.

“For example,” says Kaufmann, “our platform encourages non-digital customers to become digitally engaged with our client. We ask users (Players), right after they’ve selected their first Challenge (offer) to provide their email address so they can receive email updates on their progress. 20% to 30% of Players provide this information the first time they are prompted.”

“Simply put, use collected data to personalize your customer’s experience with your brand,” says Preston. “The brands that do this best combine a one customer view of data into a packaged marketing message that speaks to that customer in their preferred channels and intercepts them at the time of consideration. Brands like DSW, Starbucks, etc., leaders in the loyalty space do this well.”

Once a brand has zero- and first-party data, Group FiO advises them to combine the data and look for cohorts with clustering logic. Once segmentations are established, they must perform a simple A/B test with control groups to establish the segment’s validity.

Says Srinivasan, “The brand needs to be mindful to ensure the objectives are clear on whether the desire is to increase engagement of the brand or purchase of the brand’s products and services. The most interesting result we found were strategies on customers to focus on and which ones were costing us money and effort to keep their business.”

“One of the reasons zero-party data is so valuable is that it allows you to understand the values most important to your consumer,” says Frech. “Zero-party data is paramount to relationship-building and is especially important for staying top-of-mind between purchases.”

She gives this example: Suppose you delivered a lifestyle quiz, and a consumer identified that they have a graphic design interest. With the right platform, this data should be used to deliver a relevant offer like an art contest or a survey asking for feedback on a logo redesign.

“When this process becomes automated, executing personalized engagement at scale becomes achievable. All of this is to drive emotional loyalty – which consistently leads to consumers buying more products, being less sensitive to competitive promotions, and driving brand advocacy and new customer acquisition.”

“It’s all about using data to serve customers what they want and items or experiences that are relevant to them,” says Gordon. “If you know a customer likes certain brands and you can use their previous purchases to serve things you know they will like, then it is a win for the brand and a win for the customer.”

Another example from Vesta comes from ARM & HAMMER baking soda. The brand initiated its Simple Solutions online community to increase household penetration by collecting information about a consumer’s lifestyle and then offering relevant educational tips on the many uses of Baking Soda. For parents, this has included science experiments and craft ideas. For people with an active outdoor lifestyle, they have shared tips on using Baking Soda in skin remedies like bug bites. This personalization has led to a 16% increase in household consumption by community members and a 10% lift in Net Promoter Score.

“Broadly speaking, all data a brand can be harvested should be used in segmentation, product research, product recommendation and personalized communication,” explains Kecsmar. “In practice, one use case a potential fashion brand could use that would make the customer’s jaw drop is to identify their favorite brand and product type via an incentivized survey, and then offer a coupon for that particular item type during the customer’s birthday (information they disclosed when completing their profile).”

At Bakkt, the company also suggests delighting customers with engaging personalized user experiences. Says Gordon, “A user who feels that their unique needs, wants, and questions are addressed will visit more frequently and have a higher probability for conversion.”

The company suggests that brands recommend products or services that speak to a customer’s preferences (experiences, beliefs, budget, location, etc.) to differentiate the business. Delivering recommended marketing content like blog articles that reference a user’s interests, concerns, and questions via their preferred communication channel will increase their patronage. Using that data outwardly to interact with customers, while simultaneously utilizing it internally to inform the product roadmap, makes for better products and happier customers.