In 2020, Forrester Research came up with a phrase that’s since become a buzzword among many marketers: zero-party data. Essentially, zero-party data is information that individuals proactively and freely supply to companies, so it’s reliable and meaningful. By contrast, first-, second-, and third-party data are not proactively provided by the individual to the company that is requesting it and can often be gleaned from directly or indirectly observed behaviors such as browsing or purchase activity.
Zero-party data gives companies the opportunity to establish closer relationships with their customers based on a willing exchange of data. Unfortunately, costly data breach scandals have rocked consumer trust and diminished their willingness to share their data. How high are the stakes? Well, more than 80% of consumers have stated that they will discontinue a relationship with a brand after a data breach.
If you want consumers to trust you to handle their data properly and protect their information in the event of a breach, you may need to make some adjustments to how you collect and use zero-party data. Here’s some guidance on how you should think about your zero-party data policy and why it matters.
The Necessity and Risks of Zero-Party Data
Privacy laws and practices have changed over the years, and as a result, so have the methods companies can use to collect consumer data. Third-party cookies, once an invaluable source of data for marketers, are pretty much dead. Major browsers including Firefox, Safari, and Chrome are phasing out most tracking cookies, and the General Data Protection Regulation (GDPR) in the EU has dealt another blow by making cookie opt-outs a necessary feature on any website.
As companies have had to look elsewhere to collect personalized data about their consumers’ preferences and browsing habits, roughly 50% of marketers have turned to zero-party data as the logical alternative.
That said, zero-party data comes with some inherent vulnerabilities because much of zero-party data is personally identifiable information (PII) rather than general statistics. For example, zero-party data might include phone numbers and email addresses, information that users supply to a social media platform to recover accounts when they forget their passwords. So, if a breach occurs, those consumers could be at increased risk of identity theft, phishing attacks, phone scams, and many other cyberthreats.
Nearly half of companies suffered a breach of some kind within the last year, so it’s obvious why your consumers might have trust issues. And recent privacy scandals from big companies like Amazon and Google have given users even more reason to be wary. But zero-party data only works if individuals can trust companies and are willing to share that data. Marketers need to regain consumer trust and assuage their natural reluctance to share personal information.
Collecting Zero-Party Data the Right Way
Around a third of marketers are understandably concerned that privacy-conscious consumers may be reluctant to give out their personal data. But there is an immediately evident principle that will help businesses gain the trust of consumers and encourage them to share zero-party data. Businesses should always ensure that it is clear how they intend to collect user data as well as whether they will share that data with any third parties.
There are many different ways businesses have skirted the truth when it comes to how they collect or use consumer data. For example, a company might claim to be collecting data for security purposes, for instance, so users can retrieve their accounts if they forget their passwords, when in fact the business is using that information for marketing. Or a company might openly ask consumers to agree to share certain data while the platform collects additional data behind the scenes.
Think those examples sound unlikely? Think again. In 2019, Facebook collected zero-paty data in the form of phone numbers by stating that the platform would use those numbers for security purposes, like resetting a password. Instead, Facebook used the numbers for marketing purposes, for which the Federal Trade Commission hit the company with a $5 billion penalty. This despite promises that the platform would get “express consent” when collecting and sharing consumer data. Facebook hasn’t seemed to learn its lesson, either; the company has since had numerous scandals and breaches that have combined to make it the least-trusted social media platform in the United States.
So, if you want to make full use of zero-party data for marketing purposes while maintaining consumer trust, be honest and always disclose not only what information you are collecting, but how you intend to use that information, specifically whether third parties will have access to the data.
You should also be careful to confirm that any data provider that you work with that is claiming to have collected only zero-party data has actually amassed that data with full consumer knowledge and consent. In other words, verify that they have taken the necessary steps to respect consumers’ privacy by way of sufficient notice of data collection and usage.
Zero-party data comes directly from the sources you most need to cater to: consumers. As such, zero-party data is an invaluable source of information, and there’s no reason why it can’t replace or even improve upon the third-party data sources you may have relied on in the past. But that can only happen if you put privacy first.
Privacy means putting your consumers’ needs and preferences ahead of your marketing goals. It means being honest and transparent about how you collect and use your customers’ data. And privacy first means continuing to adjust as privacy regulations and preferences change.