Harnessing First-Party Data in Ecommerce

In recent years, we’ve seen a shift in traits of what makes marketers successful, from being known as “the creatives” to being more of a “data scientist”. Of course the reality is a blend of the two but it is clear that data analysis has become an integral part of effective marketing strategies. But the question arises, “what data should I be looking at?” The answer is multi-pronged and has become even more murky in today’s uncertain “data” landscape with pending changes such as the depreciation of third-party cookies, an on-going issue for many marketers. Here we will look at the different types of data marketers need to leverage, with a specific focus on “first-party data.” Cary Lawrence, CEO of Decile, a marketing analytics platform which helps marketers to gain actionable insights from their data, explores the topic with us in a question and answer format where she provides some context for marketers to think on as they dive-deep into their first party data.

Data Defined 

Q: Could you start by explaining what first-party data is and how it differs from second and third-party data?

A: First-party data is a company’s own customer data, and typically requires a ‘match key’ (e.g. something to identify them as a known individual like an email, phone number or home address). Brands can also have access to other first-party identifiers that might be unique to their business, for example, a Customer Survey response or store location where they made their first purchase. 

Second-party data is less commonly used, and most often refers to some other company’s first party data. Perhaps a partner who is willing to share that data with you for targeting or insights. Second- and third-party data are sometimes interchangeable. 

In the context of brands, third-party data is often leveraged to append additional attributes to a brand’s first-party data. In addition to purchase metrics, you can provide a fuller picture of your customers by also enriching that profile with demographic, psychographic or behavioral characteristics.

Q: What are some examples of the types of first-party data that are most valuable for an e-commerce company?

A: An email address or phone number are the most valuable (and commonly collected) forms of first-party data for ecommerce businesses. Once a brand has a known identifier for their customers, they can leverage customer data platforms or email service providers to then convert that customer data into audience segments for more personalized marketing campaigns. In addition to purchase behavior, if a marketer has access to additional third-party metrics, they can learn more about customer personas, traits of their top value customers, and product preferences.

Data Sourcing

Q: What are the primary sources of first-party data for an e-commerce brand and how should e-commerce brands gather it? 

A: Really any location (online or offline sources) where companies collect information about their customers from their own sources. This could be from an app, a website, newsletter signup, social media, an in-store promotion or a customer survey, for example.

Typically, if consumers feel like they are getting something of equal value exchange (e.g. more personalized marketing message, tailored discounts) they are willing to voluntarily provide their first-party data (email, phone number, etc.). Marketers have many methods for gathering that data, including tactics like a landing page that is gated until an email address is provided, or only offering a special discount in exchange for that customer data. Additionally, when an ecommerce purchase is made the customer is typically required to provide first-party data – like an email and mailing address – to complete the transaction. The important thing is for a marketer to have a way to easily capture and securely maintain that customer data (oftentimes this is via a CRM or Customer Data Platform).

Q: Are there any challenges companies face in collecting first-party data while respecting user privacy and data protection laws?

A: It is important to make sure whatever [data or source] provider you are working with, they have SOC2-Type 2 certification and have been audited by a third party to ensure that the data is being safely processed and secured. 

[Lawerence notes that her platform Decile is designed to “help brands to leverage their first-party customer data to build and retain a more loyal customer base, inform product optimization strategies and drive more personalized marketing campaigns to ultimately help that brand to grow profitably.”]

Leveraging First-Party Data for Results

1. What best practices can you share for making first-party data actionable and impactful?
2. Seamless integration with your existing MarTech stack is important. Make sure that you are not just leveraging data pipes, but working with a partner who can provide advanced analytics (e.g. predictive models, personas, audience enrichment) and easy paths to automation with your key acquisition and remarketing platforms. Understanding cohorts of your customers by any dimension is critical to executing on personalized marketing initiatives.

Q: How would a brand take this raw first-party data and use it to drive actionable insights that increase sales and improve customer experience?

1. In addition to a customer data platform or CRM, you also need advanced analytics to help identify your highest value customers: those with the highest LTV and predicted LTV or propensity to purchase. Additionally, a way to identify and track your personas (sub-clusters of your customers) and understand their product preferences so that you can engage with them in the most personalized way possible. It is also essential to have automated connections to all the acquisition and remarketing platforms so that you can activate these high value segments seamlessly.
2. Are there specific tools or technologies that you find essential, besides Decile, for analyzing and activating first-party data?
3. I think that marketers should not try to recreate the wheel and build their own custom platform when existing (and vetted) solutions already exist (e.g. Shopify for commerce platform or Hubspot for CRM).
4. Can you provide a specific example of how first-party data has driven a successful marketing campaign for one of your clients?
5. One of our fashion & apparel clients found that their highest volume product (that they continued to showcase in creative for digital acquisition) was actually bringing in a lower value customer (lower LTV) but that their third most popular product was actually bringing in a much higher value customer. By making the simple switch to change the lead creative in their carousel ads, they increased revenue 20% quarter over quarter. 

First-Party Data Effectiveness

1. How do you measure the effectiveness of marketing campaigns based on first-party data?
2. Don’t rely on platform reported conversions for business impact, but look at your first-party data. See if you are bringing in a higher value customer over time (cohort LTR and repurchase rate) and acquiring more of your most valuable personas. With acquisition costs rising, it’s important to accurately target campaigns and bring in more high LTV customers to offset those costs.
3. What are the key benefits of using first-party data over other types of data in e-commerce marketing?
4. With Google Chrome’s announcement to fully deprecate 3P cookies beginning in Q3 2024 the time is now to shift your mindset to ‘identity-based marketing.’ It is essential for marketers to take control and fully leverage their most valuable marketing asset – their first-party customer data. Learn more about who your highest value customers are, understand their purchase behavior and product affinities and start your customer journey with them from the moment of acquisition.
5. Are there common pitfalls or mistakes companies should avoid when starting to focus more on first-party data?
6. Without a platform that makes it easy to sift through the ‘noise’ of first-party data with a solid data hygiene and identity resolution process, the collection and activation of customer data can be overwhelming. Make sure your partner has both the segmentation and activation capabilities that are known to be associated with a CDP, but also the advanced analytics that can be leveraged with a marketing mindset to find and retain your highest value customers.

Future of First-Party Data

1. Are there any upcoming trends or technologies in data collection or analysis that you are particularly excited about?
2. Leveraging machine learning for predicted models (e.g. High propensity to Purchase, Personas, Predicted LTV) will advance the way marketers both acquire and retain their customers. This added layer of sophistication will allow marketers to focus on growing profitably, not just growing topline revenue.
3. How are you preparing to adapt to the increasing importance of first-party data in the evolving digital landscape?
4. By continuing to build and refine our platform that was ‘purpose-built’ for leveraging first-party data that is 100% rooted in people-based matching. Leaning into AI and machine-generated audiences and personas will help brands activate more personalized marketing initiatives that are likely to lead to improved profitability.

Takeaways

It seems that first-party data may be the new gold standard in terms of data in e-commerce marketing. With third-party cookies on the way out, it would appear that collecting and analyzing a customer’s first-party data is more crucial now than ever. But beyond collecting this data, the real magic happens when you dive into advanced analytics. This isn’t just about crunching numbers; it’s about finding patterns that can guide your marketing decisions. With predictive models and automated segmentation, you can pinpoint who your high-value customers are and make sure your campaigns are speaking their language.

So, embrace first-party data, keep it safe, dig into the analytics, and make sure your platforms work together. If you can do that, whether you’re a data scientist or the creative, you’re set to come out on top with campaigns that truly connect with your customers. And remember, it’s not just about marketing; it’s about building relationships that last.