ParadigmBusinessConsulting

Breaking Down the Data Types: How Brands Should Comprehend 1st, 2nd and 3rd Party Data

Category: SMALL BUSINESS
September 2nd 2021
6:53:06 pm

For a handful of years now, it has been recognized that.

That’s a pretty big statement.

However, given that today’s hyperconnected world is incredibly dependent on a variety of forms of data, this assertion is understandable in many ways.

For today’s retailers and marketers, learning how to use first-party data, second-party data and the like are essential skills to engaging customers, driving conversions and achieving success online.

In particular, learning and how to use third-party data to further business goals are foundational elements to scaling an eCommerce business.

That said, successfully utilizing these data forms means that merchants must first understand the difference between them and their place within a company’s efforts, as well as how each type of data is used.

That is what this piece explores.

For those who are looking to better understand how to use first-party data, how to use second-party data or even how to use third-party data, look no further.

On that note, let’s get started.

What Is First-Party Data?

First-party data is information that brands have collected from their audience directly. “First-party” refers to the party that collected the data.

As far as marketing strategies like retargeting are concerned, first-party data is the best type to leverage. This is particularly true in light of on Chrome and similar industry developments.

Part of the reason for this is that first-party data is the most reliable when making predictions and forecasting consumer behaviors.

First-party data can be comprised of information such as:

  • Data from a company’s CRM
  • Data produced by on-site or in-app behaviors and actions
  • Data from social media profiles
  • Data from product or email interactions
  • Data from surveys
  • Direct customer feedback

The Benefits of First-Party Data

Since first-party data is a brand’s own raw data, sellers can control how it is collected (as well as what is collected), as well as how it is stored, secured and managed over time.

By controlling these parameters, merchants can help to ensure its accuracy and integrity.

Moreover, first-party data gives sellers a competitive edge, as the brand maintains exclusive insights into customers, thereby allowing the business to optimize its experience, products, messaging and the like.

The Limitations of First-Party Data

While there are undoubtedly a myriad of benefits associated with learning how to use first-party data, there are some limitations to its application as well.

Namely, first-party data only gives merchants insights into their own audience. Therefore, this kind of proprietary information does not provide merchants with much understanding of new audiences who have yet to engage with the brand in some way.

How First-Party Data Is Collected

Since first-party data is growing in importance, it is vital for retailers to understand quickly.

Fortunately, there are a myriad of tactics sellers can deploy to achieve this aim.

For instance, lead generation forms are one of the easiest and most common ways for merchants to harvest data from visitors. Sellers can use these in conjunction with offers like a coupon, downloadable like an eBook or similar perks that incentivize an exchange.

Similarly, retailers can conduct consumer surveys, quizzes, incentivized account creation and other strategies can be deployed as well. 

Retailers can also utilize customer relationship management (CRM) platforms to collect data on customers as they interact with a seller’s website, emails, social profiles or even support agents.

Another tactic for collecting first-party data is to implement progressive profiling. For those who are unfamiliar, is the process of slowly accumulating information about customers over time, as opposed to trying to get a bunch of data at once.

How to Use First-Party Data

Frankly, how to use first-party data is a rather large subject given the numerous ways in which it can be applied to advance a brand’s goals, campaigns, on-site experience and the like.

One of the most common ways to use first-party data is to apply such info to retargeting campaigns. However, first-party data can also be leveraged to map out the customer journey to reach consumers with the ideal information or offers for each given step.

Similarly, retailers can use first-party data to, reach new audiences on social media, build more personalized shopping experiences, focus content creation efforts and generally elevate the user experience from numerous angles.

However, while learning how to use first-party data is an essential skill, there are other types of data merchants must consider as well.

What Is Second-Party Data?

Unlike first-party data, second-party data is information that a brand did not collect on its own. Instead, second-party data can be thought of as “secondhand” data.

Second-party data is typically shared between who come to an agreement about how to share audience insights in a mutually beneficial way.

For instance, if a software company partners with an agency to resell its offerings, the software company is likely to share its first-party data with its agency partner to utilize as second-party data to target new prospects.

This dynamic creates a beneficial exchange between the two organizations and helps to that stunt business growth.

The Benefits of Second-Party Data

Second-party data can be quite useful in supplying retailers with additional insights on existing customers and prospects, thereby allowing sellers to form more complete targeting profiles or.

Moreover, unlike first-party data, second-party data can give sellers important insights into audiences outside of their current customers, subscribers and followers. As a result, second-party data can help retailers expand their marketing reach and targeting abilities.

Additionally, since second-party data is provided by a trusted partner, retailers maintain most of the competitive edge that first-party data provides as a result of not being widely available.

The Limitations of Second-Party Data

Brands that utilize second-party data can run up against migration or integration issues.

The fact is that most every company is unique in how it collects, stores and manages data. Therefore, it can be difficult to combine data sets from outside of an organization with data already held by a business, given that each likely has different standards.

Moreover, second-party data can be limited in its accessibility. Finding another business that is willing to trust a company with its proprietary data can be challenging. This is particularly true in light of incidents like, as well and GDPR.

How Second-Party Data Is Collected

Since second-party data is merely another company’s first-party data, the only real way to obtain this information is through a mutually beneficial partnership with another brand.

That said, merchants can purchase second-party data, though that route is not advisable. By buying such information, sellers can quickly spend considerable sums of money on information that might not be very useful or even accurate.

However, for those who are determined to go this route, one benefit to buying second-party data is that retailers can tell the selling organization the exact information that the brand wants to buy, thereby saving team members hours of sifting through irrelevant data.

That said, it is still not advisable to purchase second-party data.

How to Use Second-Party Data

After second-party data has been obtained, it is used in a similar fashion as first-party data. Using this information, merchants can:

  • Create resonant ads
  • Target relevant audiences
  • Nurture leads
  • Eliminate friction in the sales process

These are just a few ways that merchants can use second-party data.

However, the main difference here is that this kind of data offers sellers a new perspective on customers. Since it comes from a different company, merchants might uncover new trends or behaviors that were previously overlooked or not seen.

What Is Third-Party Data?

Finally, third-party data is data that comes from a variety of sources and is harvested by a company that does not have any direct link to the visitor or customers.

Third-party data is typically compiled, aggregated, and sold to organizations as a means of helping them to create effective advertising strategies.

However, since third-party data is not harvested from a retailer’s customer base, this information is available to the seller’s competition as well.

Given recent developments such as Google ending third-party cookies and, many retailers are beginning to realize that their time is better spent collecting first-party data from their customers than chasing third-party data.

That said, there are still benefits to utilizing third-party data.

The Benefits of Third-Party Data

One of the most significant benefits of third-party data is that it is readily available and supplies a host of insights that cannot be matched to scale by an individual organization.

Up to this point, third-party data has been instrumental in helping to build upon the profiles of existing customers and prospects, as well as providing knowledge on audiences that have yet to engage with a brand.

Moreover, the data is often already arranged into audience segments, thereby disposing of the need to sort and analyze the info.

The Limitations of Third-Party Data

The fundamental drawback of using third-party data is that this information is restricted by a growing preponderance of data privacy laws and company policies.

For instance, when it comes to third-party cookies, most browsers block them by default, even if they are not required to by law.

Moreover, there is no transparency regarding how third-party data is collected. This can result in issues such as:

  • Segments of data being low-quality
  • Poorly aggregated data
  • Difficulties integrating data properly
  • Potential risks of breaching data privacy regulations

Additionally, as was mentioned earlier, third-party data is not unique to a company, meaning it can be used by competitors.

How Third-Party Data Is Collected

Third-party data is harvested and used by data providers to help enrich or generate targeted profile segments that can be bought by brands for their marketing campaigns.

Retailers can purchase these segments or infuse them into their own first-party data to enhance their targeting and create larger audience segments for various campaign efforts like social media, paid search, and the like.

There are a multitude of platforms from which third-party data can be purchased. The most common are demand-side platforms, where programmatic data providers place their data for sale.

How to Use Third-Party Data

Generally speaking, third-party data is used to complement a company’s first-party customer information.

While it can certainly be tempting to use third-party data as a replacement for research, doing so is strongly discouraged as some of the information may not be relevant to the business, it is accessible by just about anyone and first-party data are becoming increasingly important to collect in the privacy-focused online era that is currently taking shape.

Instead, merchants should analyze their first-party data for patterns of customer behavior and then compare those findings with third-party data to target those who fit.

Using this approach, retailers can see if the behaviors observed among their customers align with the majority of the market.

Final Thoughts

The fact is that learning how to use first-party data, as well as second- and third-party information, is a vital skill in the digital age.

However, given that there are advantages and drawbacks to each type of data, it is recommended that sellers utilize a blend of data types to optimize performance.

That said, given that the future of third-party data is questionable due to the increasing rollout of privacy-oriented features by major tech corporations, it is strongly recommended that retailers lean into collecting and learning how to use first-party data to drive their marketing and optimization efforts.

The downside here is that harvesting first-party data from customers is much more challenging than procuring readily available third-party information.

If your brand needs help in its data collection strategies,.

Our team of skilled eCommerce professionals can help your company establish first-party data collection and use strategies that can directly lead to business growth.