How to harness the power of your 1st party data

by James Green on Friday 14 December 2018

At our all client event this year, we discussed the topic of 1st, 2nd and 3rd party data, what it all means and why it matters. This post discusses the key highlights from the event and explains why brands should focus on targeting existing customers.

Marketers are facing an increasingly challenging environment. That was the key message from the event held at Forward3D HQ.

Brands are facing a challenging environment with data consent and data clarity becoming requirements rather than preferences for the EU regulators. As a result, many businesses who often look to 3rd party data sources to expand their customer base may have seen this as a concern. However, it need not be this way.

Take care of your brand advocates

Whilst 3rd party data sources are useful for expanding on current audiences, it can also be deemed a costly exercise to recruit new customers with additional marketing activity. Whilst 3rd party data sources are becoming increasingly targeted when it comes to understanding brands customers and communication strategies. The level of accuracy and efficiency is unlikely to equate to that of the existing customer base.

As 1st party data is data that is collected on brands own audience, this data is often readily available and collected through CRM systems, email lists, sign ups and conversions. The common trait is that 1st party data is being collected from within a brands own ecosystem via one-to-one interactions with a customer/user.

1st party data in action

As 1st party audiences have already interacted with the brand previously, there is generally a higher propensity to do so again. This provides brands with the opportunity to predict patterns with how these customers will engage with them in the future. Let's consider an example within the OTA (Online Travel Agency) sector for instance, where a user who has visited webpages looking for deals on a holiday destination over the course of a 15-day period has since booked a holiday. We could infer that the user (or similar audience) may require a similar amount of time to book in the future – and visit multiple webpages.

Conversely, brands may want to understand whether supporting content is integral to the propensity to purchase for a specific audience. Lissa Hyacinth, Senior Data Scientist at Forward3D and Matt Curry, Head of Ecommerce at Lovehoney wanted to test just that. The team wanted to understand whether product videos were statistically significant in the decision to add a product to basket across a range of products; vibrators, anal sex toys and lubricants to name a few…

Whilst seasonality and weather may play a part in the ratio between new vs returning customers (rainy days may lead to more new customers…), A/B Testing infers cause and effect for this consideration when run over a period of 1 year.

The results were interesting. The team found that, whilst more users added vibrators and anal sex toys to basket when in conjunction with a product video, the same could not be said for lubricant. The test found that far more users added lubricant to basket when a product video was not placed alongside the CTA.

1st party data in search

The holy grail of advertising is to spend less money on converting more customers. How do we do this? By serving the best ad at the right moment to the right customer. This was the message from Rosie Horsfall, Associate Director at Forward3D.

We all understand the process of searching for things and buying them. Step one, search for the product we're looking for; step two, see the ad and get directed to the appropriate page; step three, checkout. Right? Well not always. Recent customer data for one of our multi-brand retailers showed this not to be the case for 70% of the sales made online from search ads. Instead, customers were searching for one brand and visiting the site, then purchasing from an alternative brand once they were there.

Whilst this can seem confusing and threaten our confidence in retailer advertising, it can also help shed light on crucial customer research behaviour, helping to join some of the elusive dots between marketing activity, website content and potential customer value.

Search advertising used to mean keyword bidding. But the targeting toolkit has grown exponentially and consumer behaviour is now something we can target or exclude to refine not just what ads we show, but who we show them to and when. Behavioural targeting, (such as whether a user has visited your website before, or how often they have purchased, or even whether they are interested in football or fast cars), provide levers to push or pull when it comes to establishing the value of a customer. This means leveraging the first party data we have from our customers and targeting them based on who they are, not just what they searched for.

So, should we just focus on 1st party data?

Whilst there are core benefits to 1st party data, we must consider how these data sources fit within the overall brand objective. For instance, if an entry level brand with a low customer base and little audience data is looking at scalability, then relying on 1st party data alone may take them far longer to acquire the number of customers that they require. In this case, supplementing the 1st party data the brand has with 2nd and 3rd party data will provide the level of reach that they need.

Alternatively, an established brand that has fully capitalised on their current audiences may look to 2nd and 3rd party data sources to gain a competitive advantage.

It is integral that brands audit their 1st party data and then build on these audiences in a concise way. By fully understanding existing customers, brands can work with 2nd and 3rd party sources to build on audiences that are known to convert or interact.

At Forward3D we work closely with our clients to ensure that they are leveraging 1st, 2nd and 3rd party audiences in-line with their core objectives. There is no one-size-fits-all and it’s important that brands find what works for them.