First party data and CDP: A recipe for excellent CX

It may seem like customer data and CDPs have little to do with recipes, but they do. The value of first-party data is a central ingredient to customer experience and CDPs are a solution for strengthening, shoring up, and generally ensuring that your data collection and interpretation is planned for maximum effect.

Imagine this: you’ve been entered into a salsa-making contest. But you can only use the tools and ingredients you have in whatever space you’re in right now:
Are the ingredients fresh?
Do you even have the right ingredients?

Maybe you chop up some tomatoes and onions, add a little salt, and voila! It’s… technically salsa. But it sure as habanero won’t have anyone coming back for seconds.

But first, lets get familiar with the most important ingredient of all… first party data.

What is first-party data?

First-party data is information your business obtains directly from individuals interacting with your business, either through online or offline engagements. This data is owned by the business entity collecting it and can be used for a variety of purposes, such as personalization, advertising, and analytics.

First party data can include information like:

• Behaviors or actions taken across your website or your app
• Subscription-based products or services
• Email or newsletter subscriptions
• Data in your CRM system
• Survey data
• Customer feedback
• Customer purchase history
• Online chat transcripts
• Social media conversations
• Demographic information

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Why is first-party data important?

First-party data is important because it’s information collected by your business directly from its customers and brings with it the following benefits:

• Data ownership: The business entity collecting the information owns the data about its customers, and can use it for various purposes with relying on third-party data providers
• Quality & trust: Since information is collected directly from customers who have offered it voluntarily, there’s a relatively higher degree of trust in the quality of the information collected.
• Control & security: Since business entities collecting first-party data own the data, they have better control of the security and use of the data
• Customer insights & personalization: First-party data gives businesses unique insights into their customers and their preferences; this information can be used to tailor or personalize products, services, or entire experiences based on customer’s individual preferences

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How is first-party data collected?

First-party data is collected directly from individual customers and stored in an organization’s CRM system or a CDP solution; it’s important for companies to be transparent about the data they collect, and obtain consent from individuals where necessary.

Companies must also comply with relevant data protection regulations, such as the General Data Protection Regulation (GDPR) in the European Union.

Some of the many ways businesses use to collect first party data include:

• Forms and surveys
• Website and app tracking
• Cookies and pixel tracking
• Customer account
• Transactional data
• Purchase history

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What are the barriers to first-party data collection?

There’s enormous value in first-party data and a growing priority on collecting and using it, however many companies are struggling to unlock its potential.  

Barriers to collecting first party include:

• Data security: Individuals are wary about freely providing personal information to businesses due to security concerns. In recent years, the number of data breaches and ransomware attacks, when cybercriminal sell stolen customer information on the dark web, has skyrocketed.
• Data privacy: Privacy concerns have become a major barrier to data collection. In addition to customers being guarded about personal privacy,  data protection regulations, such as GDPR, have placed restrictions on the collection and use of personal data.
• Data quality: Ensuring the quality and accuracy of first-party data can be difficult, as individuals may provide inaccurate or incomplete information.
• System limitations: Collecting first-party data can be technically challenging, especially for companies that operate across multiple channels and devices. There may be limitations in terms of data integration and management, as well as in accurately tracking individuals across different touchpoints.
• Resistance to change: Businesses may be resistant to changing the way they collect and manage data, as well as unwilling to invest in new technologies like a CDP solution that supports the collection, processing, and storing of first party data.
• Unclear customer value: Businesses typically do a poor job of articulating the value to customers in them providing their personal information; as a result, individuals are less likely to provide their personal information, if they do not receive any tangible benefits in return.

Overcoming these barriers requires companies be transparent about the data they collect, provide clear and compelling benefits to individuals in exchange for their data, and comply with relevant data protection regulations.

Companies must also continuously improve their data collection and management practices to ensure the quality and accuracy of their first-party data.

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Use the value of first-party data for optimal results

Back to the salsa contest – the contest is a month away. You have time to plan, shop, and test your favorite recipe – maybe even research the judge’s taste preferences. Just how much better would that salsa be with the foresight of planning?

Ask me what this has to do with a CDP and I’ll tell you: Todo, or everything.

Having the right ingredients (and knowing what tools and ingredients you have) is as crucial in customer data management as it is in the kitchen. Customer experiences are driven by data – increasingly, first-party data allows us to accurately create CX experiences geared to the individual. If that data is incomplete or inaccurate, you’re going to get a bland experience at best.

At worst…

…it’ll cost you handsomely. Poor data quality can cost companies around $15 million a year on average, which explains why 68% of digital leaders are investing in new data platforms to enhance CX and business agility.

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You need to know your end goal, and work your way back to your shopping list:

• What data do you need?
• Where will you get it?
• How will you make sure it’s fresh and high-quality?

Sure, you could makeshift a recipe, retrofitted based on what you’ve got. But why risk serving up something bland when you can use a CDP to check every box and deliver CX with spice?

A well-planned data strategy, facilitated by a customer data platform, can help amp up CX and keep people coming back for seconds and thirds.

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Weak data plagues many companies, in part because how businesses use data has evolved –  the way we collected data 10 years ago doesn’t meet today’s needs.

That means that even the most proactive, future-casting organizations – the ones who saw the importance of collecting data early – may be facing challenges. The good news is that a lot of data quality issues are fixable. And a CDP can help.

Some of the most common first-party data issues are easily resolved:

1. Inaccurate, duplicate, or incomplete data spread across multiple systems
2. Non-standardized data structures
3. Data collected isn’t relevant or useful to the business

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Once you discover the value of a CDP, it makes the reasons for having one much more clear. Here are a couple of challenges that organizations face when it comes to data, and how a customer data platform can help solve them:

Inaccurate, duplicate, or incomplete data spread across multiple systems: Imagine each section of the kitchen (the pantry, the fridge, the freezer) was stocked by someone else, and you don’t know when they went shopping, or how fresh the ingredients are. That’s what it’s like trying to execute great customer experiences when your data is spread across multiple systems.

And if you design experiences based on inaccurate data, you may misstep and damage your brand’s reputation. Weak data doesn’t just impact individual customer experiences – it can lead to a lack of confidence in business decisions overall.

How a CDP can help: Customer data platforms pull data from your company’s various systems and repositories and compile it into a single, comprehensive database that’s accessible to everyone who needs it. They bring all those tools and ingredients out so you can see exactly what you have, and what you may be missing.

In doing so, a CDP will clean up your data, removing duplicates, merging multiple records of the same customer, and identifying gaps. An accurate understanding of what data you have, and the quality of it is one of the most fundamental steps you can take to level up your data-driven experiences. 

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Non-standardized data structures: There’s nothing like working with a recipe from another country. You know you have all the same ingredients, but they use different words and measurements then you’re familiar with. It takes a lot more time to cook when you’re constantly having to convert milliliters to teaspoons or googling “is there a difference between poaching and blanching?” The value of first-party data grows with methodical collection, interpretation, and use.

In business, even something as seemingly simple as one department asking a question with a checkbox, and another asking a similar question with an open-ended form can lead to data translation issues. Those issues don’t just cause confusion, they can make it impossible to get accurate insights. To get the most value out of your data – from trends and insights to campaign execution – you need it to follow the same structure.

How a CDP can help: As your CDP consolidates data into a single place, it automatically cleans and standardizes it, meaning when another system submits a query to the database, it will get all the applicable data – not just what was entered a particular way. Unifying your company’s data into a single, standardized system unlocks the ability to build rich, dynamic customer profiles, and recognize behavioral, cross-channel patterns.

When businesses first keyed into the value of first-party data, they started collecting it before understanding what they’d use it for. Now, companies are swimming in data – everything from in-store transactions to smart-device usage. The volume alone can be staggering.

One core element of data quality is relevance. Superfluous information takes up valuable space and actually hampers your data’s effectiveness.

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First-party data: How a CDP lets you get quality in, and quality out

CDPs don’t simply make it easier for you to collect and use your data; they let you track its usefulness.

• What data are you using in your customer segmentation?
• Which targeted campaigns are creating useful leads?

You can zoom out and see what’s working, what’s not, and where you need to fill the gaps. With that sort of meta-understanding, you can adjust your data strategy “shop” smarter next time. The value of first-party data becomes even greater when you have the resources to use it to its full potential.

Once you realize how much of your pantry is filled with junk food or old ingredients that’ve been sitting there for years, untouched, you can get rid of them and make space for the good stuff. You can make your pantry – your whole kitchen – work for you.

How customer data management can unlock growth and power revenue

When you go beyond identity and descriptive data, and get into more qualitative or attitudinal data, you can learn a lot about what’s important to your customers. Good customer data management lets you do just that.

To deliver experiences that work, go beyond bland, and keep people coming back for more, you need to start with data as your core ingredient. Because in CX, you are what you eat. As the saying goes: garbage in, garbage out.

Thankfully, you don’t have to meal-prep alone. A customer data platform is like a sous chef for your data, helping you prepare your ingredients and setting you up for success.

Getting by on a technicality isn’t enough to succeed in today’s business landscape – in a world filled with bland experiences, you need to be spicy.