Last updated: Zero-party data: Definition, examples, and marketing benefits

Zero-party data: Definition, examples, and marketing benefits

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Zero-party data is redefining the way brands think about customer identity.

While many companies operate with customer profiles built from device graphs and third-party data, forward-thinking customer experience leaders are headed in a different direction. They’re incentivizing customers to share preference information, building this zero-party data into customer profiles, and using it to deliver truly personalized engagements.

Through this approach, they’re earning more trust, delivering market-differentiating personalization, and ultimately boosting customer loyalty.

What is zero-party data?

Zero-party data is data that a customer willingly shares with a business. It includes things a consumer wants a brand to know about them, such as personal characteristics like size, style preferences, and purchase plans.

Digging into this definition uncovers a couple of key points:
  1. This data type only has value if a brand can associate it with a first-party customer profile. This means it needs to be collected after customers identify themselves on digital properties through registration or log-in.
  2. It’s wholly permission-based since customers intentionally share it. For brands, this means there’s no ambiguity about using this data for segmentation, in personalization engines, or for product recommendation tools.

Zero-party data vs. first-party data

So how is zero-party data different from first-party data?

Businesses collect first-party data through interactions with customers. This data type includes site-wide, app-wide, and on-page behaviors. Examples include hovering, scrolling, and active time spent on page. The goal of collecting first-party data is to better understand customers’ interests and intent.

Zero-party data has the same goal, but it’s created by directly asking customers for their preferences in a value exchange. The engagements can occur on websites, social media platforms, mobile apps, or in preference centers.

In this web engagement example, a coffee brand requests a customer’s date of birth in exchange for an exclusive offer.

What is zero-party data? It's data that customers willingly give to a brand. This image shows a brand offering a gift in exchange for a birthdate.

As another example, the coffee brand requests data on the customer’s drinking habits in exchange for a more personalized experience.

In this last example, the brand asks about the customer’s views on sustainability.

Countdown to zero: Why now?

The concept of collecting customer interests and using this data to deliver relevant engagements is the essence of modern marketing.

So, what makes zero-party data a key trend instead of another jargon exercise? Here are three key reasons:
  1. A clear step toward transparent, value-added relationships

For years, marketers defined audience segments and fueled personalization efforts with inferred data sources. This led to poor conversion and retention, as well as a massive loss of customer trust. The zero-party data trend represents a welcome move toward transparency and trust.

  1. Increased digital interactions

Whether it’s to save time, find products or services easier, or avoid going into a physical store, consumers are creating accounts, logging in to digital properties, and engaging online more than they ever have before. In fact, three in ten U.S. adults say they are ‘almost constantly’ online. This activity is a golden opportunity for brands to ask for preferences, learn more about customers, and deliver improved experiences.

  1. The reality of data deprecation

Google Chrome is preparing to remove third-party cookies in 2024. Apple is making it easier for users to block data tracking. At the same time, regional data privacy laws are getting tougher. As a result, it’s getting much more difficult to collect and activate customer data at scale for marketing purposes. Collecting zero-party data mitigates a brand’s regulatory risk exposure while strengthening its ability to create truly personalized engagement.

The holy grail for marketers is finally within reach

Zero-party data gets marketers closer to the holy grail of “the right message to the right customer at the right time.” But it also comes with a heavy responsibility.

If customers take the time to provide preference data, brands need to hold up their end of the bargain by delivering real value.

Three technologies enable today’s enterprises to collect, process, and activate zero-party data effectively:

Customer identity and access management (CIAM) software helps consumers seamlessly and securely identify themselves through registration and log-in. It enables brands to develop and deploy the screensets used to create the preference questions at scale. With CIAM, brands can associate the zero-party data they collect to customers’ first-party, permission-based profile.

Customer data platforms (CDPs) build on these profiles by connecting other sources of data to create a holistic view of customers from across the enterprise. CDPs also surface insights, such as a customer’s buying preferences, and orchestrate this context to engagement systems. Touchpoints across marketing, commerce, sales, and customer service can benefit.

Enterprise consent and preference management solutions ensure the data brands collect have the proper consent agreements associated with it. They create an audit trail, so brands can address regional data privacy law requirements as they collect, store, and process customer data, including the zero-party variety. They also allow brands to offer self-service portals where customers can manage their communications preferences, which is a key type of zero-party data.

What’s in it for me: Incentivizing consumers to share data in exchange for rewards, exclusive offers, and more

While consumers want personalized experiences, they’re also under siege from virtual noise. Brands need to offer clear value in exchange for zero-party data. Otherwise, customers won’t bother.

The promise of better product recommendations and personalized experiences are common value rewards. Yet some brands are taking the value-for-information exchange up a notch. They’re experimenting by offering loyalty points, exclusive offers, and discounts to incentivize customers to share their interests.

Consumers change their minds a lot. An effective zero-party data strategy needs to account for the fluidity of preferences.

This means brands need to provide the ability for them to modify preferences. It also means requests should be constantly refreshed to form a cadence of engagement.

Better communication gets customers to stick around

George Bernard Shaw is credited with the quote, “The single biggest problem in communication is the illusion that it has taken place.”

By finding innovative ways to collect zero-party data and use it to improve personalization, brands can avoid this problem and strengthen customer loyalty in 2022 and beyond.

What can a CDP do for you?
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