September 7, 2018

1st, 2nd and 3rd Party Customer Data Explained

minute read

1st, 2nd and 3rd party data are ways of classifying data and where it comes from

Conventional classification refers to the origin of a data source, but the emergence of new technology allows Data Rockstars to use all types of data together to understand and enrich customer data. This presents exciting new opportunities for you to connect with your customers.

We’ve summarised each type and their differences to help you navigate this emerging space, with a specific focus on customer data.

  • 1st party data – the data you have collected and are able to use.
  • 2nd party data – the data you receive from partners.
  • 3rd party data – data collected from everywhere else.

1st party is the data you own.

Think about the customer as the fan or groupie of your rock band. They like your music. They’ve signed up to your band’s newsletter to keep up to date with tour dates and ticket releases. You know their email, first name, and how they browsed your band’s website. You know whether they’ve clicked through to purchase tickets or buy merch. If you’ve established a Customer Data Platform, you’ll know which gigs they’ve been to, which merch they bought, when, and if they’ve responded to free ticket giveaways.

1st party data originates from the direct relationship with your customers like your CRM, email engagement, website behavior. And, it’s arguably the most valuable to the brand as it is owned, easy to access, unique and actionable.

94% of advertisers turn to their CRM as a known first-party data source to optimize advertising efforts.
- Salesforce

E-Consultancy recently reported that 75% of marketers surveyed said “first-party data provides the greatest insight into their customers”, and of those surveyed, “81% say they use their first-party data regularly”.

It’s important to know that there is often untapped potential in 1st party data, especially when customer data hasn’t been unified into a Customer Data Platform.

You need to know how your data can be used:

  1. What rights do you have over it?
  2. Have customers opted-in?
  3. Are you allowed to use it for targeting, segmentation or insights?

It’s good business practice to handle your 1st party data with care. It’ll improve the customer’s experience, and you’ll avoid fines and PR dilemmas that can damage your brand. (See more on GDPR over here)

One big challenge you might face is that 1st party data only provides insight into your direct relationship with the customer… so aside from their previous interactions with you, you know very little about other things that make them tick.

2nd party is the data from partners.

This is how you find out more about your fans (and future fans) through partnerships. Have you played a gig at a local hotel or festival? Sold tickets through a third-party ticketing website? Had a brand sponsor? All of these organizations can share their data so you can get to know your fans even better.

2nd party data is data you acquire from another organization through a commercial arrangement where there is an exchange of money, trade or other value. Acquiring 2nd party data through a mutually beneficial relationship gives you a competitive edge – it means you’ll have access to data that you wouldn’t have had otherwise, helping you build out a larger and more complete view of the customer.

As the data does not originate from direct interaction with the consumer, it could be seen as 3rd party. However, when this data is combined with CRM information owned by the brand, the line between 1st and 3rd party data is blurred significantly.

60% say they will increase their use moving forward.
- Signal

Signal have recognized through their research that “nearly 80% of marketers reporting high returns on their data-related investments are leveraging 2nd party data, and 60% say they will increase their use moving forward”. Brands are recognizing that 2nd party data is transparent, trusted and scalable to amplify their 1st party data.

And it’s when the unification of 1st and 2nd party data takes place through a CDP, that the magic really happens.

3rd party data gives you the full picture.

To find out more about your fans, you need to collect even more information about them. What other bands do they like? What sort of music are they streaming, or music videos are they watching? What other artists are they following? Where do they live? What other gigs are they going to? Are they ready to buy right now? Where do they listen to music? Which celebrities influence them? Who else likes your band but isn’t yet signed up – the list goes on.

3rd party data is data that relates to your customer’s world, entirely separate from any connection to your brand.

Typically modeled and licensed for use, 3rd party data can help to define important variables such as drivers for purchase, likelihood to buy and potential value. A Customer Data Platform enriches your customer records with 3rd party data out of the box. For example, we provide demographics and household data with Experian Consumer View and Roy Morgan and retail shopping habits with Mastercard.

This type of data presents its own unique challenges, with many 3rd party datasets built from small samples and modeled out across broader groups of people or households, meaning they are lacking transparency around data sources, depth and overall freshness.

Be clear on the data’s integrity, recency and important how you’re going to use it in your strategy.

Where we fit in.

Where things get really intelligent, is when and where it all comes together – 1st, 2nd and 3rd party data, in the Lexer Customer Data Platform (CDP).

How these streams of data are gathered, organized and activated is critical – and the Lexer CDP brings all of these sources of customer data together into an accessible, analyzable and actionable asset using machine learning. Lexer integrates your customer data from multiple sources to create a single view, and single source of truth to power both customer and prospect data.

This is what takes you from a musician to a true rockstar – you’ll know everything there is to know about your fans, from which gigs they’ve been to, which merch they’ve bought, how, where and when they buy their tickets – through to other music they are streaming, where they live and who influences them. The opportunities are transformational.

Your rise to Rockstar-status doesn’t need to end here – discover more insights into achieving a single customer view by exploring our recent guide Navigating Martech or the Lexer Data Culture Study here.

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