Zero-party data: A fair exchange between brands and customers

Zero-party data is the information customers actively, consciously, and directly share with the companies. Examples include consent for updates on new products, communication preferences, survey responses, items on a wish list, and so on.

First-party and zero-party data could theoretically overlap since they are gathered from individual customers. Zero-party data, however, merits its own category due to the way it is presented. Zero-party data, as opposed to data that customers passively provide while online, is information that consumers voluntarily and consciously share with brands.

Zero-party data is valuable, as marketers are aware, but most brands need to use it better. Customers who provide zero-party data are extending an invitation to customize their experience according to their preferences. This presents an opportunity for a paradigm shift to a fair value exchange model and is a gift from the consumer to the brand.

A fair value exchange

Consumers are known to be willing to give brands their information if they receive something valuable in return, like exclusive offers. Loyalty programs work on the same principle. In exchange for discounts or other benefits, like a heads-up about sales, the consumer signs up and provides personal information like their mobile number, email, or physical address.

Brands miss out on this opportunity far too frequently. They may provide customers with coupons they don't use (providing no value) or gamify a challenging points system that they must control to benefit from discounts (adding yet another task to actualize value). When customers leave product reviews, brands occasionally give them nonsensical electronic rewards, like a non-exclusive digital badge.

These are missed chances to find out what the consumer actually wants from the brand. More significantly, it's a lost chance to establish a long-term relationship. For instance, if you join the loyalty program of a big-box computer retailer, you'll probably start receiving a ton of texts or emails about products you don't care about and end up unsubscribing.

What if the retailer instead presents a chance to specify exact interests and the frequency of communication? The specificity conveys strong intent and is an invitation to offer customers high-quality content and value. This is useful information for the brand. It's a fair value exchange, in other words. With zero-party data, brands can develop a relationship with their customers based on trust rather than just a transaction.

Rewarding trust

Third-party cookies are being phased out because consumers no longer trust digital platforms to use passively collected data for their benefit, even though they are fine with sharing data if they receive something of value in return. It's time for marketers to take this distinction seriously: Consumer data that consumers actively share is much more valuable than consumer data that is passively provided.

Since trust takes time to develop but can be destroyed instantly, it is important to reward trust rather than just loyalty and to approach a zero-party data strategy with caution and good intentions. Instead of treating it like a new tactic, consider it a long-term play. In a sense, developing a fair value exchange entails forming a partnership with customers. In exchange for their freely provided data, the brand must respect the customers' preferences for communication and data privacy, or it runs the risk of losing their trust.

The way the fair value exchange works will vary depending on the kinds of brands and consumer segments. If brands make it simple to earn points and simple to use them, it can be effective because some people value the gamification element of rewards programs. Others prefer physical or virtual experiences, so customized virtual goods or experiential marketing may be effective. Brands can reward select customer groups with exclusive goods or limited-edition rewards in exchange for actively exchanging precise information. Exclusivity and scarcity are powerful marketing tools.

Zero-party data present a great opportunity

One of the biggest threats to any marketing campaign is the inability to stand out from the crowd. Brands that recognize and reward customers who actively share their data can eliminate this threat. In a crowded market where customers have many options, brands must maximize retention and re-engagement.

A non-exclusive app badge is insufficient. A program that awards points without specifying the reward or how to use them is also not enough. Customers can choose the conditions of the value exchange through a program that engages them in a conversation about their needs and preferred methods of engagement. Customers and brands can both greatly benefit from this new partnership.

Seize the opportunity presented by zero-party data. Think of it as a long-term venture that develops trust over time. Approach it with sincere intentions. Create a fair value exchange. Businesses that fully adopt this model and give customers' shared data a fair amount of value can fundamentally change their customer relationships into customer partnerships.