What is First-Party Data?

Data is king in small business. It’s the fuel that keeps your business humming efficiently, from product development to customer service. But not all data is created equal. Third-party data is collected by data aggregators and sold to businesses, so they’re effectively cold-calling people who know nothing about the business. Second-party data is someone else’s data that has been shared with you, like by a partner. It’s good, but it’s not the cream of the crop.

The best data is first-party data. This is information your business collects directly from its own customers and audience. It’s the insights you gather firsthand, straight from the source, without any dependence on outside providers. First-party data is the cleanest, most actionable data because it has been shared with you voluntarily by customers who are at least interested in your product or service.

Here, we delve deeper into first-party data, including the compliance regulations and responsibilities companies have when acquiring and managing it.

What is First-Party Data?

First-party data is data that you collect directly from customers, visitors, or users. There’s no middleman involved in its acquisition, so you know that it is authentic, good data. Since you’re the one who collected it, you own the data and have full control over how it’s used, analyzed, and protected. And, most importantly, first-party data must be gathered consensually. First-party data must be collected with the user’s clear permission (like checking a box) or through their actions (like browsing your website).

Some common places you might collect first-party data include:

• Website and app activity: This includes what pages people visit on your website, what products they click on, how long they stay, what they add to their cart, what they actually buy, or any forms they fill out.
• CRM Systems: A customer Relationship Management (CRM) system can automatically gather data on purchase history, contact information, notes from customer support interactions, and much more, making a treasure trove of first-party data.
• Surveys and feedback: Direct answers from your customers gathered through online surveys, feedback forms, or direct conversations.
• Email and newsletter sign-ups: Names, email addresses, and more information given when someone subscribes to your email list or newsletter.
• In-store and offline interactions: Data from your point-of-sale (POS) systems, loyalty programs, customer service interactions at your physical location, or information collected at events or trade shows.
• Social media: Direct messages, comments, likes, or other interactions on your business’s owned social media pages.

Why First-Party Data is Useful for Small Businesses

First-party data is a strategic imperative for growing small businesses. Every dollar and customer relationship matters, and data allows you to operate more efficiently. Since you gather first-party data directly from your customers, it’s usually the most accurate and trustworthy information you can get. That provides deep insights into your customers to help you understand their behaviors, preferences, and needs better than with third-party data. Not only can you better cater to them, but you can target people like them to draw them to your business.

Because first-party data is exclusive to your business, it can also give you an advantage over competitors. For instance, a coffee shop that gathers customers’ drink records through a loyalty program has a better likelihood of surprising a loyal customer with their drink already made when they walk through the door. What coffee drinker doesn’t want that customer experience? They’d never go anywhere else!

Finally, there are legal advantages to gathering first-party data rather than relying on second- or third-party data. Because you collected this data with direct or implied consent, first-party data is generally more compliant with evolving privacy regulations like GDPR (Europe’s General Data Protection Regulation) and CCPA (California Consumer Privacy Act). This can significantly reduce your legal risk and build trust with your customers.

How to Collect and Use First-Party Data Effectively

We’ve touched on some practical first-party data collection methods already. You can easily collect and manage data leveraging your existing tools and technology, but there are also many programs you can adopt to help.

If you don’t have one already, it’s a really good idea to get a CRM like Hubspot, Zoho CRM, or Salesforce. These programs can integrate seamlessly with your website and apps to collect and organize customer data in a single place, updating automatically as information changes or as you gather new data through online purchases, online registrations, loyalty program sign-ups, customer support experiences, and more sources.

After collection, some smart ways to use your first-party data include:

• Personalize customer experiences: Use the data to tailor your website content, product recommendations, and email messages to individual customer interests. If a customer frequently buys pet supplies, show them new pet products. If they abandon a cart, send a reminder email.
• Run highly targeted marketing: Create ad campaigns that speak directly to your most loyal customers — or your churned ones. Using your data, you can create “lookalike audiences” on platforms like Facebook or Google to find new potential customers who are similar to your most loyal ones. Targeted marketing is more efficient than just fishing for customers in the dark.
• Improve products and services: Analyze feedback and behavior data to identify what your customers truly need and want, as well as any pain points they experience. This direct insight is invaluable for guiding your product development or service enhancements.
• Deliver better customer service: Your first-party data provides a complete view of a customer’s history, so you can provide faster, more informed, and more personalized support.
• Inform business strategy: Analyzing your data can help you figure out which customer segments are most profitable, identify new trends in purchasing behavior, and calculate your most valuable customers and what they buy. All of your data insights can empower you to make smarter, data-driven business decisions.

Challenges and Important Considerations for Small Businesses

While there are clear benefits, managing first-party data effectively also comes with challenges and important considerations. These may include:

• Data silos: Data can end up scattered across different tools or departments if you have many different places you gather it. For instance, your CRM, Google Analytics, and email sign-ups in your marketing platform may not integrate, creating “data silos.” This makes it difficult to get a complete picture of your customer and business. Make sure all of your data collection methods are funneling to the same place.
• Data management: As your business grows, collecting and organizing a lot of data can become complex without the right systems and processes in place. It’s important to have a plan for how you’ll store and access your data efficiently.
• Data quality: Keeping data up to date is a constant challenge. Old, incorrect, or duplicate data can lead to bad decisions and wasted marketing efforts, so you should regularly review and clean your data.
• Consent management: To avoid legal penalties, you have to continuously manage and respect your users’ consent preferences. This means creating clear opt-ins and easy opt-outs wherever you gather data, establishing an accessible and easy-to-understand privacy policy that explains your data collection, usage, and sharing practices, and protecting data with secure platforms.