Why First-Party Data is the Key to Improving the Customer Experience

Data Storage
Daniel Bailey, Vice President, EMEA, at Amplitude

In the past decade, data privacy has become a primary concern for consumers and business leaders alike. According to Forrester, 47% of UK adults actively limit the amount of data they share with websites and apps.

In an effort to make consumer privacy a priority, many countries and governing bodies are cracking down on organisations that track users’ data across the internet, especially via third-party cookies. Google Analytics, for instance, has been banned in a number of European countries, such as France, Austria and Italy, after the analytics tool was found to have violated GDPR rules. If these rulings continue, Google Analytics may very well lose some of its most useful features within the EU. 

With third-party data all but eliminated in most cases, first-party data is coming to the fore. Not only can it replace third-party, but it is a superior option for organisations looking to understand the complete customer journey without violating users’ privacy. By gaining a far better understanding of their customers, businesses can create more personalised experiences. For many, using first-party data is new territory. Below we’ll share more about what first-party data is, how it meets the needs of today’s organisations, and how best to use it.

What is first-party data?

 First-party data is information that a business can collect from its customers about their interactions with its product or service. The data belongs to the organisation that collects it and has not come from anywhere else. One example of first-party data is user attributes, such as names, ages, locations and phone numbers. But businesses benefit from first-party data through information about actions that users take with the organisations’ products.

Examples of events that generate this type of data include clicks, adding items to a cart, or even when a user simply hovers over an item. And this data is critical to understanding how a product is used, where users are getting stuck or abandoning carts, and where opportunities for an improved customer experience may exist.

First-party data vs third-party data?

First, there’s the obvious. Most companies have already removed third-party cookies, making it far more difficult for advertisers to track users across the web and serve them targeted ads. But there are a number of other benefits to leveraging first-party data. For one, because third-party data can be bought by organisations and their competitors, it doesn’t necessarily offer any competitive advantage. First-party, on the other hand, belongs entirely to the organisation that owns it. Additionally, organisations using first-party data are more likely to keep with privacy laws and regulations. Not only is this a privacy best practice, but it also impacts how organisations can best serve their customers. Taking in potentially inaccurate or low-quality data means personalisation efforts will be off, which could wreak havoc on a business’ decisions.

First-party data is also highly flexible, allowing organisations to easily update, add, and create audience segments or specific groups that exhibit certain behaviours. This is often impossible when businesses receive their information from another organisation or third-party source. Finally, businesses have more end-to-end control of collecting, analysing, and activating first-party data. This means organisations can ensure the data’s quality and accuracy and no longer rely on any partners or providers. This is pivotal, especially considering the cost of poor-quality data. Organisations spend 10-30% of revenue on data quality issues. Embracing first-party is a step towards overcoming this challenge.

How can first-party data transform customer experiences?

By nature, first-party is highly relevant to an organisation’s customers and products. Insights gathered are specific to that particular product and can be activated to drive tangible and valuable improvements. For instance, friction points in the journey — like a bad user experience that causes users to abandon a product altogether — can be easily identified and resolved using first-party insights.

Activating first-party data can also crucially help boost retention and the overall experience of customers.  For example, one of our UK-based customers who creates personalised gifts was battling with data overload.  By taking first-party data and looking closely at how users engaged with their in-app customer experience, they realised the journey was suboptimal.

In fact, people often looped back to the very start of the journey and clearly did not understand the difference in offerings, such as the difference between a card or postcard. The team created clearer labels with these insights, making the customer journey more intuitive to push people through the funnel. As a result of product changes made based on first-party insights, the team increased its signup-to-paying-user conversion metric by 66%. While it may seem minor, these changes had a major impact when removing friction, adding value, and delivering personalised experiences are crucial in creating loyal customers.

Letting go of third-party data, and embracing first-party, is a non-negotiable for businesses today. While the global shift away from third-party may seem daunting, it is a huge opportunity for organisations to get closer to and understand their customers better than ever before. Organisations taking the plunge now with their first-party data will come out in the race to create personalised and meaningful customer experiences.

Daniel Bailey, Vice President, EMEA, at Amplitude.

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