A Basic Definition of First Party, Second Party, & Third Party Data

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The major benefit of using a customer data platform (CDP) is that it centralizes all available customer data in one place, from which data-driven marketers, sales reps, and customer success managers can run analyses to work more effectively to attract, close, and retain successful customers.

CDPs are primarily focused on collecting and aggregating first party data, but they can also store second and third party data as well. In this blog post, we’ll discuss the difference between the three terms, and which type of data is best for your business.

When it comes to retargeting, first party data is the best of the best to use, because it’s collected from the people you have the most to learn from — your own audience. That makes the data as reliable as possible for making predictions and forecasting future behavioral trends. It can be comprised of data like:

  • Data from behaviors or actions taken across your website, app, and/or product
  • Data in your CRM
  • Data from your social media profiles
  • Data from your subscription-based emails or products
  • Data from surveys
  • Data from customer feedback

How is first party data collected?

First party data is collected by adding a pixel to your website, product, or social media profiles that collects information about behaviors and actions and records it within your CRM or CDP. Whenever a visitor lands on or click your website, looks at your products, engages with a social media post, or fills out a survey, that data can be collected by the business.

How is first party data used?

First party data is used for audience retargeting via advertisements, nurturing, and during the sales process. It’s also used to learn more about what an ideal or best-fit customer looks like to learn more about how to reach out to new audiences, and how to close those site or social media visitors familiar with your brand who might become future customers.

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If you’ve ever looked at a product online, and then continued to see ads for the product follow you around in banner and social media ads, that’s an example of first party data retargeting at work.

In addition to first party data, you may also be familiar with the terms “second party data” and even “third party data.” Here’s a quick breakdown of the differences between the three terms.

For example, if a software company works with an agency partner to re-sell its products, the software company might share its first party data with the agency to use as second party data to target and attract new clients. This creates a mutual-beneficial relationship between the two companies and removes data silos that are restricting their growth.

How is second party data collected?

Since second party data is essentially the same information as first party data, the only way to obtain it is by getting it from somebody else. As we mentioned above, one way you can do this is by partnering with another organization that shares your goals. Since both your interests are aligned, exchanging data will only improve your customer service and marketing efforts.

The easier way of obtaining second party data is to simply purchase it. While this faster than finding a partner, it’s riskier, too. You can quickly spend a lot of money on data that’s not really useful for your business. So, if you are going to buy second party data, make sure you get a preview of the information it contains so you can ensure it’s relevant to your company.

One benefit of this is that you can find specific information without having to weed through irrelevant data. Since your making the purchase, you can tell the organization exactly what you want and don’t want from your second-party data. That way, your team doesn’t spend hours trying to find the one piece of information that you wanted in the first place.

How is second party data used?

Once the data is obtained, it’s used in a similar way as first-party data. You can create ads, nurture leads, and remove friction within the sales process.

The difference though is that this data offers you a new perspective on your customers. Since it’s coming from another organization, you may uncover trends or patterns that you overlooked in your first party research. By looking at the information from a different lens, it becomes much easier to spot customer needs or interests that you haven’t considered.

Third party data is often collected, aggregated, and sold to companies to help them build effective advertising and retargeting strategies. But, since it’s not collected from your actual customers and is available to your competitors, it’s up for debate how useful it actually is. It’s a better use of your time and resources to collect first party data about your own customers and site visitors to help inform your strategy and get better results.

How is third party data collected?

Third party data is collected and distributed in the same way format as first and second party data. Independent researchers use surveys, interviews, and feedback forms to gather information about a large audience. Then, like second party data, organizations can purchase this information for their own use.

The difference though is that most third party research is conducted on random sample sizes. Unlike first party data where the information is derived from your customers, third party data simply surveys anybody willing to fill out the form. While this yields more participants and responses, it’s tough to say whether the information will be useful for your business.

How is third party data used?

Third party data should be used as a complement to your first party data. While it may be tempting to use it in place of your own research, remember that just because the data has more results, doesn’t necessarily make it more relevant to your business.

Instead, you should first analyze your first party data for trends and patterns in customer behavior. Then, you can compare your findings with your third party data, specifically targeting respondents who fit your buyer personas. That way, you can see if the behaviors you observed align with the majority of your marketplace.

To learn more about using customer data, read about how to conduct an RFM analysis next.

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