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Using First, Second, & Third Party Data

Posted by Steven Sheck, President, Infinite Media

March 15, 2021

How First, Second, And Third Party Data Work Together

First, second, and third party audience data are parts of a whole. Each contributes in its own way to building a high performing marketing database through quality, relevance, completeness, and scale. It is helpful to understand what they are and how they can work together.

All In The Family: First Party Data

What is first-party data? This is audience data that has been collected by businesses and organizations through interactions and transactions with existing customers, members, or prospects. It is data the collector owns and manages. Sources include purchase records, catalog usage, website registrations, survey responses, and form completions. It is precise, readily monetized, and very economical – as in free – since the collector owns the data.

The grail of marketing data is first party data. This is your customer base, your nuclear family unit. They know you and trust that your products and services will continue to satisfy their needs. Plus, they are on record as to who they are, what they need, plus how and when they actually buy. This intimate, proprietary knowledge makes them a rich source for marketing data of the finest kind; precise, predictable, and recurring. What could be better…?

…Why, More Of The Same: Second Party Data

What is second party data? This is first party data from another company that is in a similar or relevant market (while not a direct competitor). It may be obtained by establishing a cooperative relationship or a strategic alliance that is mutually beneficial to each company. This may happen directly between companies, or through a broker/manager assigned to act as an intermediary. Customer profiles, including behaviors and preferences may mirror those of the original first party data subjects. Since it has been collected from an audience directly by the owner of the data, quality tends to be high.

It is like an extended family. Think of your closest friends, and the basis of that affinity., Members of a second party data cohort should resemble your first party data audience in important psychographic, demographic or firmographic ways. These nuclear family units that can add to your first party family, forming a larger audience of customers for whom your business is relevant. While first party data is the crown jewel, one thing it may lack is scale. Second party data is a way of enlarging an audience while maintaining strategic focus.

Expanding The Universe: Third Party Data

What Is third party data? This is data collected and prepared by professionals, data experts whose integrity and experience is important to the value proposition. The databases and mailing lists they create are then brokered for sale to marketers and researchers. There are many sources of such data that are theoretically “public”. Others are under the control of owners who engage with brokers to manage the sale of their data assets. The fact is these sources tend to be too vast, complex, or simply unavailable if privately owned, making it unrealistic for data customers to evaluate and parse. Government databases (census.gov for example), other public records, surveys, directories and more are typical resources for demographic and behavioral data that must be collected, verified, and prepared for use. It’s always a good idea to begin the process with a solid understanding of what you have, and a clear picture of what you need. Careful planning will save time and money.

Marketers, like politicians refer to “building a bigger tent”. The scale and variety of third party databases offer the most potential to grow a first party database, through greater reach, and appending of detail. They include data points which enable large scale predictive modeling and expanded reach that fits with well-defined customer personas. Making good use of third party data requires discipline. Sources must be vetted scrupulously. Data sets are often composed of many more elements than either first or second party data users may need. Marketers must take a close look at their house list with respect to their marketing plans, to “know what they don’t know”.

The Data Choice: Quality? Reach? BOTH!

In a nutshell, first party data is the highest quality because it is proprietary and precise. A first party database can grow “close to home” augmented by second party data that mirrors the first party data set in specified ways. First party data can reach its full potential for both reach and relevance aided by high quality third party data. Through casting a wider net via “look alike” modeling, appending key data points, revealing behavioral insights, and even exposing fresh marketing opportunities, the value of first party records is enhanced. Think of it as a customer database on steroids.

In recent years, the movement toward more stringent privacy controls has led to measures such as the EU/US Privacy Shield, Consumer Privacy Protection Act (CCPA) and the General Data Protection Regulation (GDPR). It is important when using any form of audience data that applicable statutes be observed. Information concerning collection, processing, and use of personal data is available on the GDPR or CCPA websites or from any reputable data broker/manager. You are welcome to contact us with questions you may have about mailing list data, its sources and use. That said, whatever market a business wants to reach, there is an approach to building the largest possible database of prospects that precisely fits the target.

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