As ever-stricter privacy laws are passed, zero-party data may be the only way to future-proof your consumer interactions and prepare your company for the future.
Marketers today face an unprecedented, seemingly self-contradicting consumer landscape. While four out of five consumers prefer companies that personalize the buying experience based on their preferences, 92% of consumers also want businesses to give them control over their own data. In short, the customer attitude has very much become, “Give me what is most relevant to me and only leverage the minimal amount of data about me to do so, nothing more.”
Recent data privacy laws like the General Data Protection Regulation (GDPR) in the EU give consumers a chance to act on that mindset by requiring companies to provide opt-outs for cookies and tracking. As a result, many customers have chosen to opt out, and marketers have fewer options to collect consumer data for use in their marketing efforts.
Seemingly to evolve out of these needs and privacy regulation requirements is the concept of zero-party data. Since zero-party data, by definition, encompasses only data that individuals freely and proactively supply to companies, a correctly applied zero-data policy allows consumers to both take control of their privacy and also receive a personalized experience. It also allows companies to continue to inform their marketing efforts with consumer-provided data that the consumer has agreed to provide for this purpose. Here’s what you need to know about why zero-party data is important and how to meet your consumers’ expectations for both privacy and personalization.
See also: 7 Countries Creating Cross-Border Privacy Standards
The Why: Consumer Expectations and Trust
Marketers won’t always find today’s privacy-first world easy to navigate regarding consumer expectations for personalization. For example, a major European privacy regulator called for a full ban of ad targeting early last year. Advertisers may have hoped that was an isolated incident. However, the proposed Banning Surveillance Advertising Act of 2022 in the United States, plus additional calls by privacy advocates to ban online behavioral advertising, have contributed to an ominous trend.
These demands are very telling: consumers don’t want companies to collect their data without their express permission. Why? Because most businesses have failed to earn their consumers’ trust.
Yet despite the widespread demands for less tracking and a reduction in passive data collection behind the scenes, around 80% of consumers are glad to directly share their preference data—i.e., zero-party data—with a company to get a more personalized experience. For example, when you first set up an account on Pinterest or Instagram, both platforms ask you about your preferences in order to personalize your feed, and most people answer readily. That’s an example of zero-party data.
By contrast, a platform that simply collects data passively about your viewing habits over time and uses that data to personalize your feed is using first-party data. Not everyone is thrilled with first-party data collection because it usually violates that fundamental consumer preference, which is that consumers want to have control over their own data. In particular, consumers get very unhappy about brands that aren’t transparent about how they collect and use first-party data or companies that use gray-area tactics to obtain consent, regardless of how big or reputable the company may be.
Facebook is a prime example of a company that has failed to address consumers’ privacy preferences and suffered from the failure. Late last year, a poll showed that Facebook is the least trusted social media platform in the US, and over 50% of Americans actually believe Facebook is harming society overall. The main reason for this is that individuals don’t feel they can trust Facebook with their personal information. And with good reason, since there were several major privacy scandals related to Facebook in 2019, 2020, and 2021. Some of the scandals inevitably involved leaks of first-party data that users didn’t particularly want to share in the first place.
On the other hand, brands that strive to respect users’ privacy concerns by giving individuals control over their own data often see an increase in consumer trust. For example, late last year, Apple made a choice in favor of privacy and transparency that seems to have garnered considerable consumer trust and may have improved the company’s bottom line. Simply, Apple chose to allow consumers to opt out of third-party device tracking for advertising purposes. The response from consumers to increased control over their privacy was unsurprisingly quite positive.
In summary, consumers have been making their privacy concerns perfectly clear. It’s time for companies to respond, and those that respond positively can win consumers’ trust.
The Hows: Zero-Party Data Best Practices
Here are some things you can do to follow Apple’s example to increase consumer trust while also collecting insightful data directly from your customers with their permission. In short, avoid gray areas in how you try to get consent for data collection, don’t ask for too much information at once, and communicate the intent for data collection and your intended use of the collected data clearly.
Let’s take a closer look at the concept of avoiding gray areas. What does a “gray area” in data collection look like? Well, you may have heard of something called dark patterns in user interface design. Dark patterns are the shady methods companies sometimes use to trick, manipulate or otherwise influence consumers into giving consent for data collection, a subscription, or a purchase instead of allowing them to make a fully informed choice.
For example, let’s say your website presents users with a dialogue box allowing them to accept or reject taking a survey. A survey is a prime example of zero-party data collection as long as the consumer makes a fully informed decision to participate. But in this case, let’s say your dialogue box automatically highlights the accept button or that the accept button is much more prominent than the reject button. That could be an example of a dark pattern that might direct consumers to subconsciously favor the accept button.
Another example is a page that requires users to untick a box to opt out of having their data shared with third parties outside your company. Since the default is to leave the box ticked, a user might not know to untick the box in order to opt out. This means consumers may not even realize that they’re sharing data with third parties.
Since the definition of zero-party data is data that is freely and proactively given, there’s absolutely no room for dark patterns in a good zero-data policy. Plus, relying on shady methods is a good way to lose consumer trust and incur massive fines.
When it comes to asking for too much data, how could you possibly know whether you’re doing that or not? Well, if your surveys are longer than a few questions, most of your consumers will not take the time to fill out the form. In fact, the shorter and simpler your questionnaire or survey, the more productive your collecting process will be. Try asking your consumers just a few questions about their preferences briefly at the beginning of each new interaction, for instance, when they log into the website or app. Then you can tailor the interaction in real time based on your consumers’ input.
Which leads directly to the third point: communicate outcomes clearly. Explain that you’re asking for the users’ preferences to give them a personalized experience. For example, Yelp asks consumers to submit certain personal data about dietary restrictions upfront in order to personalize restaurant recommendations accordingly. Yelp makes it clear that the platform will use the data for that purpose, and people willingly share the data because it makes finding a restaurant that fits their dietary needs that much easier.
All in all, if you prioritize transparency, avoid asking consumers for too much data, and endeavor to clearly communicate the immediate advantages of zero-party data to users, most consumers won’t mind providing preference data and a limited amount of personal information in order to have an improved experience.
Zero-Party Data for the Win
There’s not much that can beat zero-party data when it comes to understanding a consumer’s preferences and providing them with a personalized experience based on those preferences. And as we see the passage of ever-stricter privacy laws, zero-party data may be the only way to future-proof your consumer interactions and prepare your company for the future, so long as you are transparent that you are collecting this data and how it will be used.