The Importance of First-Party Data for Scaling ecommerce Brands

A primer on First-Party Data — and how to leverage it for growth.

Meta (a.k.a Facebook) lost billions in market value when Apple announced new privacy features for customers. This kind of change trickles down to other companies too, especially ecommerce companies that rely on third-party ad platforms to market accurately.

But that doesn’t mean independent brands are completely left out in the dust. This is where first-party data (often abbreviated as FPD) comes in.

Not only does first-party data help with more customer insights, it’s actually better than the information you can get from third-party advertising platforms— here’s what I mean.

First-party data means insight with consent

First-party data is when you know your customer (or potential customer) directly because they consented to sharing information with you.

Examples of first-party data include:

1. Pre-purchase based on cookies or UTMs: Click data, navigation data, contact information provided through lead magnets, and preferences expressed through user accounts or similar.

2. Post-purchase based on customers providing information: Financial information, address, and data about which products they purchased.

The powerful thing about first-party data is its fidelity. First-party data has direct lineage back to the person who did the action (or at least segmented understanding of the person, in the case of cookies). In comparison, the hallmark of third-party data from advertising platforms is that the platform collects the data and you get to access it for targeting. Customer knowledge of (and consent for) data tracking is often limited at best. Further, it’s much easier to game or show up inaccurately due to malicious actors.

Navigating a changing landscape with first-party data

Privacy rules, whether at the company or country level, are giving customers more opportunity to opt out of anonymous third-party tracking. As a result, advertising platforms can still rely on their quantity of users but are less able to offer targeting.

This is the real power of first-party data. Once you have it, you don’t lose it. And you can use it for purposes that actually benefit customers:

Gather in-depth personas (individual): Learn more about your actual customers (potential and actual) so you can craft marketing copy that resonates.

Build segments (group): Leverage your data to build segments you can use to display relevant advertising that won’t be interruptive to your ideal customers.

Addressing the elephant you know nothing about

One major pitfall of losing third-party advertising platforms (and the hyper-targeting they offer) is there will always be a portion of your customers that you don’t understand or know because they didn’t consent to sharing data.

However, this problem can actually self-correct by redirecting investment from third-party data platforms to first-party data initiatives:

  1. As third-party advertising platforms lose targeting capabilities, the ROI of the platform goes down. As a result, brands might spend less on those platforms.
  2. Spending less on these platforms due to lower ROI frees up budget room.
  3. This budget room can be reallocated to community-based initiatives that offer value or benefits to people before they become customers.
  4. People who might opt out of anonymous cookie tracking might willingly provide information about themselves in return being able to join a community.
  5. Your business now has a rich source of first-party data to build in-depth personas on the individual level and build segments for advertising.

The actions look a lot different - and require different skill sets - but it can be equally effective over time.

A digital take on traditional business practices

While third-party data reigned supreme for over a decade with the advent of search and social media giants, first-party data is the only type of customer data that has withstood the test of time. Third-party data is a lot like gossip, whereas first-party data is a lot like information shared by a trusted confidant. This is why Chord focuses on building features that make it easy to collect and analyze first-party data. We recognize that new technology tools are essential to accommodate the sheer mass of information brands have in front of them - more people and more data points than ever before - but the fundamental game of providing value is the same as it ever was.

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