Stepping up on your data game

Stepping up your game by going beyond first and third party data: The power of sharing and trading data with your partners

Data Management Platforms (DMPs) track consumers’ online behavior, leverage the company’s own knowledge on the consumer and integrate relevant third party consumer data to create unique and insightful consumer profiles. However, today media agencies tend to be prevalently in power of marketing campaigns related consumer data, especially when collected and activated via traditional processes, but even when bought programmatically. This needs to be recognized as a clear challenge for companies seeking to leverage their consumer data in the most effective and efficient way. In many cases the lack of transparency and control leaves the companies helpless: What the media agencies really do with the existing consumer information and to what extent they activate the data to make their clients more successful and save cost, is questionable.

Leveraging consumer data in a smart way is the top priority for almost any company, which relies on marketing campaigns and consumer insights to drive sales. Often companies already collect data, but in many organizations this happens in silos or the data is not leveraged thoroughly enough to generate valuable insights

Data Management Platforms rely on three different types of data sources to create their user profiles: first party data, second party data and third party data.

Rich first party data – a marketer’s goldmine

Most people are familiar with first party data. First party data describes all information that a company or brand has collected within their own walls and that is owned by the company or brand. It is considered each marketer’s goldmine as it is knowledge about consumers that is unique to the own company. Consequently, it is your best bet to get a differentiated view on your consumer

Typically, valuable 1st party data assets are CRM and POS data or even transactional purchase data: For example, basic contact data that can be combined with sales data including product preferences and shopping behavior based on loyalty card information

Another highly relevant first party data source is your own website traffic information that indicates which content has been viewed, which search terms have been entered and which other site activities have been performed, such as videos watched, clicks or hovering over products have been observed

Next to website traffic information, mobile and social media data can be collected: consumers are tracked when using marketer’s apps or liking, sharing or commenting on social media sites

However, the value of first party data is strongly linked to the recency of the attributes. Events such as “car purchasing intention “ (e.g. triggered by the search and the configuration of a certain car model) and the action of ordering it online need to be scored in real time or near real time to ensure the audience profile is not outdated and ads for this car are wasted on a consumer who already owns it

Usually, direct to consumer businesses have an advantage over non direct to consumer businesses when it comes to collecting 1st party data.  Those companies directly interact with their consumers online and track their consumer journey from interest in products to actual purchase

Even though first party data is a marketers key asset, it is limited in scale: it contains only little information about your consumer and there is a lot more to know about him on the way to a 360 degree consumer view

Third party data – how it compensates first party data’s lack of scale

Third party data are audience segments collected and sold by data providers and traders. Traditionally, there are different types of segments. Demographic segments contain information on gender, household income, household composition, ethnicity, age geography, etc. Behavioral segments are built based on the assumption that a consumer’s purchase interest or level of intent can be determined by tracking her online behavior (e.g. “she checked flights from New York to London on swoodoo.com, so she must be planning that particular trip”). Contextual segments are created based on understanding website content - either on page level or even on word level - to make sure ads are placed in the right context. Other segments concentrate on search, keywords, user profession, or on information which products a user owns.

Third party data provides the required scale that first party data is missing. Purchased segments are used to enrich first party information and consequently add a lot of knowledge to consumer profiles. For example, a user has been tracked on car manufacturer’s homepage. This information is enriched by demographical data on users household size and income allowing the car manufacturer to show ads for cars in users income range.

In addition, third party data is used to detect new, so far “unknown” users that fall into certain segments. The audience is extended by correlating known customer profiles and their behavior with third party data sets. Let us assume a campaign successfully targets 30-40 year old females interested in cooking and bakery that have been seen own the companies cookie recipe homepage. In order to extend the audience to users that have not visited the company’s website, cookies of 30-40 year old females interested in bakery are purchased from a third party data provider.

However, as informative and detailed 3rd party insights are, they are available to all players in the digital advertising system and hence do not allow to gain a competitive advantage or unique consumer insights

Second party data – data sharing as pathway to unique and scalable data

An area which is not yet exploited to the full by most players but combines the advantages of both first and third party data is second party data. Second party data is data shared and traded through partnerships. It presents a very powerful source since this information is unique – as it is someone else’s 1st party data -  and scalable. Consequently 2nd party data can be a marketer’s strongest weapon in the sense that it is a source of unique information that is not available for purchase by competitors

Hence, it is essential to identify the right strategic data partners. The possibilities range from non-competitors, to industry partners positioned at a different point in the value chain to competitors of the same industry that offer slightly different products. Those partnerships can either be mutual in the form of data sharing or based on financial compensation in the form of data trading; in the latter case they are usually still more cost efficient than buying third party data segments

Second party partnerships commonly seen in the industry are between brands and retailers, brands and credit card companies, travel companies and credit card companies, brands and telco providers, car manufacturers and insurance companies and brands from completely different industries but similar in their consumer reach

For successful data sharing it is essential that platforms involved provide trusted transfer and control of second party data.

There is a clear action for all marketing folks: Draw up a plan of how to leverage your own data in a smart way. Then go out there and handpick strategic partners to team up with to best enrich your data.

Authors: Andreas Liedtke, Greg Portell, Victor Dijon, Teresa Kuebel, Nadja Goldbach