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

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Sophia Bernazzani Barron
Sophia Bernazzani Barron

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A customer data platform (CDP) centralizes customer data in one place, from which marketers, sales reps, and customer success managers can run analyses to better understand audiences. 

what is first party data

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.

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Essentially you or your business are the first party that has collected unique information about your audience directly from your audience. First party data can include things like:

  • Demographic information
  • Behaviors or actions taken across your website, app, and or product
  • Data in your CRM
  • Social media conversations 
  • Subscription-based emails or products 
  • Survey data
  • Customer feedback 
  • Customer purchase history 
  • Online chat transcripts

Why is first party data important?

First party data is important because it’s collected directly from the people you have the most to learn from — your own audience. There is no third party collecting the data or getting in the way of collection; it’s just you and your audiences. 

Having this information also makes it easier for you to retarget and nurture your audiences based on what you’ve learned about them. It also helps you make informed decisions and changes to your business processes or products based on what your audiences say they do or do not like, not educated guesses.

According to Think With Google and Boston Consulting Group, brands using first party data in key marketing functions achieved a 2.9X revenue lift and a 1.5X increase in cost savings. 

How is first party data collected?

First party data is collected by adding tracking pixels to your website, product, or social media profile that collects information about behaviors and actions and records it within your CRM or CDP. 

So, for example, whenever a visitor lands on or clicks on your website, looks at your products, or engages with a social media post, the pixel will collect and record that action. 

You can also collect first party data from customer surveys you send to your audiences, conversations with customers, or from any direct information about their experience that customers have shared with you or your business specifically. A good example of how first party data is not collected is if you were to aggregate customer product reviews from Amazon, as that would be second party data.

How is first party data used?

First party data is used for retargeting via advertisements, nurturing, and during the sales process. It's also used to learn what an ideal or best-fit customer looks like, giving you more information about how to reach out to new audiences. 

As a reference, whenever you’ve looked at a product online and then continued to see ads for the product, first party data retargeting is doing its job. 

You might also be familiar with second or third party data — here’s a quick breakdown of the differences between the three terms. 

For example, a software company working with an agency partner to re-sell its products might share its first party data with the agency to use as second party data to target and attract new clients. 

How is second party data collected?

Second party data comes from another source rather than direct actions taken by your business, like sending product satisfaction surveys. 

An easy way to obtain second party data is to purchase it from a source that has what you need. However, while it’s certainly faster than collecting it yourself, it’s riskier, as you can quickly spend a lot of money on data that is not useful to you. It’s a best practice to ask for a preview or a summary of the data you’ll receive to ensure it’s relevant to your company. 

How is second party data used?

First and second party data are used in the same way; to create ads, nurture leads, and remove friction within the sale process. 

The difference is that second party data can offer you a new perspective on your customers. You may uncover trends or patterns you overlooked or didn’t include in your own search, helping you spot customer needs or interests that you can further incorporate into your business processes and products. 

It, however, not be used as the most trusted and valuable source of information as it has been gathered from an entity with no direct relationship to your customers. It's valuable as a supplemental source. 

Third party data is sometimes compiled from multiple different sources and is sold to or bought by companies to learn more about audiences. However, since it’s not directly collected from your actual paying customers and is also available to your competitors, it may not be as useful as first or second party data. 

Third party data can, however, give you a wider view of audiences that your data could not.

How is third party data collected?

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

Another difference lies in that much third party research is conducted on random sample sizes, often by anyone that is willing to fill out the form, which is why the results don’t directly come from your customers. While this yields more participants and responses, the information might not always be useful for your business. 

How is third party data used?

While it may be tempting to use it in place of your own research, third party data should be used as a complement to your first party data. Remember that just because there are more results it isn’t necessarily 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.

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Topics: CDP

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