Zero-Party Data: Personalization and Privacy Can Coexist

If the customer goes more in-depth and joins Ulta’s loyalty program, special in-store events that are closed to the public are opened to them. Ulta also offers all shoppers “clienteling” services, such as free beauty consultations with makeup, hair, nail, or skin experts. The company attaches the data it gets from the consultation into its loyalty program, further enabling personalization and sales.

Capturing zero-party data like this is critical, particularly as businesses start moving away from the third-party cookies that they used for years to collect data from website visitors.

“In terms of the experience of the data collection itself, it requires a balance, just like with any survey or information-gathering technique,” Heitzig says. “Everyone wants to ask 50 questions to make sure they truly understand, but it’s better to ask the five that matter so people actually complete the process.”

Xanthopoulos also suggests adding a progress bar that enables customers to fill in some basic data early on and then add other information when they get more comfortable in their relationship with the company.

Assuming the customer provides accurate data, which is more likely if the customer wants a long-term relationship and is not just trying to cash in on a one-time offer, zero-party data can be used with algorithms to continue to refine personalized offers, according to Xanthopoulos. He points to Amazon as one company that has done this well. Amazon customers can indicate which types of products they prefer, which then will be promoted when they visit the site. But if over time a customer’s purchasing history indicates a different preference, the top offers presented might change.

That enables marketers to stay on top of customers’ evolving preferences, without the customer having to do a lot to receive the most relevant offers.

“Zero-party data represents the crux of consumer consent to engage with [companies],” Raj says. “It represents the willingness of the customer to do something with the organization.”

It was only a few years ago that customers were reluctant to share so much data about themselves, Raj says, but the popularity of Amazon and its recommendations have changed all of that.

Cookie tracking is going away, and with consumers able to connect with a growing number of devices and methods (e.g., growing social media options), marketers need to focus on leveraging zero-party data, according to Raj.

To get the most value from the data, Raj recommends using it at various stages throughout the customer journey. “In the discovery phase, put the brand first as a choice. As the customer goes deeper into the sales funnel, the brand can offer ever more precise choices.

“Context is everything,” Raj continues. “You have to present the right content to the customer at the right point of the customer journey. The content has to be contextually relevant.”

Ulta Beauty, for example, offers its own brand first, then will use zero-party data to differentiate offers—including those from other suppliers it carries—based on customer preferences, then more targeted offerings as the customer explores specific categories of products.

Some coffee companies follow a similar approach, leading with the brand. Then as customers become more engaged, the companies can provide more detailed content about, for example, the type of beans used, the farmers who supply the beans, the regions where the beans are grown, etc. The idea is to start with zero-party data, then to increasingly engage customers to secure current and future purchases.

Raj and Heitzig both point to Disney’s use of “magic bands” at its theme parks as an excellent example of a company maximizing zero-party data to engage customers.

Disney guests can obtain the magic bands ahead of their visits. The wristbands contain chips with guest names, digital park entry tickets, digital hotel room keys, and other information. A guest with the band will be recognized by certain electronic devices in the park, creating a highly personalized experience. Typically, these are high-value guests who will be staying for multiple days, meaning additional revenue.