The Position of Zero Occasion Information within the Way forward for Loyalty Advertising
In the past, loyalty marketing was powered by behavioral data gathered from customer interactions over time. It serves as the basis for advertising planning and analytical knowledge and comes from the “T-Logs” of point-of-sale systems that are used in both online and stationary retail.
By: Tim Collins
“Smart” marketers know that successfully executing a loyalty program strategy requires that behavioral data be complemented with qualitative data gathered through member communications. The communication between a brand running an opt-in-style loyalty program and the customers who join the program is an exchange or “dialogue” that enjoys a halo of trust and sets future expectations. When the brand asks customers questions about their likes, needs, and wants, the answers are immensely more accurate than those gathered through focus groups, exit surveys, and intercept studies.
In short, all of this data (and subsequent insights and program development) is critical to creating programs that consumers want to participate in – and stick with.
Recently (around 2018) both types of data, which are fundamental to a successful loyalty execution, were given new names. Traditional behavioral data is now called First Party Data (FPD) and the qualitative data obtained through member communication has been called Zero Party Data (ZPD). To the best of my knowledge, Forrester was the first to introduce the term zero party data, and the term has become famous for representing the potential heart of the future of digital marketing. It has also created uncertainty and confusion in the marketing community.
As the marketing world adapts to the reality of the elimination of cookies, government regulations like GDPR and others gain in importance, and a growing generation of data-savvy consumers fed up with irrelevant, disruptive, and pointless marketing, a new urgency has rightly emerged in the market crept in system.
So what is zero party data??
Forrester defines ZPD as the “data that a customer” intentionally and proactively with a brand that may include center of preference data, purchase intentions, personal context and the way the person is supposed to recognize them through the brand ”. These underlined words are a critical aspect of the ZPD.
To add some details, my opinion is that ZPD is shared by a client with a specific purpose. It is given to a brand consciously and in anticipation of better service and a relevant response. It is the notion of dialogue that matters, and the implicit expectation of this exchange of intentions, beliefs and values is key to the success of using ZPD.
You might not be surprised to hear that ZPD isn’t something customers are in a rush to share, but when you ask people questions in the context of something they care about, with a clear understanding of why you’re asking, they become much more open for sharing.
To breathe life into the concept, here are two examples to differentiate between zero party and first party data:
1) When you search for shoes on a retailer’s website, it leaves a web search history that is classified as first-party data. Interacting with a live chat window and giving the context as to why you want to buy the shoes will likely lead to ZPD. When you let the brand know that you’re going to an important family gathering and ask if you’d like to build a full outfit around the shoes, you’re providing more personal context – that’s ZPD’s gold. Likewise, if you say you like the shoes but just want to buy a gift for someone else, ZPD tells a different story and requires a different relevant answer.
2) Choosing a drink at a Coca Cola Freestyle machine simply means you are making decisions that have been planned in advance by the machine. Although this can be a source of market information for Coca Cola. However, the customer does not share the context in which they make their decisions and is therefore considered an FPD. If the device asks: “How thirsty are you?”, “Have you just come from the gym?”, “Are you on a diet?” Or “Diabetic?” That would be ZPD and could enable the machine to select the most relevant and desired beverage selection to lead. Think how much stronger the ZPD would be for Coca-Cola from a product innovation perspective.
The main differentiator in classifying data as zero party is that a customer is willing to share more in anticipation of better service or a more appropriate and personalized product. Context is added and a valuable source of transmittable data is retained to inform future encounters. This allows the brand to penetrate deeper and become more contextually relevant to the customer for current and future interactions.
Why is zero party data so important?
Zero party data is important because it provides a direct connection with – and richer feedback – from the customer and combines to create a unique brand value. Marketers have an almost limitless ability to digitally monitor their customers’ online behavior, with the exception of a loyalty program or other brand-centric club that requires customers to sign up “by invitation”. In essence, marketers have only created customer profiles with the tacit consent of the customer. Yes, when browsing a website, consumers are required to consent to the use of cookies (at least since the advent of privacy regulations around the world), but clicking this button is something most consumers don’t think twice about.
The sense of urgency in collecting ZPD arises as the market moves away from traditional profiling methods. The wheels are already moving to limit the ability of marketers to track consumers’ browsing and buying behavior. If you are reading this article in Europe, you will know how aggressively the EU has tightened its legislation in this area.
Some of the changes are there today, while others are slated to go into effect by the end of 2023. In early 2020, Google announced that it would remove third-party cookies from its Chrome browser by 2022, a date that has since been extended to the end of 2023. Apple has rolled out its introductory policy for the use of Identification for Advertisers (IDFA ) changed to require Apple mobile phone users to opt for tracking on a per-app basis.
The changes on the horizon come because of one important fact: Consumers have grown tired and suspicious when brands take their data, market it, and sell it to the highest bidder. For the consumer, this has created the noise we all feel in our inboxes and on our mobile devices. Because of this, data protection regulations have spread all over the world, even in China.
As a marketing manager, what should you do about it?
Some people say marketers need to look for a new approach to digital marketing just because the cookie goes away. But the importance of ZPD isn’t tied solely to marketers being cornered. The more fundamental problem to be solved is that the usefulness of the behavioral data that brands have been collecting for years has been thoroughly worn out. Brands have commercialized the data, worked on it with partners, applied AI and machine learning to it, used it in personalization engines, and more. The result is that our customers are skeptical of these tactics and we need a better way to build more authentic relationships.
While we need to keep investing in working with first party data, we also need to focus more on zero party data or miss a huge opportunity. From my point of view, marketers have two options:
1) Keep going the AI path, collecting more data from disparate sources in a black box and processing it to spit out huge amounts of offers and promotions that end up pissing off your best customers.
2) Start by gathering real world information through proper dialogue with the customer. Use ZPD to create emotional bond with customers, build engagement and trust, create brand ambassadors, and climb the ladder of loyalty.
Focusing more on ZPD is the only way brands can reclaim the magic that shopkeepers had with their customers in the “good old days” – or in the classic line of “Cheers” – where everyone knows your name.
How do you start on the ZPD path?
The process is easier than you might think. Think about what you want to know about the customer that you don’t know today. Maybe you own a fitness facility and see your members doing all kinds of workouts. The problem is, you can’t ask invasive questions about the “why” behind your training. However, you can create a situation where partners work together to collect the ZPD informing their fitness activities.
For example, a healthcare provider who is familiar with individual health conditions can ask, “Are you interested in a fitness program that will help you with your illness?” Referring insured consumers to a partner fitness provider with the intention of offering any number of conditions work can open a meaningful dialogue between the customer and the gym. Now the gym owner can have a meaningful conversation about whether someone is looking for a beach body, getting fit for their favorite sport, or maintaining their health to moderate a physical condition before their spring break trip. And the idea of working with partners – especially new and fresh partners to offer your consumers new added value – is definitely a growth area for marketers as well. We’ll get into this idea in a future post.
summary
Marketers should move towards zero party data to identify an inevitable eventuality. The change has already begun and if you don’t move now you risk getting left out of the digital marketing conversation. Additionally, our customers seem to be giving us a unique opportunity to unlock a brand’s ability to serve them better. All we need is to ask new questions and listen in new ways. Focusing on ZPD is a unique opportunity to take a brand, your brand, to the next level.
There is legitimate excitement about ZPD, and the most important first step is to ask your customers what they want from you. Being consistent and experimenting will produce results.
Second and third party data will always play a role as it is very important to understand the behavior of other similar groups of customers. But train your second and third party data for purposes other than personalization – that is the potential and promise of zero party data.
Tim Collins, Chief Data & Analytics Officer, Cognitive, is a proven business developer, consultant, and general manager with experience working in NA, EMEA, and APAC specializing in customer-centric retail, customer analytics, category management, and personalized communications for retail and CPG.
