First-party data in marketing is crucial—but it’s not enough

Mary HennenJune 6, 2022

Imagine you’re a retailer, and you have certain customers purchasing trendy fashions like fringe dresses and barrel jeans.

They’ve purchased from you online, so you have their name and shipping address.

You probably have an email address for each of these customers.

You’re starting to develop a view of who this person is with your first-party data. You may decide to overlay other characteristics and behaviors, do some lookalike modeling to find other trendy buyers for your barrel jeans.

But then something interesting pops out in your analysis.

The segment of consumers buying these trendy fashions is dominated by people in the age range of 45 to 54.

That’s a head scratcher.

This isn’t your target audience for this clothing line (you had been targeting 18 to 34), so what’s your next move?

As the retailer, you have to decide if you’re going to adapt your website and change your content. Should you change your broader strategy to incorporate more inventory to align with this age group?

These are really big—and potentially costly—decisions.

This is a true story, and it turns out that the brand had made false conclusions from their first-party data.

In reality, there were young adults purchasing these items while living with their parents.

If the retailer had a few more signals to better identify their customers, they’d see that while the shipping address belonged to a middle-aged couple, the email address belonged to their 25-year-old daughter.

The shortcomings of first-party data in marketing

Everyone talks about creating a single customer view or a unified customer view using your first-party data. First-party data strategy is all the rage. And it’s true—unifying your data across silos in your business is a critical step in executing efficient, effective marketing.

A customer data platform (CDP) is the perfect tool to help you bring this data together in one place.

But ultimately, understanding your customer is limited by your ability to first identify your customer correctly. And if you can’t identify your customer, you cannot progressively understand your customer, and you will fail to deepen your relationship with that customer.

Identity is therefore at the core of the relationship with your customers.

As we saw with the barrel jeans retailer, it’s easy to misattribute the identity of the people interacting with your brand when you’re working with limited amounts of first-party data in marketing. This can lead to false conclusions that inaccurately define the market opportunity for you and your brand.

Brands have ceded control to third-parties

A big part of the problem is that over the past decade, companies have ceded much of their customer experience—and thus their knowledge and identity of customers—to large third parties. This includes walled gardens like Facebook, Instagram and Google.

Then they pay for the privilege to actually access that information about their customers.

When you give up part of your customer experience and your knowledge of your customer, your ability to recognize your customers and solve their challenges is greatly diminished. It becomes more and more difficult to differentiate your brand in a crowded market.

With this approach, you’re not only going to lose ground to your competition, you’re going to lose, period.

Filling the identity gaps

To bring control back in house, you need a combination of a strong CDP to curate your first-party data, plus identity resolution to unify and enrich that data.

If you’re not familiar with the term, identity resolution refers to the ability to recognize an individual person, in real time, through various identifiers (fragments of identity) based on their interactions with your brand.

The technology behind this capability includes an identity graph and sophisticated resolution algorithms that sit on top of that graph.

You can think of an identity graph like a giant database full of billions of identifiers. The algorithms on top of the graph tell us which identifiers belong to which human being.

Common identifiers include:

Hashed email
Mobile ad IDs
Social identities
Customer and/or loyalty ID
First Party Cookies
Device IDs
IP address
Physical home street address
Physical office street address
Phone Numbers
Clear text emails

There are also frequently undeclared identifiers, such as:

Membership in an email or subscriber list
Demographics
Purchases/transactions
Visits to online news sites
Other financial and digital behaviors

By linking all of these separate identifiers to the real person they belong to, in real time, you get a holistic view of their engagement with your brand—that single customer view everyone is looking for.

It allows you to recognize people as they engage, so you can personalize their experiences. You can also continue to evolve your understanding of who they are and what they’re looking for.

If our barrel jeans retailer had been supplementing their first-party data with identity resolution, they would have been able to quickly see that it was, in fact, young adults buying their wide-leg denim—not their middle-age parents. The retailer would also have been able to quickly respond with a highly-relevant next-best marketing message or offer (maybe a fringe dress?).

The need for customer recognition isn’t new

About 25 years ago, I was giving a presentation to a CPG brand. One of my slides outlined:

You have to utilize your customer data
You have to identify your customers
You need to know who they are and what characterizes your best customers

I told my audience that identifying customers allows you to:

Immediately react to customers when their engagement is in decline
Understand how new customers differ from your existing customer base
See new areas of opportunity
Suggest ways of refining your strategy

This message was relevant nearly 25 years ago, and it’s still relevant today.

The need for customer recognition isn’t new, it has just evolved.

We’re operating in a complex digital economy. Your customers display different behaviors now than they did even two years ago. You have to stay on top of these things. You have to understand their needs and their preferences.

You still need a solid grasp on that first-party data in marketing—but you also need to recognize that any given brand only has a limited amount of the first-party data to work with.

Identity resolution is key to filling the gap.