The trick to maximising first-party data? Make it worth their while

“Data! Huh, yeah. What is it good for? Absolutely everything. Say it again!” While not as catchy as Edwin Starr’s No. 1 hit, the sentiment behind this version of the lyrics rings true in how we used to think about data. You probably know the importance of data to modern businesses well, and have heard it often described as ‘The new oil’. Yet, the way retailers need to think about data is changing.

Legislation, led by the General Data Protection Regulation (GDPR), is pushing businesses to document and justify their reasoning for collecting and processing data. At the same time, the way organisations can track individuals through cookies is changing and regulators are even considering whether tracking de-identified data (a common strategy to cope with the ‘death of cookies’) is OK. At the same time, consumers are becoming more educated about the value of their data, having been burned by multiple recent public data breaches.  

Combined, this all means retailers must now have clear strategies for not only data security, but even how to obtain data in the first place. And as it’s getting harder to access data from other sources (‘third-party data’), it’s increasingly critical for retailers to focus on their own data sources (‘first-party data’). But what does that actually mean for retailers? 

Beyond the critical technical aspects (managing consent and opt-outs, using the correct cookies etc.) retailers need to be strategic about how they collect and use first-party customer data. Below are a few practical strategies you might consider as starting points based on our consumer research and work with brands:

1. Conduct a data audit

One of the problems with the ‘data is the new oil’ analogy is that it leads to an implication that brands should collect (or ‘mine’) and store as much data as they can. While more data can bring benefits, it now also creates more risks – particularly if it is personalised or identifiable. 

Consider this example. You host an event that customers register for through an online form that collects their name, a few demographic details, and some contact details. That’s pretty standard practice, but it also means you’ve just collected Personally Identifiable Information (PII) and need to be able to justify why you collected it, how you’re storing it securely, and when and how you will dispose of it securely. 

So, while in the past, collecting as much data as possible may have seemed sensible to the marketer, now it could introduce increased risk from a compliance and even legal angle. So ask yourself: Do you really need all the data you collect for a valid purpose? If asked, would you be able to explain what you collect and give a compelling reason why? 

Because depending on your location, you may already be legally required to do sp, and if not, you likely will be soon. 

2. Communicate the purpose with consumers

Having a clear purpose for collecting and using data isn’t just about risk mitigation, though. It can be a powerful tool in encouraging consumers to actively share data with you. (Jason Pallant has written about this before for Inside Retail, based on his peer-reviewed research on consumer-retailer data exchange.¹) 

One of the key findings of that research is that consumers are much more willing to share their data if they feel like the process is transparent and they understand how and why the data will be used. This is particularly true for consumer segments that have higher privacy concerns in general, or less inherent trust in technology. 

So, having a clear purpose for collecting each piece of data, and then making that purpose clear, not only could protect you legally now or in the future, it could help increase how much data consumers are willing to share. 

3. Create value for consumers, not just yourself

Treating consumer data as a value-exchange goes beyond transparency, which is a critical but insufficient part of encouraging consumers to share their data. The main part is a trade-off consumers make between the risks they perceive from sharing their data and the benefits they expect to receive. Academics call this ‘Privacy Calculus’. For retailers, it means that the data you collect needs to not only have a purpose for you, but you also need to create and demonstrate that it provides benefits to consumers themselves. 

Facial recognition is an interesting example of this at play. Most consumers say they aren’t very comfortable with being identified using their facial ID, yet many use their face to unlock their phones, computers, even banking apps multiple times a day. Why? Because in that setting many consumers perceive that the benefits (convenience of not typing a password or PIN every time) outweigh the potential risks. 

So, ask yourself: what real value are you creating for consumers with the data you collect on them? ‘Targeting more relevant ads’ probably isn’t enough. Are you able to create real bespoke personalisation for them, like Spotify’s popular For You playlists? Or is their experience notably better, more enjoyable, or more efficient because they share data?  

4. Make it easy (a.k.a. the ‘logged in’ state)

If you’ve completed the above and now have compelling reasons for collecting data that are clearly communicated to consumers and create mutual benefit, the last step is making it as easy as possible for consumers to share their data with you. 

Giant consent pop-ups that block the whole website experience? Maybe necessary but not a good customer experience. Repeating that experience every time someone visits your website? Even worse! 

While these consent pop-ups are common practice, and good from a risk mitigation perspective in the short term, looking at alternative ways for consumers to opt-in to data sharing is beneficial for everyone involved. 

In digital channels, this often takes the form of encouraging consumers to create accounts and opt-in to data sharing because of perceived benefits. In physical channels, this gets harder, but the idea is the same. 

What compelling reason can you create for consumers to identify themselves in-store beyond earning ‘points’ they may never use? It’s a hard question to answer, but brands that get it right will have a big advantage moving forward. 

Jump or be pushed

To summarise our message, retailers have an opportunity to jump into first-party data as a value exchange with customers, or be progressively pushed into it against their will. The way we think about, collect, and use data is changing – whether you want it to or not. Retailers need to stop trying to mine data like commoditised oil, and start thinking of it as something you can exchange with your customers for mutual benefit. 

Those who are proactive and can create compelling propositions for consumers to want to share their data will have a huge advantage. Those who don’t will be at best battling to catch up, and at worst could be facing major regulatory challenges and even consumer backlash in the near future.

1 ‘When and how consumers are willing to exchange data with retailers: An exploratory segmentation’ co-authored with Jessica Pallant, Sean Sands, Carla Ferro, and Eslam Afifi, published in the Journal of Retailing and Consumer Services.

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