The past three years have seen increasing dialogue in the United States over how companies are using consumer data; and it’s a dialogue that has sparked continued calls for regulatory action.
What began with the California Consumer Privacy Act in 2018 is now spreading to many disparate states. New York, for example, is looking to pass its own variation on consumer privacy legislation, the Data Economy Labor Compensation and Accountability Act. This new legislation aims to demystify how big tech companies commodify and commercialize consumer data, essentially treating it as a new form of labor, and then taxing companies that monetize consumer data irresponsibly.
The federal government is itself looking to get ahead of these disparate state laws, moving to pass an overarching bill that works to legislate consumer data, the Social Media Privacy Protection and Consumer Rights Act.
Regardless of the final form the proposed legislation takes, however, one fact is becoming abundantly clear: we’re living in an era where consumer privacy is finally being given value. The largely unwritten rules that previously guided data use have been distorted and altered to the point where they’ve eroded consumer trust in online commerce, and companies that traffic in consumer data are going to need to adapt, and adapt fast, to this new regulatory structure.
Brands that embrace ethical and transparent practices with respect to consumer privacy and consumer data will be in a much more advantageous position going forward. And that’s where zero-party data (ZPD) becomes an important tool for brands moving forward: it provides essential personalization while still respecting consumer privacy.
Where zero-party data fits into the equation
Anyone who works in digital commerce can attest that the past two years have been particularly transformative; the sunset of third-party identifiers in addition to the aforementioned regulation have pushed brands to invest in new forms of data collection, particularly first-party data and zero-party data.
Zero-party data, for its part, isn’t simply a means of data collection. Rather, it’s a fundamental reevaluation of data itself. ZPD breaks from the concept of third and first-party data because, by its very nature, it is collected and used transparently. ZPD operates under the framework of a value exchange: a consumer offers a brand the use of their data in exchange for more personalized experiences. For example, if you’re a vegan and you offer that information within Yelp, the app can use that information to personalize the restaurants you’re shown, rather than recommending local steakhouses.
Brands gather ZPD by engaging consumers directly and asking for specific data points that the brand can use to personalize each consumer’s experience. Consumers knowingly and intentionally share their data, and then expect it to be used to improve their experience. By contrast, first-party data is tracked and used behind the scenes, opaque to the consumer. The transparent, explicit nature of ZPD presents an opportunity for brands to build deeper, more trusted relationships with customers.
More than anything, ZPD is about quality and not quantity, which is a major departure from other forms of data. ZPD is intended to be used for the benefit of the consumer, and as such, if a brand isn’t using the data to improve the consumer experience, the brand shouldn’t hold it in the first place.
How ZPD aligns with the emerging regulatory framework
Because of how different ZPD is from other forms of data, it’s not exactly clear where it fits into the proposed legislation, particularly New York’s Data Economy Labor Compensation and Accountability Act. What is clear, however, is that the fundamental, consumer-first nature of ZPD makes it the best path forward for brands as they look to personalize the consumer experience in the most transparent way possible.
One of the cornerstones of the New York legislation is imposing a two percent tax on annual receipts earned off of the data of New York residents. For some massive brands, accepting a two percent tax may be feasible in the short term, but it’s not a sustainable solution to a solvable problem.
ZPD being transparent in its value exchange between brand and consumer may exempt it from these penalties in the first place. But, even if it isn’t, the very nature of ZPD is quality over quantity. By having the best data possible, a brand will justify the ROI over time. Making the pivot towards a more consumer-first data model by leveraging ZPD, and doing it soon, will help brands fortify themselves from all forthcoming regulation.
How brands can begin assembling zero-party data
The exciting thing about zero-party data is that brands already have existing sources they can tap into. Some of these data sources include: product finder quizzes on their e-commerce sites, customer surveys, digital campaigns and promotions, loyalty programs, and email preference centers.
The further collection of ZPD often revolves around microexperiences, which include a wide range of interactive experiences that plug into existing websites, mobile apps, and landing pages. These microexperiences can be simple signup forms, “next best question” prompts, quizzes, polls, and much more. The key is to collect data points progressively over time, and make sure that each incremental piece of information can lead to more intelligent personalization efforts.
For example, a skincare brand can offer a skincare routine finder quiz, asking each customer to select from different options to better understand the types of products that would work best for them. If a customer selects that they have dry skin and worry about breakouts, the brand will know that the customer isn’t interested in products for oily skin. This one data point, offered freely by the customer, has just transformed that brand’s relationship with the customer.
Using ZPD to chart the way forward
Whether it’s the proposed New York legislation, a national data privacy bill, or any legislation that may be coming in the future, the bottom line is that consumer data is under a microscope now. Brands need to begin moving their efforts to meet the moment, and zero-party data provides a consumer-first way to divest themselves from outmoded data practices.
The future of personalization is privacy-first, and ZPD is poised to be the right tech at the right time to address the challenges brands are facing. Even as laws governing data remain ever-evolving, one thing is certain: consumers having control over their own data will win out in the end.
Source: CPO Magazine
