How Web3 Enables Brands to Unleash the Power of First-Party Data

Toju Ometoruwa · August 1, 2023
How Web3 Enables Brands to Unleash the Power of First-Party Data

The importance of first-party data in digital marketing cannot be overstated. First-party data refers to the information that companies directly collect from their audience – this can include customer purchases, website visits, product feedback or social media followings. Unlike second-party or third-party data, first-party data is communicated directly from the end user to the organization, ensuring its accuracy, relevance, and legality.

Elements of first-party data encompass various metrics such as purchase history, behavioral data, demographic details, social media interactions, customer feedback, and survey responses. By harnessing this data, brands can truly understand their audience, identifying unique consumer traits and tailoring their engagement strategies accordingly. This results in more targeted, personalized marketing that caters to each customer's individual preferences and behavior, enhancing customer experience and fostering long-term brand loyalty.

Moreover, first-party data allows brands to make more informed and strategic decisions, by offering insights into what products or services their customers prefer, how they navigate their website, which marketing channels are most effective, and where there might be opportunities for growth or improvement.

#The Limitations of Second-Party and Third-Party Data

While second-party and third-party data have long been staples of the digital marketing world, their inherent limitations are becoming more apparent in today's customer-centric era.

Second-party data refers to data that has been collected by one entity and then purchased or exchanged by another. This data is often gleaned from industry partners or consulting firms, providing valuable insights about a brand's target audience. However, the second-hand nature of this data means that brands must place trust in the accuracy and relevance of the information, which they have not directly collected themselves.

Third-party data, on the other hand, is aggregated through intermediaries like Facebook and Google. This type of data is typically collected from numerous websites and platforms, tracking likes, searches, and other browser activities. While this method does offer a broad view of customer behavior, it often lacks the precision and specificity that comes with first-party data.

The use of third-party data often results in generic customer personas being created, which brands use to target their ads. However, this approach frequently leads to irrelevant ads being displayed to users, which can be off-putting and lead to a general distrust in online advertising. 

A study conducted at North Carolina State University provides evidence of this issue, revealing that 33% of the topics identified as interests by Facebook's ad platform were incorrect or irrelevant. At the same time, brands spend thousands of dollars bidding for access to generic customer personas, leading to low conversion rates and poor ROI on marketing spend. Research by Comscore found that U.K consumers spent 35% of their online time with Google and Facebook properties. However, these services captured 63% of all U.K. digital ad spending, meaning that Google and Facebook received almost double the ad spending their consumer attention warranted.

Lastly, changes in privacy laws and browser policies, such as the phasing out of third-party cookies, are making it increasingly difficult for brands to collect and use third-party data effectively.

#Web3 Technologies: A New Era of Customer Engagement

The decentralized web, or Web3, is changing the way brands interact with customers in digital marketing. By providing direct access to customers via their Web3 wallets, brands can communicate and engage with their audience in a more direct and transparent manner.

Web3 technologies employ blockchain, which offers a decentralized, transparent, and secure platform for transactions. In digital marketing, this could translate into a more honest and trustful relationship between brands and their customers. Blockchain-based customer data is transparent and verifiable, thereby increasing consumer trust in how their data is being used. This also provides brands with more reliable and accurate data, which can significantly improve their marketing efforts.

Moreover, Web3 technologies enable the creation of token-based loyalty programs. Brands can issue their own tokens or digital assets to reward customer loyalty, incentivizing engagement in an entirely novel way. The introduction of Non-Fungible Tokens (NFTs) as a reward mechanism offers customers unique, non-interchangeable tokens, taking personalization to a whole new level. These advancements have the potential to redefine customer-brand relationships, leading to a more engaging and satisfying customer experience.

#Token-Based Loyalty Programs and the Rise of NFTs

Token-based loyalty programs are a burgeoning trend in digital marketing, fueled by Web3 technologies. Essentially, they allow brands to reward their most loyal customers with tokens, which can be spent, saved, or traded like traditional loyalty points. However, unlike traditional programs, these tokens are digital and operate on a decentralized platform like the blockchain.

One key innovation in this realm is the use of NFTs as a form of reward. NFTs are unique digital assets that can be linked to a specific product, service, or piece of content. Unlike cryptocurrencies such as Bitcoin, each NFT is unique, lending them an exclusivity that increases their value to customers.

For brands, this creates an exciting opportunity. Rewarding loyal customers with NFTs grants them access to exclusive offerings and creates a deeper, more personal connection between the brand and the customer. This can lead to increased brand advocacy, as customers who perceive value in their NFTs share their positive experiences and encourage others to engage with the brand.

The collection of NFTs that a user holds in their wallet can also serve as a valuable form of first-party data, indicating their purchase behaviors and likely preferences. For example, the collection of Proof of Attendance Protocol (POAP) NFTs that a person holds can be a good indication of the type of events they enjoy attending, which brands can use to promote similar events or products that attendees of those events are likely to enjoy.  

#The Impact of First-Party Data on Revenue

Brands that strategically leverage first-party data can significantly improve their financial performance. Research conducted by Think With Google and Boston Consulting Group revealed that brands utilizing first-party data in key marketing functions saw a 2.9x increase in revenue and a 1.5x increase in cost savings.

Why does first-party data have such an impact? It provides insights that enable brands to better understand their customers, personalize their offerings, and optimize their marketing efforts. With first-party data, businesses can deliver more relevant, targeted advertising, resulting in higher engagement rates and improved ROI.

Furthermore, the insights derived from first-party data can help brands identify new opportunities, streamline operations, and make informed strategic decisions, all of which can positively impact revenue and profitability.

#From Funnel to Cylinder: Refining Customer Conversion

The traditional marketing funnel is a model that visualizes the customer's journey from brand awareness to purchase. The funnel model assumes a large number of potential customers at the top, with numbers dwindling down at each stage of the journey until only a few make a purchase. This model has been used for years but is largely based on second and third-party data.

However, access to first-party data allows brands to shift this model from a funnel to a cylinder. In a cylinder model, the focus shifts from mass marketing to a narrower, more personalized approach. By understanding individual customers better through first-party data, brands can target their marketing more accurately. This increases the probability that a potential customer will move through the entire customer journey, from awareness to conversion.

The cylinder model emphasizes prequalification, personalized marketing, and loyalty programs that create positive feedback loops. This not only improves the efficiency of marketing spend but also deepens customer relationships, leading to increased loyalty and customer lifetime value.

#Case Study: Salesforce Web3: Reinventing Customer Relationships and Harnessing First-Party Data

Salesforce, the global CRM leader, has made a game-changing move with "Salesforce Web3". This innovative NFT management platform is empowering brands to develop token-based loyalty programs and cultivate direct, personalized relationships with customers. 

Salesforce Web3 gives brands the ability to mint and sell NFTs as rewards for customer loyalty. The platform offers a suite of security and customization features and integrates seamlessly with Salesforce's traditional CRM tools, offering a complete overview of customer interactions.

The platform has seen over 275,000 transactions through its pilot program with high-profile clients like Mattel, whisky brand Crown Royal and clothing brand Scotch & Soda. The company's ambition doesn't stop at facilitating NFT launch, though. Adam Caplan, GM of Web3 at Salesforce, has indicated the company's goal to aid brands in accessing first-party data directly, a vital step in transforming the traditional advertising model.

In summary, Salesforce is spearheading a shift in digital marketing by leveraging Web3 technology, fostering deeper brand-customer relationships, and unlocking the untapped potential of first-party data.

#The Future of Digital Marketing

In the future, brands must shift from indirect tracking of consumer behavior to direct customer engagement. Token-based loyalty programs, backed by NFT rewards, offer an innovative approach to this challenge. The potential of first-party data and Web3 technologies is vast, and brands that leverage these tools effectively will see enormous benefits, from improved ROI to a more engaged and loyal customer base. ⁠ ⁠Subscribe for More Web3 Insights to Boost Your Customer Engagement.

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