Decoding consumer behaviour: The pivotal role of zero-party data
By Dr Mihajlo Popesku, Chief Research Officer at Qudo
Marketers are facing an increasingly challenging task of understanding consumer behaviour and preferences in response to a series of recent market disruptions, including the pandemic, rising inflation, and the emergence of general-purpose AI. Each disruption brings about a novel market complexity reflected in consumers forming new habits and discontinuing old ones. Diminished brand loyalty and increased use of e-commerce sites are some of the few new consumer trends. The challenge the marketing industry faces is: how can it understand consumers’ true behaviours and preferences, without invading their privacy, and yet addressing them in their own language?
First-party data is collected directly from consumers and can be collected either actively or passively. Third-party data, on the other hand, is data that companies purchase through the free market, which can often lead consumers to ask how their data was obtained. While first- and third-party data allows marketers to learn more about consumers, data privacy concerns and greater penalties for data handling misconduct have led to a greater need for zero-party data. By collecting anonymous data with the consent of research participants, companies and organisations can build detailed and granular consumer groups which can facilitate precision engagement, all whilst addressing privacy concerns and avoiding penalties.
This may sound easy, but modern marketers expect more from insights and also seek creative ways to progress these insights. Platforms that allow them to understand and action insights are crucial to building better campaigns and keeping up with consumer habits. Traditionally, building robust insights via a large sample using older research methods is typically slow. But, by using panel aggregators, researchers benefit from agile and nimble data collection.
The future of consumer research isn’t just about zero-party data. While many research agencies can offer incentives to recruit participants, there is a lack of actionable insight available to marketers conducting the research themselves. Instead, marketing teams must work with research agencies and data scientists to make sense of the data provided.
Progressing from insight to action has always been challenging and typically, improvisation is necessary. Traditional research programmes tend to leave marketers with the same question as when they began – “what do I do now?”. The missing piece of this puzzle is technology that bridges the gap between insights and activation: insights must be actionable and digestible, allowing marketers to export audience segments to their social media channels and launch campaigns.
Streamlining the creation of meaningful data
Typically, when companies use research data, they often draw from only one, and in the best case a few, sampling frames. This might be from a research company that primarily recruits its respondents from those who bank with Monzo, or individuals who read Sifted, for example. These respondents are financially incentivised to take the surveys and form the basis for the samples. However, the issue with this is that researchers draw their samples from one panel, meaning they inherit the bias of respondent recruitment.
The solution to this is simple, yet effective and agile. Use a panel aggregator to recruit respondents from tens of hundreds of sampling frames at once. This significantly reduces the resulting biases and makes the sampling much quicker and more streamlined.
Going beyond first-party data
Unlike first-party data, zero-party data gives precise, targeted consumer groups. As such, marketers should advocate an approach centred around it.
Another reason to move beyond first-party data is tied to privacy and fair data principles: there is no need to ask someone a set of personal identifiable questions – putting sensitive information at risk of falling into the wrong hands – when it’s possible to use zero-party data to find people and achieve the same marketing result in a much safer way, using affinities and interests as targeting proxies. With the technology available to marketers today, there is no longer any excuse but to be fully transparent and uphold the highest standards of conduct when it comes to data collection and data use.
Simplifying consumer habits
From a practical perspective, zero-party data eliminates many of the core challenges marketers face today. Chief among these is the problem of understanding consumer complexity – in other words, people are complicated, often irrational ,and prone to occasional behavioural changes.
Take financial data. People’s financial lives are extremely nuanced, given the huge variation in financial behaviour you see across the market. Chosen at random off the street, someone may be an active investor, a debtor, retired, or own millions in assets. The challenge for marketers is how to tackle this huge complexity and the non-linear nature of consumers.
By using panel aggregators and working with MarTech companies which utilise zero-party data, it’s possible to create short, simple surveys that can derive insight into specific consumer groups. MarTech companies who combine marketing science, behavioural science, and knowledge of consumer psychology are best placed to provide marketers with unique, actionable insights into their desired consumer group. This allows marketers to not only understand consumers, but also to address them in their own language, letting them express their behaviours in a way that can be easily understood.
Boosting research productivity
Another key problem in marketing research is the issue of suboptimal reporting, where survey respondents inaccurately answer questions for whatever reason. For example, they might rush through their answers or project what they want to be rather than how they are, leading to unreliable data. That’s why it’s crucial that survey designs include good screening questions, attention traps, manipulation and consistency checks. Good design should also take into account respondent diversity (inclusive of neurodiversity) and ensure engaging surveys, with varied easy to read and answer questions. These techniques allow researchers to identify and remove the vast majority of dishonest and inattentive respondents, while helping genuine respondents to enjoy and navigate the process of responding surveys smoothly.
The result is a product immediately useful to marketers, which not only streamlines and simplifies consumer complexity, but ultimately boosts researchers’ productivity. Instead of having to sift through masses of data that may or may not be actionable or even accurate, this approach brings data to life and streamlines the process of turning insights into action.
What does the future of market research hold?
While the dynamic and fast-moving nature of the marketing research industry is undeniable, the future is just as exciting. For example, it’s now possible to build a survey hosting platform that will enable marketing researchers to generate questionnaires in real-time using AI and derive meaningful consumer insights. The world has seen how powerful a tool ChatGPT can be for augmenting the workforce; imagine what a similar approach to research could look like. We’re already working on training AI tools to behave like segment persona (chat to segment) and allowing users to query data using natural language (chat to data).
This would also have an almost instant impact on researchers’ productivity, allowing marketers to swiftly generate insights on topics as diverse as mobile phone preferences or attitudes towards credit products. By dramatically reducing the need for manual desk research, this kind of technology would allow them to spend more time creating compelling campaigns and working creatively in a way that generative AI tools simply cannot.
In an industry that is evolving constantly, and where copious amounts of data are available to us all, it’s imperative that marketers streamline consumer research as much as possible. By using sophisticated research techniques and powerful tools such as panel aggregators and zero-party data, marketers can fast-track the creation of meaningful questionnaires for consumer research, simplifying and boosting their productivity in the process.