Choosing your company’s most beneficial data collection type can dramatically improve your marketing strategy. Client information can help your small business’s design and marketing team better understand your customers, which can boost growth and create more effective engagement. 

Finding a suitable service for your small business is extremely important. You must consider the pros and cons of first-, second- and third-party data collection to determine what’s best for your company.

Understanding First-, Second- and Third-Party Data

Make the most of your data gathering experience by choosing a data collection type that can best align with your needs. Here are brief definitions for each one:

• First-party data: This form of data collection is recognized as the most reliable because the information is collected by the company that wishes to use it. Examples of first-party data include email sign-ups or customer surveys.
• Second-party data: Data is collected through joint partnerships instead of gathering it yourself. This form relies on receiving information from another trusted business.
• Third-party data: In this method, information is provided by outside parties that do not share a direct connection to your audience. A typical example is a company purchasing email lists. 

Data Privacy: What SMBs Need to Know 

As each data collection form is considered, it is essential to note that all three have positive and negative components. In all cases, clients’ personal information must be handled carefully to remain a trusted business or partner. 

About 73% of Americans feel they have little to no control over data collection by businesses. However, this has not profoundly affected the steady stream of online purchasing. E-commerce sales reached $5 billion in 2021 and are expected to grow 56% by 2026 since this form of shopping is so convenient. Using the most reliable data collection type will help enforce customers' desire to buy your products or services rather than looking elsewhere.

First-Party Data: The Gold Standard for SMBs

First-party data is the most reliable form of personal data collection. Rather than looking for information through a different source or company, the business gathers it from its own clients. About 84% of marketers prioritize engagement data as they build their marketing strategies. There is no middleman in this situation, which also helps improve accuracy. 

Furthermore, first-party data lets your customer feel unique, enabling you to customize their dealings with your business. About 81% of people prefer companies that offer personalized experiences. Conveniently, it is the most affordable form of data collection because no other parties are involved.

When updating your marketing strategy, consider the information you gain from first-party data and analyze how to strategically plan your business, products and services to reflect this. Take time to understand information obtained from the client, such as purchase and browsing history, in order to increase engagement. Just remember that while this is the most reliable form of data collection, it does not reach as large an audience as other forms might.

Second-Party Data: Partnering for Growth

Second-party data collection success depends on partnerships and the ability to obtain specific information. This form is also reliable because the information is sourced from a credible partner. It can help you discover new opportunities or areas of interest that were not previously explored with your client.

However, this method carries some risk because your company does not collect the information directly. Additionally, a small business planning to collaborate with another company must ensure that regulations such as the General Data Protection Regulation (GDPR), HIPAA and California's Consumer Privacy Act (CCPA) are followed.

Third-Party Data: The Changing Landscape

Third-party data collection is very different from the other types. Examples include sources like data brokers and other research companies. This method is most helpful in reaching a much larger audience and should be considered when you aim to interact with new markets by expanding your approach. 

Moreover, third-party data is best for small businesses hoping to increase brand awareness and boost product or service sales. However, the most significant downside is that the information obtained can be unreliable because of the ever-changing data privacy landscape.

Building a Data-Driven SMB Strategy

Small businesses can work closely with their marketers and designers to create an effective data-driven strategy. Take time to understand your company and consider if first-, second- or third-party data is the right approach for you. Data-driven SMBs outperform their competitors because they aren’t afraid to innovate and change for the better when it comes to customer experience. 

Here are the ideal instances to use various data-collection types:

• First-party data plans: This form of data collection should be considered when trying to learn more about your clients. Take time to create on-site initiatives that can help customize the user experience.
• Second-party data plans: This form can be very beneficial if the proper regulations are established. Ensure all partners are trustworthy in order to preserve your reputation and not put client engagement at risk.
• Third-party data plans: This form helps reach a larger audience. However, the perfect business strategy for you might not entirely rely on this method. Consider ways to incorporate other data-collection methods to maintain your credibility.

The Path Forward for SMBs

Choosing the perfect data strategy for your team can be challenging because there are benefits to each type. However, creating the most effective plan with your team of marketers and designers can help keep your business running smoothly while prioritizing ethical strategies that do not compromise clients’ personal information.