The more businesses understand their customers — where they live, what they like or dislike, what influences their purchasing decisions, etc. — the easier it is to provide a good customer experience.
One Statista survey revealed that 90% of US consumers find personalized marketing very or somewhat appealing. And in another poll, that same percentage of people said company messages that aren’t personally relevant are annoying. Forty-four percent even said they’d switch to another brand if it offered better personalized marketing.
How can brands tap into that personalization? It all comes down to data. And handling that data appropriately, including not alienating customers by asking for excessive information, or worse, losing that data, means companies must practice good customer data management (CDM).
In 2017, the Economist claimed data is the most viable resource in the world, calling it "the oil of the digital age."
TechCrunch made a similar claim in 2021, adding that data is also the world's most vulnerable resource. Stories about multinational companies that were hacked and saw reams of customer data stolen from databases are the subject of headline after headline. This fear of data loss is one of the best reasons companies should practice good customer data management.
When you ethically collect, securely store and maintain a database of relevant consumer information, it's known as customer data management. The purpose of collecting this data is to better understand and improve customers' experiences, promote goods and services and optimize the customer journey.
Benefits of Customer Data Management
During the COVID-19 pandemic, businesses increasingly turned to collecting customer data as the best way to build strong customer relationships and, in turn, sell their products and services.
Combined with the proper collection of that data, CDM provides businesses benefits such as:
- More interested customers and deeper customer relationships
- Increased opportunities to upsell or cross-sell
- Increased customer retention and loyalty
- Higher customer acquisition rates
- Increased campaign effectiveness and return on investment (ROI)
- Greater customer satisfaction and trust
Related Article: Get Your Customer Data in Order
Types of Customer Data
When creating a data governance plan, you must understand the different types of data you collect. Once you do, you can decide which data categories fulfill your business functions and improve the customer journey.
Data falls into three types:
Most websites collect this relatively basic information when customers make a purchase, download an asset (such as an ebook or white paper) or subscribe for email updates.
Identity data includes:
- The customer’s name
- The person’s date of birth
- The person’s gender (with "Prefer not to say" or "Undefined" options)
- Their phone number and phone type (landline or mobile)
- Their email address
- Home address, including city, state, zip code and country
This data tells you a bit more about each customer. Companies or organizations can collect attribute data using surveys, phone interviews or interactions in a chat box. Attribute data helps you create a complete picture of your customer as you move toward an ideal customer profile.
Attribute data includes:
- What they do for work, including a job title (don't forget to create boxes for retired or self-employed)
- Their income level (always a touchy question, so it's better to give income ranges rather than ask for specifics)
- Marital status and number of children
- The vehicle they drive, including make, model and year
Behavioral data offers clues on how potential or current customers interact with your company, including online and in-store.
Behavioral data includes:
- How many times have they visited your website?
- How long do they stay on a page?
- How many emails have they opened and read?
- Do they place items in a shopping cart but leave the website before purchasing?
- What goods or services do they buy, how often and what did they pay?
- Do they return products? If so, how many and how often?
- Do they shop in-store? How many visits compared to online visits?
- Do they use a rewards or loyalty card when shopping in-store?
All of this data helps you create the ideal customer profile. It will help you focus your marketing efforts and speak directly to the kind of customer for whom your product or service solves a problem.
Principles of Good Customer Data Management
Any business that wants to achieve even a tiny improvement in data collection needs to practice good CDM. Observing any or all the following principles helps your business get the most out of your data collection efforts while ensuring your customers continue to enjoy a positive experience.
A Data Governance Strategy
Data governance helps identify the data you need and how you will collect it. It's also a playbook for all employees on how to collect data, where to store it and how to secure it.
Data governance involves standardizing the collection of data across your business. It ensures you collect all data according to your company’s principles and relevant legal regulations. Plus, any changes you make to data collection efforts must go through the correct channels.
Targeted Data Collection
Just because you can collect certain data points doesn’t mean you should. If you do, you might encounter the data deluge — so much information that you don’t know what to do with it all.
Be specific. Only collect the data you need to help your company. You should audit and check every piece of information you collect. Ask yourself:
- Who needs this data?
- How does this data help build our company and make a better customer experience?
- If we don't collect this data, would it hinder our operations?
Silos may work well on a farm, but a data silo can be a problem. You don't want every department in your company to collect data and then not share it — or worse, duplicate their efforts by collecting the same data.
Sharing data improves customers' experiences with your brand. When the departments in your company collaborate on customer data management, you achieve a 360° picture of the customer journey. Nothing is more frustrating for a customer than speaking with a representative and being asked questions they already answered during another interaction. Data collaboration eliminates these frustration points.
In 2021, the FBI reported 847,376 complaints of cybercrime. And those cyber crimes — data phishing, ransomware attacks, supply chain attacks, etc. — target big and small companies alike.
Just this year, for instance, Microsoft was hit by an attack from hacking collective Lapsus$, which allegedly made off with “materials.” The Red Cross used a third-party contractor that invariably saw more than half a million records compromised.
Yet a 2021 ConnectWise report discovered that only 49% of polled organizations have a plan in place in the event of a cybersecurity attack — leaving 51% in the dark when it comes to taking appropriate action.
Securing data must be one of your business's top priorities. Not only can overlooking this step cost your organization time and money, it can also erode consumer trust.
The Right Data Platform
Whatever tool you select for your customer data platform, ensure that it meets all up-to-date security standards and laws. Keep an eye out for changes to the platform you’re using or potential risks that might arise. You must also constantly review your security policies and improve them.
The Eradication of Bad Data
Let's say one of your departments collects information on the date of purchases using the MM/DD/YY format. However, another department collects similar data using the DD/MM/YY format. This setup can result in a lot of confusion and useless data.
Customer data management includes going through your data stores and eliminating this bad data — information that’s inaccurate, outdated, redundant or improperly formatted.
To avoid bad data going forward, your data collection efforts should involve as few humans as possible. The more human hands that touch data collection, the more likely you'll find mistakes and inaccuracies. Using automatic data validation tools help eliminate this problem. Another idea is to perform a data audit regularly. Cleaning out old, no longer valuable data leads to fewer mistakes and happier customers.
Knowledge of Data Laws
Customers care about data privacy. While people may not mind you collecting data if it ensures better experiences, they still want you to ask for permission. Plus, they may be willing to share some data points but still want to maintain privacy in other areas.
You need to ask customers what data you can gather from them. In some cases, you’re legally required to do so. For instance, you might have to conform to data laws and regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). You should also inform customers what your data collection processes look like. Transparency here is the key to winning customer trust.
Think about what happened a few years ago when Facebook allowed Cambridge Analytica to collect user data without bothering to tell people what they were doing. When it became public, it created many financial problems for Facebook and legal issues for Cambridge Analytica.
Unintentionally losing data can be hard to do. However, the day may come when a power outage, natural disaster or employee mistake will result in a significant loss of information. In fact, according to Netwrix, human error is the number one reason for data loss, followed by phishing attacks and poor password policies.
Every business and organization, regardless of size, should have a data backup and recovery plan in place.
Why bother creating a data management plan if your employees don't know how to implement it? Even better, seek feedback from your employees about ideas for your CDM plan. The employees on the front lines of data collection will likely have useful suggestions for protecting, sharing and using it.
Regardless, every member of your team who handles data management or data collection needs to know and understand your company's data governance strategy. That includes all areas such as data collection, marketing, legal and IT.
Related Article: Is Bad Data Ruining Your Customer Experience?
Support Customer Data Management With Positive Practices
Clean, accurate data backed by a management plan can help you attract new prospects, create a better experience for your current customers and improve your bottom line. The more attention you pay to customer data management, the more ways you can use collected data positively.