Customer Data Management: What Really Matters

Posted on by Ben Legg

Magnifying glass and documents with analytics data lying on tablCustomer data management is a hot topic. According to the 2016 CMO Survey, spending on marketing analytics will increase 66% in three years. Customer acquisition, retention and segmentation are the areas where the decisions will be driven by analytics the most. However, 51% of companies lack quantitative metrics to demonstrate marketing spending impact.

A survey by Forbes Insights and Ernst & Young revealed that most large global enterprises still do not have an effective business strategy for competing in a digital, analytics-enabled world. However, many companies are tackling this by starting to build their data science capabilities.

Making Marketing Smarter

How should you think about customer data management? It really should be seen as a collection of answers to a lot of questions about your customers. For example:

  • Which customer has bought what from us so far?
  • How should I segment my customers to deliver more relevant communication?
  • What might each segment buy next?
  • Which customers churned and why?
  • What have we said to each person (and heard from them) so far, using which media?
  • Who are my most valuable customers, and what do they have in common? How can I find and win more people like that?
  • How do their reactions and buying decisions correlate with what we know about their income, ethnic group, marital status, level of education, mobile device and so on?
  • What did it cost me to acquire each customer, and how does that compare to their lifetime value? I.e. what is the long term value created, or destroyed, from each customer relationship?

You should be able to slice and dice that data in every way that’s relevant. If you’re Toyota or Ford, correlate sales and response data with credit scores and data about who is driving which car (and how old it is) to find out who your best auto buying prospects are. If you’re AIG, cross-reference your information with a pension database to figure out who’s about to retire and will therefore need new financial products. Find great third-party data sources and don’t be shy about using them.

Step By Step Towards Nirvana

The eventual goal is to create a unified view of each customer so that you can efficiently and effectively interact with each person uniquely throughout the marketing funnel, from early brand building through first trial and purchase, then on through upsell, cross sell and retention. Eventually, marketing will be to each individual differently, because every person’s life, needs and relationship with your company are different.

While you are trying to develop this eventual marketing nirvana, the most important thing you can do short term is determine which customers have the highest potential lifetime value (LTV). You can then communicate with them differently and more often, profile them in order to go and find more like that, and ensure that you find them before your competitors do.

Declare It a Critical Core Competency

Since the customer database becomes your company’s primary source of value creation, everybody wants a piece of it. It also should become your most important core competency, with your best people leading it, a very high priority for development resources, and a high sense of urgency to get ahead of competitors. It should also be kept in house.

Getting Started

It may seem daunting, but there are plenty of things that you can get started on early, while you build something more integrated. Here are some thoughts to help you get started and assess your progress:

Current Customers: What do you know about your current customers?

  • Unique Identifiers: What is each customer’s email address, mobile phone number, mobile device ID, address? These things can be used to:
    • Create a unified profile of each consumer.
    • Enhance your own data with 3rd party data (e.g. household income, car ownership, supermarket purchases etc.)
    • Target them with ads, on any platform that offers ‘Custom Audience Targeting’, i.e. targeting a specific group from your database with a unique message)
  • Key Profiles: Who are your key customer groups, and what do you know about them? This can range from the obvious (age, sex, marital status, income, etc.) to other more obscure but potentially useful insights, such as which stores they have visited recently, or what apps they have on their phones. In particular, you must profile your most valuable customers, and understand them inside and out.
  • Relationship with your company: What products and services has each person bought, what past communications you have had, their credit score, etc.

Lapsed Customers: What do you know about your lapsed customers? It’s common to believe that your customers leave you because of pricing or product. That’s not true. The widely-cited study by The Rockefeller Corporation shows exactly why customers leave – 82% of customers will leave because they think you do not care about them.

So, in the case of your lapsed customers, you should collect similar data to the points above, plus:

  • What was their real reason for stopping using your products/ services?
  • Which of your competitors do they now buy from?

Potential Customers: What data do you have regarding potential customers? What third-party data are you working with to find and target them? And in particular – once you have profiled your most valuable customers – how do you find and acquire more people like that?

Keep Learning and Building

If you have a clear definition of the end goal, and look at your customer database dispassionately, I doubt you will give yourself more than a 30% score, even after months of effort. This stuff takes time. So you need to ensure that your team is never satisfied, and always learning, testing and improving your database and how you use it.

You should ensure that your team is always:

  • Expanding the Data: Keep adding for people, and more data about those people. For instance, if you’re selling to people in a physical store, that’s an opportunity to capture their email address and/or their phone number as part of a point-of-purchase conversation, an incentive program or a comment card.
  • Testing New Marketing Tactics: Once you have defined specific customer (or potential customer) segments with specific needs, start doing much more precision targeted communication. This will ALWAYS generate a better ROI than ‘spray and pray’ mass marketing targeted at large groups defined purely based on, say, age and gender.
  • Automating Clunky Processes: Interacting with each customer or micro segment, in a personalized manner, at scale, will start off as a highly inefficient process, with a lot of time and effort spent on a relatively small amount of media spend and impact (even if the ROI is awesome). So you need to be relentless in ensuring that as much as possible is made more efficient, and in many cases automated, e.g. multivariate testing your creative, or automatic pausing of ad targets who never engage with your ads.

From Good to Great—And Fast

Doing a good job will probably not be enough. Don’t forget that if you do this faster than your competitors, you will be able to precision target and win over all of their high value customers, and well as identifying and winning all high potential customers that haven’t yet spent in your category. This will lead to you winning all (or at least most) of the high value of customers in your category, taking all the industry profits with you, while your competitors struggle with low spending and loss making customer relationships.

Now imagine what will happen if your competitors beat you in the race to develop an amazing customer database and executing personalized marketing. You will lose the 20% of your customers on which you make 80% of your profit, and your company will potentially go bankrupt. This new dynamic will create a ‘winner takes all’ dynamic in the majority of B2C companies over the next few years.

Will you, and your team, be winners or losers?

Ben Legg is the CEO of AdParlor.

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