In today’s data-driven business landscape, customer data management (CDM) has become an indispensable factor in achieving sustained success. With the proper handling of customer data, companies can increase conversions, enhance customer loyalty, and make data-informed decisions that ultimately improve their bottom line. Despite its importance, many businesses struggle with data inaccuracy, inconsistency, and security issues. Our article walks you through six fundamental principles that can help you fine-tune your CDM strategy and avoid these common pitfalls. By following these principles, businesses can ensure that their data is accurate, secure, and used efficiently to drive growth.
Establish a Data Governance Plan
Data governance is a cornerstone of effective customer data management, as it outlines the processes and responsibilities for acquiring and handling data within an organization. Creating a robust data governance strategy can help you identify what data to collect, set standards for data collection, and keep all employees aligned with these standards. There are three essential components to any good data governance strategy: alignment, validation, and enforcement.
Alignment involves standardizing customer data collection methods across all departments within your company. This ensures that everyone collects data consistently, making it easier to integrate and analyze the information later. Validation is the process of confirming that all data is collected correctly according to the established standards. This step can include periodic audits or automated checks to ensure data integrity. Enforcement guarantees that any changes to data collection processes are approved through proper channels and comply with the governance strategy. The result of these efforts is often a data dictionary or tracking plan that clearly outlines every piece of data collected, its purpose, and its owner.
For instance, Typeform, a company specializing in online form building, significantly improved its data management by implementing a data governance strategy. Before, Typeform faced issues with duplicated and incorrectly named data points. By establishing a data governance strategy, they standardized their data collection efforts and eliminated confusion, thus enhancing the utility of their data.
Concentrate Only on Essential Data
Focusing solely on critical data is another vital principle for refining customer data management. Overloading your customer data platform (CDP) with unnecessary information can make it difficult to sift through the data, increasing the likelihood of inaccuracies and inefficiencies. Furthermore, collecting extraneous data can even risk customer trust and potentially lead to legal issues.
To avoid this, perform frequent data audits to determine the usefulness of each data point you’re collecting. Ask questions like: Who needs this data? What is its use case? If it were not collected, would operations remain unaffected? These questions help ensure that you collect only data essential for your business needs, minimizing clutter and enhancing data relevance.
An example of the pitfalls of unnecessary data collection comes from a publicly traded company that faced backlash for gathering customer data even after the customers had completed using the service. The Federal Trade Commission (FTC) filed a complaint against the company, prompting negative media coverage and forcing the company to revert its data collection policies. This example underscores the importance of tailoring your data collection practices to align strictly with business needs and ethical guidelines.
Prevent Data Fragmentation
One of the significant challenges in customer data management is avoiding data silos, which occur when different departments collect data independently and fail to share it with others. Data silos often arise from a lack of a cohesive data governance or data orchestration strategy. This fragmentation can hinder collaboration and problem-solving across your company, leading to inefficiencies.
For example, consider a scenario where your social media team collects valuable customer feedback that the customer service and product development teams could use to improve services and products. However, if this data is siloed within the social media department, its potential remains untapped. Similarly, a development team focused on reducing shopping cart abandonment may miss out on crucial data from the website analytics team because of data fragmentation.
To combat this, companies should promote data collaboration across departments. Utilizing a Customer Data Platform (CDP) can help create a unified customer view by consolidating data from various sources into single customer profiles. This holistic view enables multiple teams to access and leverage the same data, thus enhancing decision-making and streamlining operations. For instance, marketing teams can run personalized campaigns, while product management can align product features to customer expectations, all based on the same comprehensive data set.
Emphasize Data Protection
Data security may have a simple definition—the protection of data from unauthorized access, use, change, disclosure, and destruction—but it is a complex and essential aspect of customer data management. Ensuring data security is critical for maintaining customer trust and avoiding costly data breaches. In the United States, the average cost of a data breach is around $7.91 million.
When using a CDP or other data handling platforms, it’s crucial to choose one with robust security standards, such as an ISO 27001-based security program. Such a program involves continuous evaluation and improvement of security practices, ensuring that customer data is well-protected.
An effective data security strategy includes both preventive and reactive measures. Preventive measures might consist of encryption, secure access controls, and regular security audits. Reactive measures involve incident response plans that outline steps to mitigate damages in the event of a data breach. These include timely communication with affected parties and implementing fixes to prevent future breaches. By emphasizing data protection, companies can safeguard their customers’ information and their own reputation.
Implement a Data Accuracy Procedure
Ensuring your data remains accurate over time is essential. Data can become inaccurate at the point of collection due to various reasons, including inconsistent data formats or improper data collection practices. Moreover, data decay over time also affects accuracy as contact information and other details change.
Deploy automated data validation systems that regularly check and correct data collection processes to maintain data accuracy. Regular audits can help identify and rectify discrepancies at the time of data collection. For instance, standardizing date formats and verifying that data points are correctly formatted can significantly reduce inaccuracies.
Additionally, it’s vital to account for data decay. For example, that valuable email address you collected from a Chief Information Officer might become outdated if the person leaves their company. To manage data decay, set up protocols for regularly purging or updating outdated information. One way to achieve this is through periodic re-validation of data points, ensuring they still reflect current and accurate information. These measures ensure that your data remains reliable and useful long after the initial collection.
Adhere to Data Regulations
Increased public concern over data privacy has led to rigorous data protection laws like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). These regulations have drastically changed how companies can collect, store, and manage customer data. Complying with these regulations is not just a legal requirement but also crucial for maintaining customer trust.
Regulations like GDPR and CCPA require companies to obtain explicit consent from users before collecting their data. They also mandate that companies provide users access to their data and allow them to request deletions. This means your data collection tools must be designed to store such consent and facilitate these user rights efficiently.
Compliance can be challenging, especially if you’re using multiple tools to gather customer data. A robust CDP can simplify compliance efforts by aggregating all user data in one place, making it easier to honor deletion requests and ensuring that consent records are easily accessible. Even if your company is not based in regions where these laws are enforced, international visitors to your site can subject you to these regulations. Preparing for such regulations in advance can save you from legal complications and help build a trustworthy brand image.
Conclusion
In the modern business landscape, driven heavily by data, effective customer data management (CDM) is critical for long-term success. When companies handle customer data correctly, they can boost conversion rates, improve customer loyalty, and make informed decisions that enhance their overall financial performance. However, despite its importance, many businesses face challenges, including data inaccuracy, inconsistency, and security issues.
Our article explores six essential principles to help you optimize your CDM strategy and avoid these common problems. By adhering to these principles, businesses can ensure their data is accurate, secure, and leveraged efficiently to foster growth. For example, having a robust data governance framework ensures data quality and consistency, while employing advanced security measures protects sensitive information. Additionally, integrating customer data across all platforms can deliver a unified view, further aiding in personalized marketing efforts.
Investing in training and development for employees also enhances their ability to manage and analyze data effectively. Finally, utilizing advanced analytics tools helps in making predictive and prescriptive decisions that can give your business a competitive edge.
By following these comprehensive principles, your business can turn customer data into a potent asset, driving not only immediate outcomes but also fostering sustainable growth.