Customer data is the lifeblood of any business. It helps you learn more about the people who buy from you, why they buy, and how to retain their loyalty (among many other things). To put it all together and turn information into value, you need customer data management.
When you can easily collect, store, organize, and access customer data using a customer management system, you have a much better chance of using that data to your advantage. Discover how to drive sales, create better products and experiences, reach new customers, earn referrals, tap into new markets, and build a stronger business.
Let’s explore the ins and outs of customer data management and best practices for using customer data and technology in your data analytics strategy.
Table of Contents:
What Is Customer Data Management?
What Are the Benefits of Customer Data Management?
Is Customer Data Management the Same as Master Data Management?
How to Choose a Customer Data Platform
Best Practices for Customer Data Management
What Is Customer Data Management?
We define customer data management (CDM) as the intentional, collective approach to managing customer data. This includes the strategy, tools, technologies, processes, and other moving parts that enable data management.
The overarching goal of CDM is to turn information about customers into useful, actionable insights. Sales and marketing teams will use these insights to improve their conversations with customers as well as the company’s products and services.
By using customer data, brands can turn themselves into customer-centric organizations that deliver on what their customers and prospects need and want.
What Are the Benefits of Customer Data Management?
Making customer data management a priority can benefit new companies as well as companies looking to increase their existing customer base even more. A CDM process helps organizations define their target audience and find better ways to connect with customers. And using a customer database software, which we'll go into later, is the best way to stay organized.
These are the key benefits of a customer management system:
Creating Stronger Customer Connections
Improving Total Customer Lifetime Values
Making Better Business Decisions
Centralizing Your Customer Management
Improving Data Quality
Creating Stronger Customer Connections
Acquiring new customers is no easy feat. It can take multiple impressions to land on a new customer’s radar. Plus, it can cost five times as much to sell to a new customer compared to an existing one.
With customer data, you can win bigger and lose smaller simply by knowing how to connect at every touchpoint in the customer journey. Use your data to find common denominators between customers, such as how you acquired them, what offers they responded to, how much they spend, and other factors. Create lookalike audiences to reach more customers like them.
You can also use customer data to empower your advertising and marketing. Instead of spending money, time, and effort on hollow marketing campaigns, you can add more impact to your campaigns that truly connect with your audience.
Improving Total Customer Lifetime Values
According to the Pareto Principle, about 80% of your outcomes come from about 20% of your causes. Applied to sales, this means that about 80% of your sales come from about 20% of your customers!
It’s easier to calculate important metrics like customer lifetime value when you have a predictable, repeatable process for doing so.
A customer data platform can help you identify your top 20% so you can nurture those relationships a little more than the average customer. For example, you might include them in a specialty customer loyalty program that offers discounts, incentives, and other rewards for continuing to be a customer.
Making Better Business Decisions
There’s no doubt that reliable, real-time data can empower your decision-making. It removes the guesswork about who your customers are, how engaged they are, and other details that can help you find the best ways to reach them.
Things like content creation and advertising will be more effective. Your outreach will be more impactful and intentional. And ultimately, your conversion rates will likely be higher.
Centralizing Your Customer Management
Companies that have all of their customer records in one place can avoid data silos that limit progress. Create a more holistic customer view with accurate, consistent data. Avoid the risks of duplicate data or incomplete data that gives you an inaccurate picture of your customers.
A customer management system makes it easy to store all of your customer information in a single location. Teams can access the same data and work toward common goals instead of fearing they’re missing a piece of the puzzle.
Improving Data Quality
Having a dedicated customer management process puts more pressure on companies to maintain high-quality data. Teams that constantly access, view, and use customer data need to trust that it is accurate, complete, and up to date. This encourages companies to establish robust best practices for collecting, storing, organizing, and accessing data.
Is Customer Data Management the Same as Master Data Management?
Both customer data management (CDM) and master data management (MDM) share some similarities. The two aren’t quite interchangeable, though.
Master data management focuses on creating a single source of truth for all of a company’s data. It focuses on everything in an enterprise, including customers, employees, vendors, suppliers, products, e-Commerce and in-store transactions, support tickets, analytics, and more. This centralized source makes it easier to share information throughout the enterprise.
With this in mind, you could consider CDM a slice of the larger MDM pie. Or, you might consider CDM as “customer master data management.”
Customer data management focuses solely on customer data, such as names, phone numbers, addresses, emails, behaviors, and purchase history. Managing customer data becomes more complex as your company grows. Customers may move, change email addresses, get new phone numbers, or switch companies, for example. They might start buying less of one product and more of another.
Having customer data spread out across various systems can lead to inaccurate pictures of your customers. With better management, you get better visibility and can use those insights to improve your decision-making.
How to Choose a Customer Data Platform
A data management strategy is easier to execute with the right customer database software. For many organizations, this might take the form of cloud-based Customer Relationship Management software, or CRM software.
CRMs are made for customer engagement. They offer turnkey solutions to start organizing customer data, create data-driven profiles, and log customer service interactions. They also help you enter the world of marketing and sales automation with ease. Many CRMs integrate with other popular marketing tools via APIs, ensuring your new system instantly becomes more valuable.
However, a customer data platform (CDP) is usually a better solution because it’s purpose-built for the cause.
A CDP serves as an all-in-one hub for all your data sources. You can also link data to specific customer profiles to get a more complete picture of each customer. As new data becomes available, it will automatically link to each customer.
CDPs thrive on both first-party data and third-party data. They usually include features like real-time analytics, segmentation, data syndication and synchronization, identity resolution, and data processing.
Features aside, let’s look at how you can choose a customer database software that supports your sales, marketing, and market research.
Integration with Your Existing Tech Stack
CDPs (and CRMs, for that matter) aren’t standalone tools. Ideally, they’ll integrate with other solutions you’re using to empower your sales and marketing even more.
Your data platforms should unify all systems that collect customer information. This is key in breaking down information silos. CDPs should have the ability to learn about customers wherever they are, including mobile apps, ERPs, CRMs, websites, and other marketing tools.
Tip: Become a data management expert with our ultimate master data management guide!
Ability to Capture Data that Matters
CDPs can capture a range of customer data. You want to be intentional about the information you store to avoid data overload. Ideally, your CDP will capture information that will make a real impact on your sales and marketing strategy.
Think carefully:
- Who needs this data (e.g., sales teams, customer service, marketing, etc.)?
- Why is this data important?
- Could we make the same decisions if we didn’t collect this data?
Not all CDPs are created equal, even though they’re all designed to do essentially the same thing. Consider your unique use cases and the other tools you’re using to create deeper customer profiles.
Scalability for Future Growth
In the early days of your company, a “CDP” might have taken the form of an Excel spreadsheet. While that may have worked for a period of time, it’s not designed to carry you through serious stages of growth.
CDPs should position you to scale. They should accommodate a growing customer base, as well as customizable fields as your company adds new products, services, and marketing channels.
Best Practices for Customer Data Management
No matter the data platform you choose, organizations will benefit from applying best practices to how they collect, enrich, cleanse, and use their customer data.
Have a Data Governance Strategy
Data management not only helps you figure out what data to collect, but also how to organize and format it. It helps you think critically about your data and what you expect to get from it.
There are three key parts to data governance: Alignment, Validation, and Enforcement. Alignment refers to how you standardize customer data across the enterprise. Validation is how you test and confirm that data is being collected and formatted properly. Enforcement ensures that alignment and validation processes are upheld, and that data collection and usage go through the proper channels.
Having a data governance strategy gives you something to refer back to when creating or updating your data systems. It keeps everyone on the same page when it comes to your plans for customer data.
Prioritize Data Security
The cost of a single data breach is alarming — as much as $8.64 million per occurrence! Companies need to ensure they’re doing their due diligence in protecting customer data — both externally and internally.
This means using best security practices to avoid hacks and breaches. It also means restricting internal access to customer data and using user-based privileges and other safeguards.
Invest in Team Training
A customer data strategy only works if you have your whole team on board. Make sure the right people know how to navigate your CDP platform and how to access and handle customer data properly. Creating a formal training program will likely include input from Legal, Marketing, Sales, and IT. Unify your customer data and create better customer experiences at scale.
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