The magic moments in a customer’s experience that create a loyal and trusting customer are getting smarter, faster, and more dynamic. Think about how you feel about a company when the perfect product recommendation is brought to your attention, or when you get in your car, and it has automatically planned the route to your next appointment in your calendar.
How does this happen? We’re in an exciting time of digital innovation! We are all producers and consumers of customer data across more digital and physical channels than ever before and the activation of customer data fuels these magic moments that deliver greater business success.
Not only does customer data identify customer preferences that allows brands to match the expectations of the experience with its reality, but it can also be used to informed decisions about current and future product offerings or how to structure sales and support teams to better empathize with the customer’s situation.
IDC has found over the last two years that the customer experience is the first or second top investment area for digital leaders with 78% stating customer data plays an extremely significant role in the customer experience.
Every department wants to gain insight into their customer preferences and their use of specific products or services through customer data.
Let’s define what we mean by customer data.
- Zero-party data is information a customer intentionally shares unsolicited with a brand such as their interest in a product based on a friend’s referral.
- First-party data is what a brand collects directly from online forms or transactions.
- Second-party data is data collected and shared through a brand partnership.
- Third-party data is collected by an external organization that does not have a direct connection with the customer.
Brands have been collecting these data types for years with the majority being 3rd-party data. But 3rd-party data is becoming unreliable and more expensive with companies like Apple rolling out consent-based tracking and Google sunsetting 3rd party web browser cookies. As global privacy restrictions increase, and consumers become more conscious of how their data is used, third-party data sharing is declining in popularity.
Now, with business buyers and consumers taking more control over what information they provide, the collection of more zero- and first-party data will replace 3rd party data because it is the more valuable resource to have. This “data flip” will dramatically impact the technologies that facilitate the collection, use and sharing of customer data.
52% of organizations are not prepared for a cookie-less future
Not only do organizations need the right tools to collect valuable zero- and first-party data, but they also need to evolve their data practices to establish a social contract with consumers in how their information will be gathered and used developing a chain of custody of their personal profile data as it is connected from one entity to another.
Managing the customer data relationship is about providing a secure experience with a brand users trust, and establishing an exchange for the privilege of using their digital identity to create that positive experience.
When customers provide information to a company voluntarily, it allows for deeper personalization and a better understanding of relevant content, products, or services.
IDC found that 59% of B2B buyers noted that the more it seemed like a vendor knew about them, the more concerned they were about privacy.
Managing this first party data effectively in a scalable way requires the right tools, and it becomes more than just managing the customer relationship – it becomes a way of managing the customer data relationship at scale.
What we are defining here is the Customer Data Supply Chain, such that digital applications will need to handle 3 things:
- 1. Regulations of data privacy that influence levels of personalization
- 2. Communication of what data is collected and used to further loyalty and engagement
- 3. Investments in technology to handle the fast pace that data comes into the organization
When customers provide their favorite brands with helpful personal data, the organization needs to be prepared to care for in a trust-worthy manner and used quickly to extend the value of the relationship. A December 2022 IDC survey asked about the ‘shelf life’ or period within which data loses its value – 75% of respondents say that most data will lose its value within days, if not hours of its collection.
IDC defines the customer data value exchange with three foundations that matter: moving from data collection to establishing a trusted relationship; moving from only using the data once to orchestrating it across teams; and finally using technology to share and scale in real-time.
Customers want to see brands personalize their offering and are OK with the use of their personal information to deliver relevant content and offers. But they’re unwilling to compromise on their data privacy and are more cautious about who they share their data with. Enterprise applications have a responsibility to actively help the data managers improve transparency and governance in how personal data is being retained, where it is being stored and who has access to it, at any point in time.
Once you have the basic tools in place to manage the customer data value exchange, it is time to increase the fly wheel of value by looking at activating the data automatically using AI/ML more effectively, connecting privileged first-party data securely through the use of customer data clean rooms and redefining new measures of customer experience.
As the customer data value exchange takes hold in the organization, it is important to introduce new KPIs that look at the customer data relationship with the organization. Very few metrics used today describe the data from the viewpoint of the customer. Most measures are internally focused – they look at the volume or age of the data- or the well-known Customer Satisfaction (CSAT) score is a lagging indicator of customer data usage.
CSAT does not represent the customers’ point of view or feelings about how much data is known about them, and whether the information was used to proactively reduce the level of effort expended to complete a task.
By 2027, 25% of global brands will abandon CSAT as a measure of customer experience and adopt a Customer Effort Score correlated to outcomes as a key indicator of journey satisfaction and success.
Getting direct feedback from the customer about the experience and the expected vs expended level of effort is a radical change for some organizations. However, businesses that look beyond customer data as only a marketing tool and use it across the whole connected customer journey will find benefits to both the customer and the business. For example, customers will find more seamless journeys and use brand familiarity to purchase more products. Businesses will see better forecast accuracy, higher order values and lower churn rates.
It is both the technology and processes that are needed to manage the customer data relationship and in turn, grow revenue at scale.
To learn more about customer data and data value exchange, view Marci Maddox’s IDC Directions presentation.