The Good, the Bad, and the Ugly in Using Customer Data for Marketing

There are good things about collecting customer data – catering to consumer preferences, ensuring relevant communications, anticipating needs in convenient ways. There are challenging things about collecting customer data – privacy concerns, data usage restrictions, maintenance and security demands. And then, of course, there are the ugly things that make consumers completely shut down or distrust customer data collection – security breaches, undisclosed monitoring, unexpected data uses, undesired outreach from third parties, etc. As the use of customer data holds distinct, research-backed competitive advantages to marketers, however, the bad and the ugly elements need to be mitigated to make room for optimizing the good. Below, I’ve outlined these good, bad, and ugly elements of customer data collection, and the best practices for maximizing the good, mitigating the bad, and preventing the ugly.

The Good Elements of Collecting Customer Data:

1. Customer Segmentation – customer analytics research shows 70% of companies capturing customer data across multiple channels segment this data by different criteria, versus only 53% of All Others. Collecting and segmenting buyer data allows organizations to not only better engage existing customers with relevant communications, but also create models for the buyer’s journey based on this data for similar prospects. As a result, marketers deliver more pertinent value at the top of the funnel as well.
2. Aligning to Customer Interests – data is a helpful tool in identifying and listening to the voice of the customer. When done in the right way, like actively listening to a friend in a face to face conversation, collecting customer data can be an effective way for organizations to show they care. Moreover, it allows businesses to align their messaging to the needs and interests of their audience. Of course, when it’s done in a creepy way it can be a turnoff, but that’s why it’s important to get it right. When following these best practices, customer engagement research shows that organizations using customer analytics average a 14.6% annual increase in positive mentions across social media channels – a general, yet telling metric of how consumers publicly view brands.
3. Maximizing Marketing Campaign Results – Companies use data-driven marketing programs for a number of reasons. One primary goal is to drive personalized buyer conversations that yield measurable outcomes in contributing to the sales forecasted pipeline as well as closed business. Capturing customer data across different channels provides marketers valuable insights on how buyers interact with specific content – facilitated by use of technology tools such as web analytics and mobile analytics. By understanding how buyers interact with specific content, marketers are better positioned at presenting the right customer with the right content – therefore reducing the customer effort to find the relevant products / services that meet their needs. In other words, create a win / win scenario for both the buyer and the seller.

Mitigating the Bad Elements of Customer Data Collection:

1. Disclosure Drudgeries – why do marketers hate placing long terms & conditions pages, or privacy disclosure notices in front of their properties? Because consumers hate having to review all the details before getting to the thing they’re actually looking for. It’s not that consumers don’t want to know how their data will be used – they actually need to know this information for compliance, and their piece of mind – but they often feel even more suspicious from the long legal jargon that they usually encounter. According to Edith Ramirez, chairwoman at the FTC, “It’s crucial to provide some sort of notice, like in the initial set-up of a device or app, about what information is collected, how it’s used, and with whom it’s shared.” Although it may seem challenging, this is actually an opportunity for marketers to highlight the good things about data usage – how it will be used to help the consumer – in quick, clear communications. You may still want legal to give these disclosures a look-see, but the more you can honestly and clearly convey your intentions with customer data, the more customers will appreciate it.
2. Maintaining Accountability with Customers – if you’re going to use customer data, you’d better do so in a way that customers appreciate. There can be significant consequences for collecting customer data that isn’t used to effectively serve customers, and the very fact that customers know (and should know) that you’re collecting their data gives them leverage to call your organization out. Companies that do use customer data and analytics in an accountable manner, however, do show measurable advantages – averaging an 11.2% year-over-year growth in their customer win back rates, and an 8.1% increase in customer satisfaction.
3. Ensuring Compliance with Regulations Governing Customer Data Security – Marketers face a number of regulations (e.g. PCI-DSS, HIPAA and CAN-SPM) that govern how they can collect, capture, store, use and dispose of the buyer data. These regulations vary across different industries and even geographies. So for marketers in businesses operating across multiple industries and / or verticals, this is an even more daunting challenge. However, keeping a close eye on these regulations not only provides the peace of mind related to avoiding potentially costly litigations, but also helps firms ensure customer trust. On the other hand, this means that marketers must work closely with the legal team members within the business, hire outside consultants or hire staff responsible for monitoring and ensuring compliance with relevant regulations – in all cases this means additional costs that come out of the marketing budget.

How to Prevent Customer Data Collection from Getting Ugly:

1. Listen to your customers; ask them how they prefer to be informed about why and how their data might be used. Don’t make assumptions on behalf of your customers on how they would prefer to be communicated with. Be sure to reflect their specific preferences and allow audience members to either opt in or be aware of your activities. Recently, a major mobile telecommunications provider was fined $7.4 million by the FCC for failing to notify 2 million customers of their ability to opt out of having their information recorded for marketing purposes.
2. Adapt to the requirements of subscription economy. While the term is often used for businesses using software as a service, it also means that your customers subscribe to become a client based on their knowledge of the alternative solution / service providers. Therefore, enable them with the ability to authorize you collecting their data in instances when they download mobile applications, visit your website, or sign-up for a loyalty card in store.
3. Train your employees on the regulatory and corporate rules regarding use of customer data. If you don’t have corporate rules in place that guide employees on how to capture, store, use or store data, work with your IT team to create them.
4. Remind customers about the value they receive by sharing their data. Nothing is more creepy than browsing for a specific product on a website via your laptop and then seeing that same product advertised on your Facebook news feed when using a mobile device. OK, maybe there are more creepy things – but you get the point. Consumers are savvy and can put two and two together to understand why they receive specific ads. Therefore communicate the value buyers receive by sharing their information. Examples to these include the total savings a buyer receives by using a loyalty card in a supermarket or the total savings a customer enjoyed by subscribing to receive mobile push notifications from a local retailer.

Clearly, there’s a lot to using customer data for marketing. Some might say it’s the future of marketing. Others might say it’s a slippery slope toward becoming too data-driven, but the realistic truth is – like any opportunity – it comes with its pros and cons. Using the insights noted above, however, hopefully you can better navigate both the good, the bad, and the ugly of using customer data.

For related customer data and analytics research, we recommend the following free resources:

• Voice of the Customer: Big Data as a Strategic Advantage, April 2014
• Customer Engagement Analytics: How to Use Data to Create (And Keep) Happy Customers, May 2014
• Customer Communications Management: Maximize CEM Results with Interactive Content, November 2014

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