How often do you find yourself asking these sorts of questions about your customer data?
- What happened on the last call with this client?
- I wonder what opportunities are available for this client?
- What’s the client’s phone number for a quick check-in call?
Each of these questions can be answered using customer data—if you collected that customer data, stored it effectively, and are able to activate it. Read on to learn more about the importance of collecting customer data, and to identify the customer data management solution that is the best fit for your needs.
Why You Should Be Collecting First-Party Data
Customer data is essential for understanding who your current customers are, strengthening your relationships with those customers, and identifying new customers to grow your business. Businesses may choose to collect first-party data on their customers, purchase third-party data, or some combination of the two strategies.
What is the difference between first and third-party data?
Simply put, first-party (or 1P) data is information that your business has collected on your customers, while third-party (or 3P) data are large data sets identifying customer trends that your company can purchase for use. These large data sets are created using third-party cookies that collect behavior across the Internet. Although many businesses have relied on third-party data in the past, there’s good reason to move away from third-party data and double-down on first-party data.
Personalization: First, and perhaps most importantly, first-party data tells you about *your* actual customers. Third-party data sets will give you lots of information, but that information will be very general, rather than specifically describing your true customer base. The quantity of third-party data enables you to spot broad market trends and test whether these trends apply to your business. However, the specificity of first-party data enables you to generate insights that are based on your actual customers.
First party data can help you confirm (or identify in the first place) the characteristics of your target audience—what do your customers have in common? Are there any surprising characteristics that can guide future marketing? Which factors predict whether someone will be a good customer or a great customer? How are customers finding you? How are they navigating your website? Relying on third-party data means you miss the opportunity for these personalized insights on your customers and how they are interacting with your business.
Quality: When purchasing third-party data, you will likely have to guess at which characteristics best define your target audience and hope that the data you’ve purchased will give you insights into your customers. You must also trust that the data you’ve purchased is high-quality and accurate. With first-party data, you will know exactly how the data was collected, when it was collected, and why it was collected. Knowing this enables you to accurately evaluate the quality of the data you are using.
Longevity: Have you heard of the cookie apocalypse? Third-party data relies on cookies, and cookies are going away. Eventually, Apple and Google will block third-party cookies entirely in their browsers, but even before they do this, changes in how cookies are implemented are already affecting the usefulness of third-party data. As more individuals opt-out of cookies, the data being collected is increasingly incomplete and the risk of bias in the data set increases substantially. We recommend starting with the following steps sooner rather than later so your organization can begin adapting to the new data landscape:
- Review all internal systems that use customer data.
- Format data so it’ll be the same for all databases.
- Verify that all data is current and relevant.
- Create connections between all data sources so that they stay up-to-date and in sync.
Where do I Store Customer Data?
The type of customer data you collect, the amount of data you collect, the purpose of that data, and the amount you can spend on customer data management all play an important role in determining what the best customer data management solution will be for you.
Spreadsheets (GoogleSheets, Excel, etc.)
Storing customer data in spreadsheets is a low-cost (often free) option for small to mid-sized businesses that aren’t collecting and storing vast amounts of information. If your business has not yet made the move to centralize and digitize your customer data, building a spreadsheet with customer information could be a great first step! Some questions you might ask yourself to determine whether you would benefit from using spreadsheets to manage your customer data include:
Would the data be more centralized and more accessible if it were entered into a shared spreadsheet?
How much data needs to be entered? Do we have the time to manually enter the data that we have collected so far?
How often does the data need to be updated? Since spreadsheets rely on manual data entry, data sets that constantly change can be very time consuming to keep updated as a spreadsheet.
How many people would be entering data / updating the file? How often would people be working in the file simultaneously? As more people work with a spreadsheet, the risk of introducing errors and/or breaking formulas increases substantially. Spreadsheets work best when only a small number of people are working in the file, and when there is low likelihood of multiple people working in the file at the same time.
How much data total is being stored? Spreadsheets can easily store contact information for a couple thousand customers, but if you have 10,000+ customers, you will start to notice a slowdown in run time in the spreadsheet file.
If your business needs to take the first step towards digitizing your customer data, spreadsheets could be a great low-cost solution. However, as your customer database grows and your business evolves to rely more on insights from customer data, you will likely need to invest in a specialized software solution like a CRM.
Customer Relationship Management (CRM) Software
For businesses that have outgrown spreadsheets, a CRM might be the solution to your needs. In addition to storing all of the data that you might keep in a spreadsheet (e.g. contact information, name of sales team member assigned to client, date of last contact, etc.), CRMs can help you store information that doesn’t fit well in spreadsheets. Most CRMs support logging client notes after calls and meetings, attaching files, and even integrating email communication into the client’s record.
CRMs are also ideal tools for really studying your client pipeline. What opportunities are you currently monitoring? When was the last contact date? Who is due for another touch by the sales team? If you’ve found yourself losing track of client information or losing a prospective client by letting your timeline stretch out too long, investing in a CRM is likely to pay off.
Customer Data Platforms (CDPs)
CDPs are ideal for businesses with high levels of data maturity. In most cases, this means that the business is collecting a large amount of first-party data on their customers from multiple sources—data that ranges from customer contact information to customer behavior on their websites. It also means that the business has already implemented a CRM and is now ready to connect their CRM with other data sources.
A CDP is a major investment, and successful implementation requires buy-in across the business—not just with your marketing team. A CDP is designed to combine customer data from multiple sources to achieve a single customer view (SCV): insight into who the customer is, how they interact with your business, their purchase history, when they are most likely to open emails, etc. However, unless you already have these data streams up and running, the CDP will not be able to offer this 360-degree customer view.
Make Sure You Have Customer Data Management
Big or small, you should have a central database for customer data management. You will have a more comprehensive understanding of your customer when your data is organized. This will help you align your marketing message, automate, and make your customer service more efficient. With well-maintained and fully integrated data management, you will cut down on data silos and increase cross-departmental collaboration.