Customer data is your company’s most valuable asset. It helps you improve your business operations by providing insight into your best customers. To get the most out of the data you’re collecting and more directly own your clients, you need to understand what information you’re collecting and how that data can best provide value to both your business and your customers. Putting data to work will lead to better customer experiences that cement loyalty and increase revenue. But you must also understand the reasons consumers choose to share data, the reasons they hesitate, and how privacy regulations can impact the way you collect, use, and store the data.
First-Party Data Drivers
First-party data is data the customer provides to you directly. It includes everything from purchase patterns to browsing behavior, from email subscription preferences to account information, from online searches to social media and email engagements.
First-party data provides a wealth of information about your customers and it is also less expensive to collect, making it more profitable in the long term. This is the data you’re already collecting. (At least you should be — if you’re not, you’re probably spending way too much on second- or third-party data and missing out on huge opportunities.)
Your first-party data is the biggest (and best) driver for:
Mapping the customer journey:
How and where do your customers discover your brand? What actions (and interactions) lead to a purchase decision? What post-purchase steps lead to loyalty and evangelism? How do customers at different stages of the journey prefer to interact with you? With a well-mapped journey, you can target customers based on where they are, using their preferred channel of interaction, whether that’s on your website, in your mobile app, or via email.
Calculating lifetime value:
Some customers are more valuable than others, based on how often they interact with your company. With first-party data, you can calculate a customer’s lifetime value, using your own, unique formula. That formula will be based on your specific business model but can include things such as how long it takes a customer to move from ‘discovery’ to ‘first purchase’, how often they purchase, their average order value, and the average rate of purchases over a specific timeframe.
Creating relevant personalization:
The more you know about the customer’s journey and their lifetime value, the better you’ll be able to provide personalized offers that will encourage new customers to make a first-time purchase or entice existing customers to spend more time and money. All that data about existing customers is hugely valuable intelligence that can be put to use attracting and converting more like them. And whether new or existing, customers don’t just appreciate personalized content and curated product offers that are unique to their browsing or buying habits, they’ve come to expect them.
Don’t Underestimate Brand Trust
While first-party data is an important driver in making connections with your customers, it’s imperative to never underestimate the importance of brand trust, both its impact on your customers’ willingness to share their data and on how they choose to allow you to use it.
“Understanding what consumers think and feel about their personal data — including the confidence level the customer has placed in a company’s ability to protect that information, has also become part of the definition of big data,” writes Steve Olenski in Forbes.
Consumers will trust brands with their data but there are a variety of factors that will play into their decision. First and foremost, the value received in return for shared data must be clear. For example, two grocery store chains offer discounts for rewards club members, all while collecting data on those customers’ buying habits. The first store uses that information to send customers occasional discount coupons based recent spend amounts, i.e. spend $200 this week, get a $5.00 coupon next. The second store, on the other hand, uses the information to send personalized ‘members only’ specials based on past purchases and related items.
At which grocery store will the customer be more willing to use their rewards card, and thus share additional data, on future purchases? A lazy marketer would say the first — providing a cash discount is fast, easy, and it’s what customers want. But a savvy marketer will know that the more personalized experience offered by the second store is the kind of value-exchange customers expect, one that will drive longer-term loyalty, and which will translate into a higher lifetime value.
Going a few steps further, Amazon Go lets you make purchases by just by scanning their app upon entering and leaving the store. Order details are compiled based on the personal information on file with the company and cameras that track your every move within the store, the items you select, and those you put back. The app will suggest items while you’re shopping and direct you to their in-store location. But except to say it ‘may’ be used to improve the technology going forward, they don’t fully disclose how that data is used beyond providing that level of personalization, calculating your order, and processing your payment.
Is the convenience of such a store worth the surrender of that much personal data and privacy? Apparently so — the success of Amazon Go in its first year of operation already has competitors scrambling to catch up.
As consumers understand more about the value of their personal data, as well as the risks to its privacy and security, they will begin to make decisions based on both the trust they have in a particular brand and the value of the exchange. The more value you can provide in exchange for that data, the more data consumers are willing to share
Understanding the Data You Have and Using It for Optimum Value
The thing with data is that the flow of information never ends. You’ll collect data that is useful to your marketing efforts and customer relationships, and you’ll collect data that has little to no value. Here are the places you are most likely to collect first-person data and the types of information you should be looking for:
- Website/browsing behavior (cookie data):
- IP address/user location, items saved in a shopping cart, pages and products browsed, etc.
- Customer and account info:
- User name, location, birthdate
- Purchase data (or usage data, if you’re a service or app):
- Purchase frequency, purchase similarity, time spent on app
- Email engagement data (opens, clicks, etc.):
- Level of interest
- Loyalty program data:
- Types and frequency of purchases, unique interests, reward redemption patterns
Once the data is collected, use it to provide value to your customers in the form of personalized experiences across all channels and devices, including:
- Website content
- Retargeted advertising
- Email content and offers, both promotional and transactional
- In-app content and messaging
- In-store offers and promotions
To achieve optimum value, consolidate your data to provide a full picture of the customer. In other words, siloed data does not serve you well. Rather, you want to use data from all sources to cross-pollinate your marketing efforts, adding layers of personalization by using one data source to inform another. For example, loyalty data can be used to personalize email, purchase history to personalize loyalty offers, or browsing behavior to personalize ad retargeting.
Your customers might be willing to share their personal information in exchange for value, but your ability to meet the expectation of privacy and security plays a huge role in that willingness.
It isn’t just consumers demanding that privacy. Governments are enacting privacy regulations with very specific requirements. CAN-SPAM was just the beginning, with the GDPR taking effect earlier this year and California’s Consumer Privacy Act (CCPA) soon to follow, effective January 1, 2020. Many states, from Colorado to New York, have passed similar privacy regulations.
Regardless of government regulation, your customers’ expectations should be your primary concern. The best way to meet those expectations is to establish compliance for all your customers, regardless of where they are, and even for laws that may not apply to you. Doing so will demonstrate your commitment to privacy and security and will go a long way towards reassuring both current and future customers that their data is safe with you.
- Make your compliance apparent to customers through clear and transparent terms of service and privacy policies
- Include details about what information is collected, how it is used, how it is stored, and how customers can opt out or ask for their information to be deleted
- Make your policies easy to find, in plain language that anyone can understand
By clearly communicating both your compliance and your commitment to data protection you will both reduce opt-outs and encourage new customers to share their data.
First-party data is a boon for your marketing team, allowing for highly personalized experiences that will result in more loyal customers with greater lifetime value. But data should always be collected and used with the goal of providing value to those customers and with privacy protections at the forefront, so your customers feel both secure and well-served.