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How to Make Sense of your Customer Data

Companies today have a wealth of data about their customers, and executives know there is a lot of value in that data. However, recognizing that potential value and actually realizing it are two different things.

Companies today have a wealth of data about their customers, and executives know there is a lot of value in that data. It can be a key to everything from finding new prospects and upselling to effective product innovation and a superior customer experience. However, recognizing that potential value and actually realizing it are two different things. As companies amass more and more data, they often find themselves struggling to make effective use of it all.

“The big challenge is trying to tease actionable insight out of the data,” says Tom Harrison, chairman emeritus of the Diversified Agency Services division of Omnicom, the global communications group. “Generally there is so much data available, but slicing it, dicing it, and transforming raw data into precise, direction-oriented knowledge that powers corporate or brand strategy is not a simple task.”

The technology for doing exactly that has evolved rapidly. “Think of what we were able to do two or three years ago from a data storage and processing standpoint,” says Marc Singer, senior partner at consulting firm McKinsey & Co. “We can do twice as much today for the same amount of money.” However, he adds, “most companies will not tell you that they’re twice as effective at using customer data as they were two or three years ago.”

For CEOs, it’s important to understand that getting value out of their data involves much more than hiring data scientists and launching big data initiatives. Often, the stumbling block is not the technology itself, but how companies approach the technology. “This is as much an organizational challenge as it is a technical challenge,” says Singer. And that’s where CEOs can play a vital role—giving the organization focus and providing direction for taking advantage of customer data.

“The vast majority of data collected isn’t useful for marketing purposes, but That doesn’t mean it couldn’t be useful in the future.”

What’s the Goal?
Just how well companies make use of their data varies. Often, large companies serving extensive consumer markets—where huge amounts of data are the norm—are doing more with their customer data than middle-market firms and B2B companies. But that breakdown is not absolute, and companies of all types struggle to make the most of their customer data.

One common problem: taking too broad an approach. “There’s a misconception that all the data they have is good data. The reality is, it’s not,” says Joe Benson, president of Knowledge Marketing, which helps companies work with their customer data. “The vast majority of what they are collecting today is not useful for any marketing purposes. That doesn’t mean it couldn’t be in the future. But it means that they are not collecting data with a specific purpose to create revenue. They are just collecting it.”

What’s needed is a more systematic approach. That starts with the upfront identification of the company’s goals for using the data, such as finding new prospects, reducing marketing expenses or increasing customer satisfaction. “You need to know how this is going to create value for your customers and for the company,” says Harrison. “CEOs today don’t have the luxury to go off on wild goose chases. Wall Street just doesn’t allow that. So everything needs to be focused on why the corporation wants to do this.” That focus allows the company to essentially target its collection and analysis efforts on data that will help meet those goals. It also makes it possible to establish solid metrics for gauging the success of the data initiative.

Building the Data Foundation At the same time, companies need to consider the quality of data itself. Customer data is often kept by different corporate “owners” in disparate formats across various systems. Companies need to find ways to consolidate that data and clean it up so that it is accurate, consistent and up to date. “There needs to be a data strategy and a data governance model,” explains Singer. “You need to treat the data as an asset, not just a byproduct of your transaction systems.”

Without unified data, the company will be working with a flawed view of the customer. Bad data is “a hijacker of your company’s time,” says Knowledge Marketing’s Benson. “You spend a lot of time chasing dead-end leads that are never going to go anywhere, because you don’t know any better.”

In addition, salespeople and marketers are likely to stop trusting the data and start ignoring it—which could lead to missed revenue opportunities. Also, says Benson, “you will tend to gravitate toward the same types of people over and over—fatiguing your best customers because you’re targeting them with every offer, not the right offers.”

Having good data may also mean including data from third-party sources to complement the company’s own customer information. Doing so can create a broader perspective that makes it possible to validate the company’s own data and, even more important, uncover new prospects and potential markets.

None of this is to say that the CEO needs to be involved in day-to-day data issues. But he or she should be asking the right questions of marketers and analytics teams. What data assets do we have? Who is responsible for them? Have we integrated our customer data? “If you had a one-pager describing the end result you want, what would that look like?” says Benson.

Balancing Science and Art
Customer data can tell companies a lot, but it can’t shed light on every aspect of the customer. “You can see who is buying, when they are buying, where they are buying and even predict when they are going to buy again,” says Harrison. “But the data can’t tell you why they do it.”

For that, companies need to bring the judgment of people to bear on the data. To gain a better understanding of the “why” factor, Harrison once employed a cultural anthropologist “who spent a lot of time in stores and in people’s homes observing people and talking to them. It was really eye-opening.” Analyses can also include input from business people who understand the company’s goals, who work with customers and so forth. In short, those who can provide business intuition and gut instinct gained through experience.

“The data will help in the decision process. But rarely should you rely on data exclusively,” says Benson. “It should be used in conjunction with the human perspective and business experience. Never underestimate the importance of human intervention with the data.”

CEOs can make sure that that human perspective is taken into account. As part of that, they can keep the organization focused on getting results and on turning insights into effective action.

“I suspect we have all seen people who do the research, do the research, and after that they do [more] research, without committing to a direction,” says Harrison. “One of the opportunities that a CEO has is to focus people and get them into the data and out of the data when they have enough insight. Make a decision, pick a direction and go for it. Because at the end of the day, we are trying to sell product and be profitable—not get locked into a quagmire of data and analytics.”

Read more: 4 Things you can do with your Data Right Now


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