The Added Value of a CDP (Part 2)
A Deeper Analysis of the Benefits of a Customer Data Platform
By Peter Gergen, Solution Architect CX
A Customer Data Platform (CDP) offers companies a wide range of benefits when it comes to using and managing their customer information. It enables extensive insights into customer behavior, personalized customer journeys, improved data quality and data integrity, automated marketing processes, and real-time interaction over a variety of channels. A CDP optimizes marketing strategies, improves customer satisfaction, and increases sales.
I will be examining the decisive differences between “traditional” decentralized handling of customer information and managing this information in a Customer Data Platform (CDP). I will highlight the many ways that a CDP adds value in the effective use and management of customer information. I will split my assessment into three posts, to facilitate a comprehensive examination. In the first part, I discussed the aspects of centralized data storage. In this second post, I will be examining the benefits provided by the customer-centric focus in the CDP in more detail.
The term “customer experience” (CX) plays a key role in many current initiatives for generating new business, as well as for maintaining and deepening business relationships with existing customers. But what exactly is this “experience” about?
To get to the bottom of this aspect, we need to change our perspective. This means companies have to temporarily give up their familiar perspective and instead put themselves in the place of a customer who is interacting with their company. This change of perspective often reveals deficits and deficiencies in the processes that have to be rectified.
Customer Use Cases
Use cases make it possible to take on the customer’s perspective. To do so, an exemplary process involving interaction with the company is examined from the customer perspective, with all its individual steps. This approach enables you to capture improvements in both service offerings and activities to increase customer satisfaction. Complex, time-intensive process steps that can be burdensome for the customer can be reduced, while new, innovative measures can be tested.
A number of different starting points are important to a successful customer experience. Examples:
- As soon as a customer registers, their customer information is immediately distributed to all relevant channels. Negative example: It is extremely detrimental when a customer has to register, log in, and define their preferences and interests again during every interaction and over every channel.
- Based on a customer’s declarations of consent, their information may only be passed on to the channels for which the customer has explicitly granted their consent. If the customer agrees to the processing of their information in accordance with the company’s general terms and conditions, but rejects marketing-related activities, then every advertising activity that is carried out represents a violation of the customer’s expressed wishes – and a breach of the General Data Protection Regulation.
- Take this drastic example of a completely failed customer experience: A customer opens a support ticket for a product and faces a complex repair. Their sales contact is not notified of this support case, however, and instead suggests a repeat purchase of the product, combined with a price increase. The fact that the customer has already searched for the conditions under which the contract can be canceled is hidden in the log files on the web server in the best case. This information is not taken into account in dealings with the customer.
In all three scenarios, a CDP can help to prevent this misguided handling of the customer. This is built on a foundation of targeted interchange of customer information and activities, compliant with data protection regulations, between the source and target systems (such as website, purchasing portal, support and service system, and CRM), all facilitated by the CDP.
Whether a CDP implementation is successful depends mainly on meticulous execution, especially of a company’s most important use cases for its customers.
The Customer Journey
The customer journey describes the full path that a customer takes from their first contact with a company until the fulfillment of their needs – and potential repeat purchases. It passes various milestones, such as the ones described in the following example:
- An anonymous user who has contact with a company for the first time and is interested in its products or services
- A potential customer who has already given the company their contact information, such as an email address, to subscribe to a newsletter, for instance
- A registered potential customer who has defined their full contact information, preferences, and consent options and has already interacted with the company through a variety of communication channels, including buying products
- A regular customer who is known to the company in all their facets and has a dedicated contact person, including discounts and exclusive service offerings
The primary objective of every company is to guide customers through this journey from the beginning and give them the custom-tailored information they need at every milestone to convert a potential customer from unknown user to regular customer.
But let’s start at the beginning. The customer journey can start long before a prospect is even aware of the company. Targeted “lookalike” campaigns can be launched on social media, such as Instagram, to address specific target audiences on these platforms who could potentially be relevant for our company. If an anonymous prospect visits the company’s website to find out about its product range, their click patterns provide important insights about the parts of the product range they are interested in. The company can then issue a targeted response by making these products the focus of the user’s attention.
The customer journey continues when the anonymous user shows interest by subscribing to a newsletter and provides their contact information, such as an email address. This creates the first, loose connection with the company, which the marketing department can identify and use. In this process, the available information such as the user’s click patterns and dwell time on specific products is taken into account, so the newsletter can be generated for the user in a targeted way.
The customer’s journey toward the company continues. Every touchpoint on the customer journey marks important milestones as the customer is converted from an anonymous prospect to a loyal repeat customer. A CDP collects and structures customer information and activities from different source systems, to create profiles in categories, segments, and target groups. This information is then made available to the relevant channels. At the start of the customer journey, the marketing system plays a key role in exchanging information with the customer, while the company’s contact persons and the CRM system become increasingly more important as the journey to becoming a regular customer continues.
Are you still with me? If so, let’s continue with the last item: the aspect of data security, privacy, and data protection regulations.
Data Security, Privacy, and Data Protection Regulations
If a customer is willing to give your company their contact information and grants their consent to recording their activities and interactions and use them to improve their customer experience, this is an important signal of trust – one that you should not treat lightly as a company. Of course, it isn’t possible to discuss these topics individually with every customer, down to the smallest detail. Therefore, basic formalities that the customer can consent to (or reject) are defined ahead of time.
The subject of data security and data privacy is divided into three areas:
- Data collection: Every time a potential customer registers, they step out of their anonymity and reveal their identity. In this process, they define how they want to be kept up to date and which guidelines the company must observe with regard to their data.
- Data storage and processing: The company is obliged to process the customer’s information exclusively for the stated purposes and in accordance with the consent granted by that customer. If a consent has not been granted, the company must take this into account and may not use the information for the affected purpose, even if it is available. Furthermore, it is the company’s obligation to take all measures needed to ensure that the data is stored securely and inaccessible to unauthorized third parties. It is also very important for the customer to have the ability to change their own information and that there is no way for third parties to manipulate this information.
- Data erasure and profile removal: The “right to be forgotten” gives individuals the option to demand that companies erase their personal data. It empowers them to control their digital presence and remove information that they deem to be irrelevant, outdated, or inappropriate from the public sphere. The right to be forgotten is intended to strengthen privacy protections and the right to informational self-determination. It obliges companies to review requests from data subjects and, if necessary, erase or anonymize the requested information.
These aspects are not only simple demands that customers can make of companies; they are firmly embedded in the corresponding data protection regulations. The European General Data Protection Regulation (GDPR) is the strictest data protection regime in the world. The regulation was passed by the European Union and came into force on May 25, 2018. All European companies are obliged to comply with the requirements of the GDPR.
A CDP plays a key role in the collection, analysis, and transfer of customer information. Therefore, it is highly important for data protection policies to be an inherent part of CDP processes. How this “data governance” is implemented in the CDP is dependent on both the system manufacturer and the configuration of the processes.
Regretfully, a more detailed explanation of this topic would be too long here, so I’ll ask you to consult the relevant literature for the time being. I will tackle this topic in a future blog post.
Summary and Outlook
A CDP gives customers decisive benefits with regard to the customer experience. An analysis of the use cases that examines interactions between a customer and the company reveals weak points and obstacles in the customer experience. When a CDP is implemented, the customer’s experiences and activities from these use cases are merged and evaluated in a comprehensive customer profile.
The CDP also represents a powerful tool for supporting the conversion of anonymous users into regular customer. To do so, the CDP defines precise phases of this conversion and then carries out automated processes to increase customer retention based on these phases.
Last but not least, a CDP supports comprehensive data governance and compliance with the General Data Protection Regulation (GDPR). It facilitates centralized data control, transparency in data collection and use, and the implementation of security mechanisms such as encryption and access controls. The CDP supports the erasure and anonymization of information in accordance with the “right to be forgotten”, as well as the management of consent and customer preferences. With these activities, the CDP supports compliance with data protection regulations, strengthens the trust of customers, and minimizes breaches of data protection.
All of these benefits help companies to improve customer satisfaction, boost conversion rates, and build long-term customer relationships. In the third and final part of my observations of the benefits of a Customer Data Platform in the context of customer data, I’ll be focusing on internal data analytics within the CDP. In the process, I will be examining how a CDP supports the company in creating a more precise customer journey, while at the same time capturing added value such as improved customer loyalty and increased sales.
More about SAP CDP:
- The Added Value of a CDP (Part 1) – Central Data Store
- The Added Value of a CDP (Part 2) – Customer-Centric Focus
- The Added Value of a CDP (Part 3) – Data Analytics, Customer Segmentation, and Audience-Building
- Unleashing Customer Insights: SAP CDP for Insurance Companies
- Unleashing Customer Insights: SAP CDP for Retail