Benefits and Challenges of Using Customer Data for Marketing

“Get close enough to your customers so that you can tell them what they need before they realise it.” – Steve Jobs

Utilising customer data offers many advantages to a company as a means of optimising its marketing efficiencies. The use of customer data, or database marketing, allows companies to create a personalised experience for its customers and according to a Smart Insights report (February 2020), 87% of marketing and analytics professionals consider it a vital aspect within their organisation. However, using customer data also has its disadvantages.

Benefits of Using Customer Data

Identifying customer groups: Database marketing allows a company to identify and organise customer based on their purchase behaviour. Ranging from potential customers to their most loyal customers.

Segmentation: Detailed customer segments can be organized based on demographics, personal interests, behaviours etc.

Advertising & Promotions: By understanding their customer base, companies can create highly detailed advertising and promotional campaigns to target the interests of their customers.

Challenges of Using Customer Data

Behavioural Change: Consumer behaviour changes within short timeframes. Acting quickly on analysed customer data is both essential and challenging.

Data Decay: Any time a customer changes occupation, email address, home address or any other life change, their profiles become outdated. Even the most well managed database decays on average 2-3% a month (Clevertap, 2019) and staying on top of this can prove challenging for any company.

Customer Accountability: The fact that customers have become very aware that their data is being collected and used, it’s important that companies use it in a way in which customers appreciate. According to Omer Minkara, President of B2B marketing solutions company Aberdeen, companies that use customer data in an accountable manner show an 8.1% year-on-year increase in customer satisfaction.

Although database marketing holds distinct, research-backed competitive advantages, it is important for companies to respect privacy rights of its customers. As well as this, companies must effectively mitigate the challenges in order to allow optimization of the benefits.

References

1: Smart Insights, Customer Experience Statistics, 2020: https://www.smartinsights.com/customer-engagement/customer-engagement-strategy/customer-experience-research-statistics/

2: Clever Tap, What is Data Base Marketing, 2019 Report: https://clevertap.com/blog/database-marketing/

3: The Good, Bad and Ugly in Using Customer Data in Marketing, Omer Minkara, President, Aberdeen, https://www.aberdeen.com/cmo-essentials/good-bad-ugly-using-customer-data-for-marketing/