Customer data is as much a part of CX today as the customers themselves and, with regulatory changes in recent years and Google’s move to phase out third-part cookies, it is a great time to revisit your long-term data strategy.
In this guide, we look at the ever-shifting landscape of customer data, considering the changes in how businesses utilize customer data and how this impacts customer service. We will also consider how businesses can get the most out of their data and utilize it for predictive modelling that can be applied to tailor and optimize the customer experience.
Finally, this guide will cover what many consider to be one of the most important considerations with regard to customer data today, the discussion about customer trust around data and how brands can win it.
Contents
- The current state of data analytics
- Getting the most out of customer data
- Ensuring customers can trust you with their data
- Conclusion
The current state of data analytics
Collecting and analyzing customer data to inform experience strategies has been a staple of quality CX for some time now. The customer data landscape, however, is constantly shifting and in recent years we have seen major changes not only to the way businesses use customer data but also to the expectations of customers regarding their data.
One of the biggest shifts we have seen in how businesses use data is that there is less of a focus on monetization of customer data and more focus on its use for service and product development, as well as addressing customer needs and refining the overall CX. This makes sense, as with 58 percent of customers claiming they would pay more for better customer service, it is clear that CX is increasingly being seen as a key part of any business’ product or service.
It is now common that we see customer data being assessed with the goal of uncovering insights that will inform optimizations of customer journey design and corrections for experience-related issues reported by customers. It is not just the customers who benefit from the visibility provided by data, as many businesses are also using it to improve the employee experience (EX), increasing their job satisfaction and empowering agents to help customers as best they can.
Unsurprisingly, the use of customer data to reduce business costs and increase profits is still prevalent. Customers today are more than willing to tell brands what is or is not working or wanted, and by tapping into these insights, businesses are able to focus on or tweak certain aspects of their products or services to meet customer demand.
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Phasing out third-party cookies
In January 2020, Google announced plans to phase out third-party cookies. With this change currently scheduled for some time in 2024, businesses that still rely on third-party cookies to collect valuable customer data will rightfully be concerned about how they will continue to deliver quality, informed CX after the switch. Research carried out by Adobe in March of 2023 has found that there are quite a few businesses that might have cause for concern, with 75 percent of marketing and CX leaders admitting that they still rely heavily on third-party cookies.
Third-party cookies are not the be all and end all of CX and marketing, however. First-party cookies are still a perfectly viable option and, in some cases, we are even seeing customers offering their data willingly, which is being called zero-party data. Collection of data in this way is not only free and easy, but it could also go a long way to improving customers’ trust around data, as they know exactly what information they have shared with a business and have done so willingly.
This approach can pay dividends. Research from Twilio has found that 51 percent of consumers in Europe will become repeat buyers after a good, personalized experience, and 33 percent would join a loyalty program for the same reason.
Hema Thanki, EMEA senior product marketing manager at Twilio says: "Looking ahead, brands will need to start relying on and collecting first-party data, if they are not already, to deliver personalized and engaging experiences. First party data – that is, the data that is consensually given to brands by their customers or generated by their interactions – not only provides the most valuable, relevant and accurate insights when building personalized experiences, but will soon be non-negotiable for marketers."
Most organisations, however, are still lagging in preparedness, Thanki says; a mere five percent of brands use entirely first party data in their marketing strategies.
Thanki adds: “Adjusting to having a greater reliance on first-party data is essential – or brands will risk not knowing their customers and their marketing campaigns will suffer. In fact, 27 percent of consumers feel personalization has become less targeted over the past 12 months, highlighting the pressing need for brands to jump on the first-party bandwagon and address this.”
Getting the most out of customer data
Customer data is increasingly being used for modelling new solutions and CX optimizations. At CX Network Live: Predictive CX 2023, Ruchika Singh, director of data science and insights at Spotify, discussed how the streaming giant has leveraged predictive modelling practices as part of controlled experimentation and assessment aimed at informing value-based decisions and improving customer journeys.
Singh explained that the first step to modelling is always to figure out what exactly it is you are trying to solve or predict. She noted that Spotify has leveraged modelling to help predict customer behavior with regard to churn and stressed the importance of a specific focus as you must know whether you want to find out which customers will churn or which will not.
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Data is also the primary ingredient necessary for the training of conversational artificial intelligence (AI). On conversational AI, David Hicks, facilitator of the CX Network Masterclass and president of Tribe CX, says: “You could actually use these technologies to completely digitalize and automate your front end. You could conceivably take all your service operations out and automate them and using some of these new technologies and you could do that relatively quickly.”
When it comes to customer data, it always pays to know who your customers are and for many business this can be very difficult. At CXN Live: Predictive CX 2023 Jon Hay, vice-president, data, intelligence and analytics at the Boston Red Sox gave an example of this by pointing to Heinz ketchup. While Heinz are a very successfu business, it is not feasible for it to know who is taking ketchup bottles from the shelves and how they can best be served.
A useful method for attaining customer data in situations where customers do not readily provide it is the implementation of loyalty programs. While noting that they are somewhat transactional, Hay explained that by offering something in return you give your customers a reason to sign up for your loyalty program and share their data with you. When you combine this with the fact that most customers are more likely to purchase more frequently from brands that offer a customer loyalty program, it makes sense that many brands have already implemented them.
Ensuring customers can trust you with their data
While the advantages of customer data for predictive modelling and AI training are great for businesses, brands must also consider how their customers feel about them collecting and assessing their personal data. It is very easy for customer data to be misused and customers may not be able to accurately anticipate what will be done with their data when they share it. Despite this, they have strong opinions on safety and how their data is used.
The Global Trust Index, which is a construct based on user perception, currently stands at 54 percent. This indicates that almost half of all mobile users currently lack trust around data. While it is understandable that customers are losing trust in businesses since many businesses have abused this trust, businesses still need customers to share their data so that they can determine how best to serve them. This will prove somewhat challenging for businesses in the big tech or social media industries, as most customers feel that social media is the least safe place to share data and a primary concern is ensuring that big tech companies do not have too much power over personal data.
At CX Network’s All Access Customer Communications Management event, Chris O’Brien, SVP of product management at M&T Bank shared a useful strategy for collecting customer data while ensuring that customers are happy about it and trust you to keep it safe.
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O’Brien offered an example from the publishing industry, whereby customers are given free access to a limited number of articles before being asked to sign up. This approach allows brands to demonstrate the value of their product or service before asking customers to surrender their data. Customers are able to see what they will get in return for sharing their valuable data before they make the commitment to do so.
The key elements that ensure customers are happy with how you use their data are loyalty and trust and gaining this trust around data is not as complicated as it may seem. According to Jan Richards, CX Network advisory board member and head of customer experience for Irish Life Group, all that is needed is communication with a human touch:
“We increasingly need an emotional connection. This is about showing you understand your customer and care about them. The human touch, in person or online, is crucial, as is trust. Keep my data safe. If there has been a problem, tell me. Years of overselling and data breaches mean it is harder for companies to earn this trust, [but not impossible].”
CX Network board member and CX specialist Guataam Borah says customer trust is a combination of principles and practices. "And it is a long haul game. It’s about an organization really being true to the customers," he says.
Borah says there are three basic principles an organization can follow:
- Transparent Data practices and a formal way of educating the customers.
- Opt-out mechanism for customers to have the choice to opt out or customise any choice being offered.
- Customer Support to address in need of customer regarding data and privacy violations.
Conclusion
With major changes regarding the availability of customer data on the horizon, once Google completes its plans to sunset third-party cookies, there has never been a better time to consider what your long-term data strategy looks like. Brands will need to ramp up efforts to collect first-party cookies or even look into the possibility of collecting zero-party data.
Figuring out how to get the most out of this data is also important. Brands like Spotify and M&T Bank are already utilizing customer data for predictive purposes, modelling CX optimizations to assess their efficacy before they are implemented or customer behavior to predict what they will do. Modelling customer data allows brands to not only get a better picture of customer behavior patterns, but also to bring down CX costs by modelling for optimized spend.
One of the biggest data concerns for brands going forward however, is ensuring that customers trust you to keep their data safe and are willing to share it. The misuse of customer data has caused trust to deteriorate, and brands will need to adopt a human approach in asking customers for their data. Those that get this approach right will win the loyalty of their customers who will be more than willing to share their data and help brands to understand them.