From a business perspective, collecting customer data is a necessity. In fact, a PwC survey found that 94% of global CEOs believe data on customer and client preferences/needs is critical or important. Brands use this data to make decisions that affect everything from the customer experience they offer, to the products they develop, to the budgets they set. But where does this data go? Who sees it? Brands are earning consumer trust and loyalty with new CDP solutions (also known as customer data platform solutions).
For many years, companies collected as much as they could with reckless abandon. This sparked widespread customer mistrust about businesses’ data practices and led to today’s restrictive data privacy landscape.
Today businesses are required to honor the purpose of the data they collect in order to build trust with customers and avoid damaging regulatory issues. It’s a major challenge of today’s digital economy.
To address this issue, market leaders are bolstering their customer experience strategies with CDP solutions.
Let’s look at why.
CDP solutions: The exploding array of customer data
Fun fact: The Internet reached 4.3 billion people in 2019, up from 3.4 billion in 2016. As more people have come online, customer data has undergone an explosion in terms of volume, variety, and velocity.
Customers use multiple devices, email addresses, and social media accounts. They interact with brands across channels: In-store, web, phone, mobile app, social, and more. They voice their opinions through surveys, reviews, and social media posts, causing the category of experience data to skyrocket. And their expectations are always rising: complex processes such as 24/7 service chats, buy-online-pick-up-in-store, hyper-personalized offers, and hyper-relevant recommendations are now expected staples.
This explosion is only accelerating. Reasons include (but are not limited to) the:
- Spikes in digital activity caused by pandemic-related lockdowns
- Constant data generated by IoT devices such as Amazon’s Alexa
- Spreading influence of social media platforms
- Rising abilities to track online behaviors
- Emergence of beacon and geo-location technologies
What does this explosion mean? New opportunities and responsibilities for global enterprises.
The tangled web of customer data collection and processing
The collection and data processing practices of businesses have come under serious scrutiny.
Internally, the explosion of available data has led to fragmentation and duplication. Individual systems across regions often collect data about the same customer and store it in silos. This limits the enterprise’s visibility into all the data they collect. They also don’t understand where it all resides. These challenges result in increased costs and strained resources.
Externally, customers have grown skeptical of data collection methods. Pew Research recently found that 81% of Americans think the potential risks of data collection by companies about them outweigh the benefits. News headlines about data breaches and underhanded data practices have made consumers wary about sharing their personal information.
Defining the purpose of customer data
In response to consumer mistrust, governments around the globe are issuing new, more restrictive data privacy regulations. The GDPR in the EU, for example, contains a “purpose limitation” principle, which says, “The purpose for processing of personal data must be known and the individuals whose data you’re processing must be informed.”
The regulation details six lawful bases for collecting and processing customer data:
- Contract: The data processing activity is necessary to enter into or perform a contract with the customer.
- Legitimate business purpose: This is the most flexible category. In principle, it can apply to any type of processing for any reasonable purpose. Yet in practice, businesses must satisfy rigorous requirements before using it as the basis for processing data.
- Legal obligation: The processing is necessary for the company to comply with the law. Examples include information security, employment, or consumer transaction law.
- Public interest: The processing is necessary for the organization to perform a task in the public interest or for an official function. This most often applies to government entities.
- Vital interest: The processing is necessary to protect someone’s life.
While a business can select the basis for its processing activities, it must do so before the processing starts. In addition, the basis must be demonstrable at all times to customers and regulatory authorities.
If the wrong basis is selected, or if the business cannot demonstrate which basis it used to collect and process customer data, a noncompliance violation could result. This would lead to legal trouble, potential fines, and brand reputation damage.
Many customers already question the purpose behind a company’s data practices. If a brand makes news because of a data privacy regulatory violation, they won’t hesitate to find alternatives.
How CDP solutions help honor the purpose of customer data
A CDP solution acts as the repository of customer profile data for the entire enterprise. It also connects with every customer engagement application, so the brand can deliver relevant, in-the-moment experiences at the right time and place.
In 2019, the worldwide Customer Data Platform (CDP) market experienced meteoric rises in revenue, investment, and number of new vendors. More recently, industry analysts have estimated that CDP market size will grow from $2.4 billion in 2020 to $10.3 billion by 2025.
What’s causing all the buzz? Put simply: Enterprises are realizing how these solutions can help elevate their customer experience strategy and honor the purpose of customer data. Three recent advances in particular highlight these benefits.
- A data privacy foundation: Customers are anything but static. One day they sign up for marketing emails; the next day, they’ll decide to opt out. They may buy a product and its warranty, then decide to return it. Enterprises aren’t static, either. Every time terms or business needs change, customers need to re-consent. The sum total of all this activity: every customer can generate dozens processing activities, which complicates their management at scale.
Today, CDP solutions are being built on a strong data privacy foundation. They enable your brand to store all of a customer’s consent and preference data in his or her unified profile, making it easier to govern and orchestrate to other systems. The solution will only merge inbound data to the profile if the required consent and processing purpose exist. Then, when customer data moves to a target system, consent, preferences, and purpose will be enforced. Additionally, this data is easier to find and surface in the event of a regulatory audit or customer request because it’s stored in a central repository.
- Connectivity to the entire tech stack beyond marketing: To customers, it makes no difference if they’re dealing with marketing, commerce, sales, or service departments. The purpose of their interactions mainly focuses on products or services they’re interested in and the experience they’re having with your brand. Frustration grows if they have to repeat passwords, addresses, and account information when they jump from one department to the next.
With new CDP functionality, every engagement solution in your organization can be fueled in real time with contextual profiles containing all pertinent customer information. As an example, data can be shared almost instantaneously between your commerce solution and your service platform. The end result: Your service reps will have all the data they need to offer a seamless, rich customer experience.
- Hyper-personalized engagements across devices and channels: Through the unified profiles in a CDP, your brand will understand who your customers are and how they want to be treated. In addition, artificial intelligence and machine learning technologies can mine these profiles to find customer insights at scale.
These capabilities can help your brand fulfill the ultimate purpose of customer data: the delivery of relevant, in-moment engagements to customers at the right time and place on their preferred channel (e.g. email, SMS, or social media). And, you can do it at scale.
It comes down to purpose
CDP solutions will no doubt continue to grow.
As they do, their ability to honor the purpose of customer data will help more enterprises positively impact the customer experience they can offer, the trust they can build, and revenue can create.