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Oct 24, 2023

How Right-Sizing Data Helps Deliver a Better Customer Experience (CX)

In the crowded customer data platform (CDP) market, there is a misconception that more is better, at least from a data standpoint. If, after all, the purpose of a CDP is to generate a unified view of the customer, it would seem on its face that the more data a company has about a customer, the more detailed the unified view.

This is generally true, with a few caveats. Because while there is a possibility of not having enough data to support a unified view or a deep understanding of the customer, there is also the possibility of having too much. It’s like throwing a dinner party where you carefully plan the guest list, considering both the right number as well as the dynamic between invitees. Too few and your “party” loses pizzazz. Too many, or the wrong mix, and the risk becomes a lack of control. The additional expense and clean-up aside, the worry is you still have a house full of people when it’s time to go to bed.

What is Right-Size Data?

The concept of right-size data refers to a company having policies and procedures in place for a strict accounting of what data the company will collect about a customer. A subset of a broader data governance structure, right-size data considerations include rules for what type of data to collect, its shelf life, rules for discarding, etc. In the house party analogy, it would be like having someone at the door checking invitations.

There are three primary countervailing forces to the “more is better” school of thought:

  1. Risk of Knowing Too Much About the Customer: The infamous example here is the department store that used predictive modeling to determine – correctly – that a teenage customer was pregnant. The store started sending coupons for cribs and baby clothes, which the unknowing teen’s father intercepted – and confronted the store. “Even if you’re following the law, you can do things where people get queasy,” said the statistician who predicted the pregnancy. The rule of thumb to avoid this type of situation is to only collect customer data that will be used to enhance the customer experience (CX) in ways that delight the customer, not make them feel like a stalking victim. Customers will share data for specific purposes – or even for a specific amount of time – and violating a customer’s trust by the misuse of data is a surefire way to drive a customer away. Conversely, being open about why data is being collected and how it will be used – and abiding by those conditions – will generate trust with a customer. In a Dynata survey of retail consumers, 85 percent said they are more likely to shop with a brand that is transparent with how they collect and use personal data.
  2. More Data Creates More Risk: Having too much data creates additional exposure for data breaches and data loss. It makes little sense to collect and indefinitely store data that will never be used without a justifiable business need, i.e., using it provide a more personalized customer experience. A determination of what to keep may also factor in how long to keep it, with different rules for different types of data, such as a credit card number vs. data from a browsing session. A potential for exposure also involves privacy concerns. This concern overlaps somewhat with knowing too much about a customer, with consequences that may exceed the fallout from sending mistargeted communications. The state of New York, for example, just joined at least one other state from banning advertisers from using geofence technology near health care facilities. Earlier this year, the FTC fined two companies close to $10 million for sharing customers’ sensitive health information.
  3. More Data = More Clutter: While there are valid business reasons for holding onto specific customer data, such as purchase history for a specific timeframe for warranty fulfillment and/or returns, the rule of thumb about having a valid business need for collecting or holding onto data applies to more than exposure to risk. It is simply good business practice for developing a deep understanding of a customer. Recency matters, and “cleaning house” on occasion might make it clear that there is no valid reason to hold onto a 10-year-old loyalty club application. In fact, keeping useless data might even be detrimental to providing a customer with a hyper-relevant experience because the old data may no longer be accurate, or it might simply not be important to how the customer interacts with the brand today. A regular audit will help ensure that existing policies and procedures for how data is collected and used are effective, up-to-date and optimized for delivering a better customer experience. In a Harris Poll survey on customer experience, 51 percent of customers identified friction in interactions with brands because the data used in an attempt at personalization was inaccurate or out-of-date.

Right-Sized Data and the Value Exchange

Beyond the CX implications, right-sizing data also reduces a company’s overall footprint, storage costs, and network and compute costs. The school of thought that says to throw all customer data in a data lake and figure it out later also ignores those pratfalls in addition to being susceptible to the three potential consequences outlined above.

A final thought on the importance of right-sizing data is that it aligns with the expectations of consumers who are increasingly aware of not just their data footprint, but that the data they provide has value. The Dyanta survey result, in which a large majority of consumers say they are more likely to shop with a brand that is transparent about data collection, validates that consumers know they are giving up something of value. In return, they want brands to honor their preferences for how their data is used. With GDPR and other data privacy regulations, more and more consumers elect to police brands on the use of personal data. Brands that honor consumer preferences build trust, loyalty and brand equity.

For many reasons, the right-sizing of customer data is good business practice. Ignoring it with the thought that more is better exposes a company to the risk that its customers will “right-size” it and terminate the relationship, to borrow the human resources connotation of the phrase.

To learn more about three hot martech trends, including-right-sized data, you can access an on-demand webinar where Redpoint Global’s Ian Clayton, Kris Tomes and Steve Zisk discuss how to ensure that you have exactly the data you need to impact the experience your customer wants. To access the webinar, click here.

Steve Zisk 2022 Scaled

Redpoint Global

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