Collecting, managing and using customer and prospect data is essential to marketing success. But it brings its own range of challenges, as well as opportunities.
New research from Royal Mail Data Services with brand and agency marketers has highlighted what these are, and how they are being overcome.
Challenge 1: Combating churn
According to the research, nearly one in five (19%) of customers defects every year.
Consequently, finding and acquiring new customers unsurprisingly remained the number-one challenge for marketers, with 42% citing it as their biggest challenge. Companies also seem to be giving up on the idea of reactivating dormant customers. In 2014 nearly one-quarter (24%) said this was their number-one marketing priority, but by 2017 the figure had dropped to just 6%.
Challenge 2: The ticking clock of the GDPR
Looking at concerns around customer data itself, it is no surprise that the GDPR is the biggest worry for marketers, cited by 29% of respondents. Agencies are more worried than brands, with over one-third (35%) citing it as their biggest challenge. This implies that agencies handle a wide range of data about consumers acquired from third parties, which can be much more difficult to check for relevant permissions, or that they potentially have better awareness of the implications of the GDPR. Still, one-quarter (25%) of brands saw GDPR compliance as their greatest worry, which shows that this topic impacts all marketers and all businesses.
Looking in more detail, the study asked brands and agencies how confident they were that their internally held and third-party customer data was GDPR compliant. The positive news is that 78% of all marketers were either very or reasonably confident that their internally held customer data complied with the new regulation – although worryingly, 11% were not confident, including 2% which didn’t know if they were compliant or not!
However, when it comes to third-party data, the levels of confidence drops dramatically. Just 43% of respondents were very or reasonably confident when it came to compliance, which demonstrates the difficulty of gathering evidence that the right permissions are in place when data has come from other sources. Only 9% of brands said they were very confident in their data compliance, which shows that there is plenty of work to do ahead of the May 2018 GDPR implementation date.
Challenge 3: Coping with legacy systems
Aside from the GDPR, the next-biggest concern around customer data management is dealing with legacy systems (cited by 28% of all respondents and 37% of brands). These can be inflexible and difficult to use, and act as blocks on using data to effectively meet wider marketing challenges.
This process isn’t helped by the fact that responsibility for it is split across departments. While 51% of marketing teams set their companies’ data strategies, for some companies, other groups such as central data management (26%) and the board (25%) were also involved. Unsurprisingly, legal and compliance teams were heavily involved in privacy and permissions decisions, taking lead responsibility within 38% of organisations. Forty-four per cent of marketing departments led in this area, compared to 20% of IT/IS teams.
Challenge 4: Boosting analytics skills
Marketers now have more data on customers than ever before. So what needs to happen to improve the overall performance of their campaigns and programmes? When companies were asked where the gaps were that need filling, 24% pointed to analysing customer data as their biggest issue, a figure that rose to 28% within brands. This demonstrates a clear need for greater analytics skills and capabilities.
Challenge 5: Ensuring data quality
Even without GDPR fines (which can be up to 4% of global turnover), poor-quality data hits the bottom line. Marketers recognise this, having estimated the average cost of poor-quality customer data at 6% of annual revenue. For major brands this is measured in millions of pounds – and even this may not be the complete picture. Poor-quality data impedes overall marketing performance, impacts response rates and reduces conversion rates, making the overall cost potentially much higher.
Nearly one in five (18%) marketers said poor-quality customer data was their biggest challenge. But what leads to this? When asked to prioritise the different causes of poor-quality data, marketers cited basic errors as the main culprits, specifically out-of-date information and incomplete data. The research found that problems such as duplicate data, spelling mistakes and data in incorrect fields tended to rank lower when it came to data-quality issues.
Validating data as it is collected is key to maintaining good-quality data. Although this is becoming an increasingly automated process, both on websites (for which 46% of marketers automatically check address data) and in internal systems (40% automatic checks), nearly one in five (19%) marketers said they didn’t validate website data, and 16% didn’t check data coming into internal systems at all. An additional one-quarter (25%) relied on manual address checks in internal systems. At a time when good-quality customer data and operational efficiency are high on the marketing agenda, there is clearly a need for brands and agencies alike to find new ways to automate the continuous cleansing and validation of customer data.
Marketers understand that data quickly becomes out of date, leading to more brands and agencies focusing on more formal, regular data cleansing – 22% said they did this daily or continuously, and just 11% annually (down from 14% last year). However, one-third (33%) still had no formal processes in place to clean customer contact data, although this had dropped from 37% in 2016. This means a sizeable minority are putting themselves at risk of data-quality issues – and potential GDPR investigations over non-compliance.
Data is the lifeblood of today’s marketing campaigns. While the GDPR may be hitting the headlines, it is just one of multiple challenges that brands and agencies need to overcome if they are to get full business value from their customer data.