The four key challenges of customer data management

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Today, customer data is essential to every organisation, whatever sector it operates in. This means that IT and marketing teams need to work closely together to effectively collect, manage and deploy data, particularly in light of the forthcoming General Data Protection Regulation (GDPR). These are some of the key findings of new research from Royal Mail Data Services which demonstrate the importance of customer data to business – and the challenges that companies face in their data strategies. The research, conducted with organisations from across the UK, uncovered four key trends:

1. The GDPR is the number-one issue

Unsurprisingly, given its fast-approaching implementation date of 25 May 2018, compliance with the GDPR was the number-one concern for respondents as a whole, cited by 29 per cent as their biggest worry. This had more than doubled since the 2016 study, when 12 per cent had listed it as a concern. This demonstrates the rapid rise of GDPR compliance as a major business issue affecting the majority of organisations.

Drilling down, the study asked companies how confident they were that their internally held and third-party customer data was GDPR compliant. The positive news is that 78 per cent were either very or reasonably confident that their internally held customer data complied with the new regulation – although worryingly, 11 per cent were not confident, including 2 per cent who didn’t know if they were compliant or not.

Yet, when it comes to third-party data the levels of confidence drop dramatically. Just 43 per cent 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.

2. Bringing IT and marketing together

When it comes to managing customer data, companies feel they are being held back by having to deal with legacy systems, a problem cited by 28 per cent of respondents. These can be inflexible and difficult to use, and act as blocks on using data to effectively meet wider marketing challenges.

Further demonstrating the need for marketing and IT to work together was split responsibilities for customer data. Just over half (51 per cent) of marketing teams set their companies’ data strategies, but for some companies, other groups such as central data management (26 per cent) and the board (25 per cent) were also involved. Forty-four per cent of marketing departments led in privacy and permissions decisions, compared to 38 per cent of legal and compliance departments and 20 per cent of IT/IS teams.

Data management responsibilities were even more diverse – IT/IS was in charge in 30 per cent of cases, compared to marketing and central data management (both 37 per cent). Given the importance of customer data, different departments clearly need to work together to meet the challenges of managing their growing volumes of data and marketing to customers in a post-GDPR world.

3. Analytics are becoming a key need

Companies now have more data on customers than ever before, but there are gaps when it comes to using it successfully. Around one-quarter (24 per cent) said their biggest issue was around analysing customer data, which shows a clear need for greater analytics skills and capabilities.

Companies also struggle to embed data cultures within their businesses. More than one in five (21 per cent) said that better understanding across the organisation of the importance of good-quality customer data would improve performance. This demonstrates a need to put data at the heart of the entire business, not just within the marketing department.

4. The key role of data quality

Nearly one in five (18 per cent) companies said poor-quality customer data was their biggest challenge. And most of the reasons for this were down to basic errors, such as 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.

Automation of data validation processes should help improve quality. On websites, 46 per cent of companies said they automatically checked address data, with 40 per cent doing the same in internal systems. However, nearly one in five (19 per cent) respondents said they didn’t validate website data, and 16 per cent didn’t check data coming into internal systems at all. An additional one-quarter (25 per cent) relied on manual address checks in internal systems. At a time when good-quality customer data and operational efficiency are high on the business agenda, there is clearly a need for companies to find new ways to automate the continuous cleansing and validation of customer data.

Data quickly goes out of date, meaning databases need to be regularly cleaned if they are to remain current and useful. Again, there is a gap appearing between leaders and laggards. The overall picture is that more companies are focusing on more formal, regular data cleansing – 22 per cent said they did this daily or continuously, and just 11 per cent annually (down from 14 per cent last year). However, one-third (33 per cent) still had no formal processes in place to clean customer contact data, although this had dropped from 37 per cent in 2016. This means a sizeable minority are putting themselves at risk of data-quality issues – and potential GDPR investigations over non-compliance.

All respondents understood the impact of data quality, which demonstrates the importance of customer data. They estimated that the average cost of poor-quality customer data was 6 per cent of annual revenue, a similar figure to that from 2016. For major brands this is measured in millions of pounds – and even this may not be the complete picture – fines for GDPR non-compliance can be up to 4 per cent of global turnover, while poor-quality data impedes overall marketing performance, impacts response rates and reduces conversion rates, making the overall cost potentially much higher.

When it comes to collecting, managing and using customer data, the GDPR may be hitting the headlines, but it is just one of the challenges that companies face. Given the importance of customer data to successful business operations, IT, marketing and other departments need to work together if they are to drive compliance and best practice and improve the quality of their growing volumes of customer data. Only then will they be able to build data-driven businesses that improve performance and company revenues moving forward.

Jim Conning, Managing Director of Royal Mail Data Services
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