What is customer data management?

CDM, or customer data management, is the process where businesses gather, store, update, access, and — most importantly for personalization — analyze information from their customers.

The ultimate goal is to ensure that the data used by customer-facing teams — sales, marketing, account management — is updated, easily accessible, and “clean,” or free of redundancies, so you can wring the maximum benefits out of it. This same data is fed into marketing automation platforms and other customer-facing software that directly influence lead generation, nurturing, and time to close — in other words, company revenue.

Importance of customer data management

The sheer volume of available data makes having a system in place to manage it hugely important. To stay ahead of the customer-centricity curve, businesses need to unify this data to create a single, personalized customer view based on the most up-to-date information.

No human can read through line after line of customer data day after day — and even if they could, they wouldn’t make much of a dent. Computers, however, can sift through this data more quickly and efficiently, without a break, 24/7/365.

Plus, as machine learning algorithms and other forms of AI proliferate and improve, data analytics becomes an even more powerful method for breaking down the mass of data into manageable tidbits of actionable insights.

Benefits of customer data management

When done well, customer data management offers several advantages that enhance business operations and customer relationships. Here are some key benefits:

1. Improved customer understanding: CDM enables businesses to create a unified and comprehensive view of their customers, including data on behavior, preferences, purchase history, and interactions across multiple touchpoints.

2. Enhanced customer experiences: By leveraging accurate customer data, companies can tailor their offerings to meet individual needs, leading to more personalized and satisfying experiences.

3. Increased customer retention: Identifying patterns that lead to churn allows businesses to proactively address issues, offer personalized incentives, and strengthen customer loyalty.

4. Improved marketing ROI: Accurate customer insights make marketing efforts more focused and efficient, leading to better returns on investment.

5. Better compliance and security: Proper data management helps businesses comply with data privacy regulations and ensures the security of customer information.

6. Streamlined operations: Centralizing customer data across departments reduces errors, enhances productivity, and ensures that all teams have access to the most recent client information.

7. Competitive advantage: Businesses that effectively harness customer data gain a competitive edge by understanding market trends, predicting customer behavior, and adapting quickly.

What is personalization?

The short answer is, it depends — on the channel, how it’s being used, and more. For example, most sales and prospecting email automation systems allow the inclusion of variables like the recipient’s first name, their title, the company name, etc., along with copy “snippets” that can mention use cases or pain points that resonate with certain personas. But this isn’t so much personalization as it is the illusion of personalization — although it’s definitely a step up from the “Dear Sir or Madam” efforts of the past.

Data management and analysis let marketers get closer to real personalization. They can take a piece of content and make it more useful for a customer, more targeted at the customer’s interests, needs, and wants. Today, advanced analytics that incorporate tools like AI and machine learning are making it possible to better manage the barrage of customer data that flows into a company from multiple channels — and then use that information to add specific messaging to their marketing that will hopefully click with individual customers.

There are limits to how personal this personalization can be — no one invites a brand to their backyard cookout. But by using customer data management, companies can consistently deliver engaging, meaningful, personalized content that has, at the very least, a human touch.

Here’s how some companies use data for personalization

To a certain extent, personalization is more like “persona”-lization — it’s probably impossible for businesses to truly know Each. Individual. Customer. But they can often come surprisingly close. Here are a few examples:

• Grammarly — This app that helps catch grammar mistakes and improve writing sends weekly reports to users on how their writing has improved. The reports include the number of words written in that week, how many mistakes were made, potential areas for improvement, and more.

• Hulu — The online streaming service collects a huge amount of data from customers, including not only what they watch but when they watch it. That information helps create targeted recommendations, which users can either like or dislike.

• Enfagrow — This baby formula company collects data from customers about their baby’s age to proactively reach out with age-appropriate product recommendations. Personalized emails for each stage of a baby’s development provide advice, activities, and discounts for products that match a baby’s age.

How can businesses gather data …

Customers interact with brands through multiple channels, both online and offline. And all of these touchpoints — store visits, social media interactions, website visits, digital asset downloads, targeted ad responses, survey responses, and more — generate valuable data.

There are three basic ways a company can gather information about its customers: 1) Ask for it directly — for example, customers give up this information when they open an account or make a purchase online; 2) indirectly track customers, for example through web cookies to determine what pages a customer has visited; or 3) add other third-party sources to your own.

Sophisticated technologies like marketing automation tools, CRM platforms, data management platforms, and cookies provide tons of data. Here are some of the most popular data gathering methods today:

• Online marketing analytics — Customers are asked to fill out a form that includes some personal information. The insights drawn from this information are used to personalize customer journeys and improve customer service.

• Loyalty programs — Customers collect points with every purchase and swap them for some rewards. In this way, businesses can create buyer profiles with detailed consumer preferences and habits.

• Games — Users interact with a brand through mini-games that pay off with incentive awards. The addictive nature of games allows companies to continue to collect data as long as the customer stays in the game.

• Social media activity — Users spend an average of about 2.5 hours a day on social media, sharing videos, texts, photos, and other sources of personal information.

… and not seem creepy?

The problem isn't so much with the collection of data. It's how transparent organizations are when they do gather it. The key is consent. Consumers feel uncomfortable when brands target them using information which they never intended to share. So businesses need to be straightforward in their disclosures.

Customers are open to sharing their information — but they want something in return

There’s no doubt that consumers worry about their online privacy and the potential abuse of their personal data. Yet their behavior often contradicts those claims of anxiety. People may be increasingly open to sharing some private information online — credit card details, telephone numbers, addresses, etc. — in return for convenience or financial benefits. While they’re uneasy about data sharing in theory, they recognize the practical benefits of doing so — including enjoying more personalized interactions.

Customer data management best practices

Here are a few best practices for an effective CDM program that drives personalization.

1. Cultivate data-centric customer centricity

The basic purpose of CDM is to deliver better customer experiences. For this, the strategy should be designed from the outside in — in other words, from the customer’s perspective and following their buying journey.

A CDM strategy that includes a customer-centric culture ensures that all data is used to improve customer satisfaction, while data-centricity means that the data is captured from all interactions and is as fresh as technologically possible.

2. Commit to customer data security

Capturing customer data to enhance experiences is a great benefit for any enterprise. But a single slip in data security can undo all these benefits and attract negative attention from the media or law enforcement. As data capture rises, so do data breaches. It’s the responsibility of the data security team to ensure that all customer data is captured and secured using encryption and/or security software.

In addition, it’s important to establish a company-wide data governance policy, outlining how data is captured and stored and who has access to it.

3. Avoid over-collecting data

There really can be too much of a good thing when it comes to data. Know what questions you’re trying to answer and problems you’re trying to solve, and then focus collection efforts in those areas. Resist the urge to collect data “just in case” you need it in the future, without specific initiatives in mind. Plus, it’s vital to categorize and tag data so you can easily access and activate it.

4. Invest in customer journey mapping

A customer journey map is a visual description of every experience a customer has with your brand. Although it isn't meant to be a 100% accurate representation, it gives marketers crucial insights into how customers interact with the brand at each touchpoint, letting them deliver the most relevant customer experience.

Customer data management platforms and software

Customer data platforms (CDPs), data management platforms (DMPs), customer relationship management systems (CRMs), and digital experience platforms (DXPs) are important tools in modern data management and customer engagement strategies. Let’s take a look at each:

• Customer data platforms (CDPs)

CDPs are specialized software solutions that collect, unify, and manage first-party customer data from various sources to create comprehensive customer profiles. These profiles are accessible to other systems, enabling personalized marketing and improved customer experiences.

• Data management platforms (DMPs):

DMPs aggregate and manage large volumes of anonymized data from first, second, and third-party sources. They are primarily used for audience segmentation and targeted advertising, focusing on understanding and reaching specific audience groups rather than individual customer profiles.

• Customer relationship management systems (CRMs):

CRMs are tools that help businesses manage interactions with current and potential customers. They store information about customer interactions, sales, and service histories, facilitating improved customer service and sales processes.

• Digital experience platforms (DXPs):

DXPs are integrated software solutions that enable businesses to deliver personalized, seamless digital experiences across various channels. They combine content management, personalization, and analytics to engage customers effectively throughout their journey.

What are the key features of customer data management solutions?

Customer data management solutions are essential for businesses aiming to improve customer experiences and drive growth. But, beyond the foundational features of data integration, data quality management, analytics and reporting, and compliance management, advanced CDM solutions offer additional features that further optimize customer data handling:

1. Data governance and security

Robust data governance frameworks ensure customer data is accurate, consistent, and secure. Features like data lineage tracking, encryption, and user access controls help maintain data integrity and protect sensitive information. Implementing role-based access ensures that only authorized personnel can access specific data, upping security.

2. Advanced analytics and insights

Beyond basic reporting, advanced analytics capabilities enable businesses to perform predictive, segmentation, and cohort analyses. These tools help uncover hidden patterns, trends, and correlations within customer data, facilitating more informed decision-making and proactive strategies.

3. Data unification and 360-degree customer view

CDM solutions integrate data from various sources — such as CRM systems, social media platforms, and transaction records — to create a unified customer profile. This 360-degree view allows businesses to comprehensively understand customer behaviors and preferences, leading to more personalized interactions.

4. Compliance management

CDM solutions that include compliance management features facilitate adherence to data protection regulations like GDPR and CCPA. These tools help businesses manage customer data responsibly, reducing the risk of legal penalties and reputational damage.

5. Customer analytics

CDM empowers organizations to conduct sophisticated customer analytics, extracting actionable insights from diverse data sources. By employing advanced analytics techniques, businesses can uncover hidden patterns, trends, and correlations within their customer data, leading to more effective marketing strategies and improved customer experiences.

Combine your customer data management and personalization for a great client experience

Engaging your customers in meaningful conversations, rather than simply delivering messages, is crucial for building strong relationships. Excellent customer data management empowers you to craft personalized communications that resonate with client preferences, offering tailored messages, suggestions, rewards, and more. It can really boost customer engagement and satisfaction on a personal level.

Discover how Vonage's omnichannel communications, AI solutions, and other offerings can seamlessly integrate into a robust, personalized data management system to elevate your customer interactions.