Effective customer data management doesn't require a massive master data management platform, according to a recent study.
Companies that achieve a return on investment (ROI) from customer data management (CDM) come from different industries but have notable similarities, according to the report from Aberdeen Group Inc.
CDM is a subset of master data management (MDM) that refers to the practice of synchronizing and standardizing customer data. Boston-based analyst firm Aberdeen Group surveyed 225 companies to determine what CDM leaders do differently from average performers. Effective CDM is not just about having integrated, clean customer data, it's about leveraging data to increase revenue and profitability, according to study author Leslie Ament, director of customer intelligence research with Aberdeen. Above-average and best-in-class companies, or "leaders," attain greater than 20% annual improvement in retention rates, revenues, data accuracy and partner/customer satisfaction rates, the study found. The study revealed those actions that helped leaders get ROI from CDM.
Automate CDM (and don't worry about MDM)
All survey respondents agreed that the biggest challenge with CDM is extracting and normalizing customer data from multiple sources -- but leaders use different technologies to solve the problem, Ament said. According to the study, 48% of the leaders using customer relationship management (CRM) systems plan to extend their use for CDM initiatives. Of the leaders using ERP systems, 32% reported plans to extend their usage. Above-average and average performers were twice as likely as below-average performers to use CDI and data quality tools, and leaders were nearly twice as likely to use a service-oriented architecture or Web services platform to facilitate data integration. Notably, none of the companies in the top tiers reported using enterprise MDM platforms.
"The takeaway for companies contemplating MDM is to do a pilot program with customer data or product data first, refine it -- then roll it out," Ament said.
Measure both IT and business performance metrics
CDM leaders were divided when it came to metrics, the study found. Approximately half measured data effectiveness, including accuracy rates, role-based access statistics, and data retrieval speeds. The others measured downstream benefits, such as customer retention, service levels and satisfaction. Less than 15% measured both kinds of metrics, Ament said, but ultimately, CDM efforts should address both.
Increase organizational visibility and role-based access
The study found that 60% of best-in-class companies wanted CDM to give employees greater visibility to customers, channels, distributors and stakeholders. Leaders cited role-based access, which enables functionally appropriate views into customer data, as an important way to optimize customer interactions and operational decision making.
Cheaper isn't better
Leaders valued technology flexibility, the ease of configuring business processes, role-based access for different operational groups, and rapid integration. In contrast, average and below-average performers were more concerned with total cost of ownership and compatibility with existing architecture.
"Best-in-class companies have gone beyond just thinking about operational use of customer data," Ament said, "and they're starting to leverage this customer data for more strategic uses."
Centralize CDM by location or division
The complexity of managing CDM business processes and usage requirements, and the high returns leaders have found so far with the location-centric approach, favor that approach over an enterprise-wide one, Ament said. Centralizing CDM by location enables leaders to test processes, fix problems and develop best practices, before rolling it out to the larger organization.
Develop data stewardship programs
Cross-functional data stewardship and establishing ultimate accountability for customer data is just as important as technology for CDM, according to Ament. Best-in-class companies reported that clearly defined roles and responsibilities and internal cross-functional teams were critical success factors.
Evaluate outsourced providers or consultants
Above-average performers are consistently outsourcing parts of CDM projects, the study found. More than 85% of respondents plan to use service providers for specific projects, ongoing processes or best practice expertise. Companies are pursuing persistent outsourcing arrangements through software-as-a-service providers or other technology enablers, the study said, and they are looking for assistance with activities such as data profiling, business process workflow and data synchronization.
Get organizational and executive support
Leaders have found that it's critical to get executive support, consider the impact of effective CDM on various departments, prioritize accordingly, and tie the project to overall corporate goals, Ament said.
"The biggest difference between average performers and best-in-class companies was executive support and operational commitment to execution," she said. "Companies that are performing better seem to take a very serious and phased approach, and you can see it in their performance metrics."