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January 14, 2021

How to Measure the Impact of a Customer Data Platform (CDP)

By Elizabeth Burnam, Lexer

210114 Lexer How to Measure the Impact of a Customer Data Platform pic.jpg

According to a 2020 Harvard Business Review survey, 88 percent of customer-centric businesses say delivering a frictionless, omnichannel customer experience is important to their company’s overall performance.

The same study cites predictive analytics, a single view of the customer, and personalization capabilities as the top three technology must-haves for delivering these exceptional customer experiences.

To meet these goals, many businesses have been turning to Customer Data Platforms (CDPs) like Lexer. CDPs combine, cleanse, standardize, and enrich your data into a holistic single customer view, providing insight into who your customers are, what they need and expect from your brand, and how to communicate with them to increase their loyalty and lifetime value.

But with a plethora of vendors specializing in different industries, a wide variety of valuable use-cases, and a diverse set of strengths and capabilities offered by different vendors, choosing the right CDP for your business can be difficult.

As you carefully consider each vendor, pay close attention to these top four CDP impact areas:

  • Customer-centric transformation and agility.
  • Revenue growth and increased customer lifetime value.
  • Cost savings, operational efficiencies, and reduction of manual effort.
  • Frictionless and personalized customer experiences.

Here’s what you need to know about evaluating the impact of CDPs on each of these business areas.

  1. Transformation

CDPs are more than just functional tools for insights and activation.

For many businesses, CDPs act as the catalyst for innovation and cultural evolution. A single customer view gives every team access to unprecedented customer insights, empowering even non-data scientists to test, interrogate, manipulate, and draw meaningful conclusions from data.

When every team is informed by the same set of customer data, your business can accelerate decision-making and agility, easily collaborate across the business, maintain sophisticated performance reports, and establish customer-centric product and marketing strategies that drive incredible results.

KPIs and metrics for measuring the impact of CDP-powered transformation include:

  • Year-over-year revenue growth
  • Loyalty program engagement and growth
  • Employee satisfaction scores
  • Employee turnover rates
  • # of new initiatives
  • ROI of customer-centric initiatives
  • Employee feedback
  • NPS or CSAT scores

If customer-centric transformation is one of your business goals, be sure to take stock of these metrics before, during, and after your CDP implementation to understand its true impact.

  1. Revenue

Revenue growth is a critical goal for any business—but revenue-generating strategies that don’t put the customer experience first are misled and unsustainable.

CDPs enable businesses to implement revenue growth strategies that are informed by real customer behavior and directly correlated with long-term customer satisfaction. From prospecting to retention and service, every stage in the customer journey can be improved with a unified, actionable set of customer data, increasing returns and strengthening customer loyalty. Marketing, ecommerce, service, and executive teams can all use CDP-powered measurement and reporting tools to understand the direct impact of their activities on overall revenue growth.

KPIs and metrics for measuring the impact of CDP-driven revenue growth include:

  • Year-over-year revenue growth
  • Customer lifetime value
  • Return-on-ad spend
  • Average order value
  • Conversion rates
  • Email list growth
  • Customer retention

As you’re evaluating different vendors, look for measurement and reporting capabilities to help you easily track these metrics as they relate to customer behavior. By giving every team member access to customizable dashboards, advanced segmentation reporting, and straightforward visualization tools, you can renew your business’s focus on revenue-based KPIs and drive better outcomes.

  1. Cost

The ecommerce landscape has become increasingly tumultuous and uncertain over the past year, and saving costs wherever possible should be a high priority for every business.

However, these cost-saving initiatives shouldn’t have a negative impact on the customer experience. That’s where CDPs come in. By increasing operational efficiencies, eliminating the need for outsourced agencies or freelancers, reducing wasteful ad spend, and automating important but menial tasks such as updating audiences or triggering customer journeys, CDPs help businesses save a substantial amount of costs while still enhancing the overall customer experience. This combination of saved costs and precise, insight-driven targeting leads to high-impact campaigns that lead to rapid business growth.

KPIs and metrics for measuring the impact of CDP-enabled cost savings include:

  • Customer profitability
  • Cost-per-acquisition
  • Time it takes to launch campaigns
  • Team effectiveness ratio
  • Employee feedback
  • Total IT spend on customer-focused software

By helping you track and improve these cost-saving metrics as they relate to the customer, CDPs facilitate personalized and efficiently-executed customer experiences at every touchpoint.

  1. Customer Experience

In today’s competitive landscape, the customer experience is paramount.

Most ecommerce businesses attract multiple customer personas with varying needs within and across each persona. In order to scale your business, you need tangible data to understand who these customers are, what they buy, why they buy, and how to speak to them. CDPs not only consolidate and standardize all of this data into enriched customer profiles, they also empower you to build high-value customer segments and activate personalized campaigns to efficiently target those segments across every channel. These proactive, relevant, and streamlined experiences delight the customer and differentiate your brand.

KPIs and metrics for measuring the impact of a CDP on the customer experience include:

  • Customer lifetime value
  • NPS scores and surveys
  • Recency and repurchase rates
  • Churn rate
  • Customer reviews and testimonials
  • Ticket volume
  • Social engagement
  • Email engagement

Of all of the metrics on this list, direct customer feedback from NPS scores and surveys is the most valuable—but traditional NPS surveys don’t tell you the reasons behind scores. By augmenting NPS surveys with additional preferential and behavioral questions and unifying each survey response to individual customer profiles, you can gain deeper customer insight for improved personalization in the future.

Ultimately, the true value of a CDP depends upon how you use it. Maximize your return by approaching your CDP with a customer-first mindset and an eagerness to test, learn, and continuously optimize campaigns.

The full version of this article was originally published on Lexer.io. If you liked this, you’ll probably find more value in the original, in-depth version too. Click here to read the full version of “How to Measure the Impact of a Customer Data Platform (CDP).”

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