Which One to Choose First- Customer Data Platform or Loyalty?
- Posted on August 3, 2022 by Robert
- Reading time about 7 minutes
Living in the data-driven world, businesses need to collect data to understand their customers’ needs precisely for more relevant offerings, which eventually will lead to a higher customer retention rate. The first step is to find out the best ways to collect customer data and use them effectively.
A customer Data Platform (CDP) is a system that collects data from multiple tools into a single centralized hub with a unified customer view. On the other hand, the Loyalty Program Platform is one of the authentic ways to collect zero and first-party data. Let’s check out which one is most effective to collect customer data and which one should your business invest in first!
Higher Demand for Personalized Customer Experience
With increasing customer expectations, businesses believe in collecting user data for personalized offerings. A study says 75% of customers prefer brands that make them feel comfortable about their data’s use. Another survey by Forbes states successful businesses that are focused on customer experience are the ones who increase their revenue up to 5.7 times more than competitors.
However, with updates in privacy policies, a cookie-less world, new privacy settings, etc., it is becoming difficult & challenging to collect meaningful data. That is why we must find a way to collect data and extract insights to be applied at the right time. Loyalty Rewards Program can be a great way to collect rich customer data through direct engagement, where customers get improved experiences and brands get more satisfied customers.
Understanding Data Types
As compared to data collected from multiple sources, collecting data from customers directly are more valuable and precise, these are known as zero-party and first-party data. Let’s understand the types of customer data every business should be aware of-
1. Zero-Party Data
This refers to data that are proactively shared by customers with their consent, which includes personal or profile information, purchase wishes, etc. This is different from cookies data and zero-party data are shared by customers voluntarily with the brands.
An example is when a brand asks customers for their information like birthdays or anniversaries to send a special gift.
2. First-Party Data
This means the data are derived from customers through their preferences, buying behavior, purchase history, past browsing habits, etc. This helps brands create custom ads based on individual customer needs.
The only difference from zero-party data is that brands do not collect data by asking customers rather they monitor customers ’actions to get a better idea about their behavior.
3. Third-Party Data
These are the data collected without the customers’ consent by brands with the help of third-party data companies that include aggregated information about a broader group where customers are a subset.
These data are collected without direct connection with customers through sources like websites, social media channels, subscriptions, etc. Though these data can be useful for customer acquisition, they are not reliable to retain and improve value for existing customers.
Loyalty Program vs. Customer Data Platform
Choosing between a Customer Data Platform (CDP) and a Loyalty program can be a tricky choice. Many retailers believe in investing in a loyalty program first to attain permission-based engagement with customers and later after gaining customers’ trust, utilize CDP to optimize personalization.
Customer Data Platform
Firstly, let’s check out what exactly is a Customer Data Platform (CDP). It is a system that combines data from multiple sources that will be analyzed to create a single comprehensive profile of each customer. Many brands rely on CDP to analyze, track and manage this data for delivering a personalized experience and the CDP market will increase up to $ 15.3 billion by 2026 as per the research by Markets and Markets.
Though CDP can be a great choice, a brand must first figure out its digital maturity to determine its applicability and feasibility. Some factors that must be considered are as follows-
– Adopt new tools & processes with proper training workshops for timely progress evaluation and seamless transition to new processes.
– Brands must evolve with continuously changing customer needs to cater to them effectively using agile solutions for timely updates.
– The one-type-fits-all concept won’t work for long, which is why brands need to focus on having a custom & well-defined strategy to get desired results.
– Focus on the availability of data (Volume, Velocity, and Variety of Data) to have a strong foundation.
Many of you must be aware that loyalty programs are the best way to offer rewards, coupons, or relevant incentives to not just acquire new customers but to retain existing ones. Keeping the focus on customer retention, these programs have the potential to collect data and encourage repeat purchases.
One successful example is Starbucks Rewards which is focused on cost savings. This famous coffee chain rewards frequent customers with free food or drinks in exchange for reward points or stars gained from their previous purchases. With more than 30k locations worldwide, the Starbucks program is quite successful and continues to grow and promote brand loyalty & has active 16.3 million members in the US.
Which one to Choose – Loyalty or CDP?
Both CDP and loyalty play a huge role in collecting and managing data. However, you can check out some of the key aspects that marketers or business owners can consider before choosing between these two-
– Data Quality
It is important to keep the focus on quality data before investing in a CDP. Know if the data collected by your brand is legitimate or not as it can cause issues. Invest in a data collection system first if there is no quality data. Go for a loyalty program platform if you need to collect quality data first.
– Data Quantity
To understand if the data you are collecting is enough to invest in a CDP or not, we can use a simple rule- if the percent of all unique customer transactions mapped to an individual on a 12-month basis is less than 30%, a CDP is not a good option. You can opt for loyalty first in such a case.
Brands must rely on personalization techniques to create targeted customer segments and curated experiences where customers get products displayed aligned to interests, history data, segmentation, etc. If all these capabilities drive your organization’s performance, invest in a CDP today.
However, if all of these are not in place, your business must analyze existing marketing strategies. Focus on segmentation & implement the right strategies to acquire new customers & target existing ones for better revenue. Go for a loyalty program platform if you want to focus on a personalized approach to marketing efforts.
Hopefully, you must have got an idea of how important it is for your business to take the right decision for building a strong customer base! The best option would be to deliver personalized experiences through a 360-degree view of your customer interactions with the help of a well-planned Loyalty Software Solution aligned with a customer data platform.
Novus is the best loyalty program platform that empowers brands across the globe to develop a highly personalized and data-driven program for long-term customer engagement. Connect with our experts to help you in obtaining genuine data and driving brand loyalty!