Why is Customer Data Important: 8 Benefits of Collecting It (2024)

Customer data includes all the information collected about customers, such as their demographics, purchase history, and behavior patterns. The value of customer data is crucial for understanding and meeting customer needs. The benefits of leveraging customer data include:

• Tailoring product offerings
• Improving customer experiences
• Making data-driven decisions
• Boosting engagement
• Increasing sales
• Fostering customer loyalty
• Driving business growth

Let’s see what customer data is, why it’s important for your online store, and what benefits it brings when you’re using it with a customer-centric approach in mind.

Why is Customer Data Important?

With so many competitors fighting for your ideal customers’ attention, one of the few differentiators is represented by the customer experiences you build around your products and services.

It’s tough to bring to the market a product or an entirely new service or to maintain a competitive price and still be profitable. In this context, customer data becomes extremely important for how you’re going to set your brand apart from the rest and create memorable experiences for your customers.

Understanding the value of customer data means recognizing its role in several key areas:

• Customer Insight: Customer data provides deep insights into who your customers are, what they want, and how they behave. This information helps you tailor your offerings to better meet their needs, thereby enhancing satisfaction and loyalty.
• Market Understanding: Analyzing customer data helps you understand market trends and shifts. This allows you to adapt your strategies proactively, staying ahead of competitors and aligning your business with the latest market demands.
• Predictive Analytics: One of the most powerful aspects of customer data is its predictive capability. By identifying patterns in customer behavior, you can forecast future actions, such as purchase likelihood or churn risk, and take proactive measures to influence these outcomes positively.
• Resource Allocation: Knowing where to focus your resources is critical for efficiency and profitability. Customer data helps you identify high-value segments and prioritize them in your marketing, sales, and support efforts, ensuring you invest in areas with the highest potential return.
• Innovation and Improvement: Continuous feedback from customer data drives innovation. It reveals what aspects of your products or services work well and what needs improvement, guiding product development and service enhancements.

There are many alternatives for what you have to offer your clients, and customers have high expectations. The only way you can thrive in this customer experience economy is to leverage the potential brought by customer data.

One of the greatest things about collecting, analyzing, and leveraging customer data is that you can predict future customer behaviors and make better decisions based on what you already know about your customers. The value of customer data lies in its ability to fuel smarter acquisition and retention strategies, ultimately driving business growth and success.

Benefits of Collecting Customer Data

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Effective usage of customer data helps you improve the online shopping experience for your customers and fine-tune various processes in your company, generating a positive impact on your profitability and customer lifetime value.

Identification of the most important customer segments

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Your customer data allows you to segment your customer base and identify the most important customer segments for your company. This segmentation is essential for tailoring your marketing efforts and ensuring your strategies resonate with the right audience.

For instance, identifying high-frequency purchasers or customers with a high average order value can help you design loyalty programs and special offers to retain them. Similarly, recognizing segments that are at risk of churning allows you to proactively address their needs and improve retention.

While demographic, psychographic, and geographic segmentation allows you to fine-tune your marketing campaigns, behavioral segmentation is one of the most reliable types for eCommerce businesses that want to achieve customer-centricity and focus on smarter acquisition and
retention.

Many online companies use RFM segmentation to identify the most valuable customer segments, by looking at recency, frequency, and monetary value.

RFM segmentation will show you how many high-value customers you have and who these customers are.

> You can learn more about leveraging customer data for segmentation purposes by reading our simple but comprehensive guide on RFM segmentation.

Attraction and retention of more high-value customers

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Once you know your most important customer segments, you’ll be more effective in attracting and retaining the right-fit customers. Recurring high-value customers are essential for sustainable growth, and you want to build your marketing and sales strategies around this type of customer.

Based on what you know about your existing top customers, you can create better custom and lookalike audiences for your paid ad campaigns and email marketing initiatives. Creating better target audiences allows you to use your budget wisely with a positive impact on ad performance, and design better email campaigns for your marketing and sales goals. This targeted approach ensures that your marketing efforts reach individuals who are more likely to engage with your brand and become loyal customers, thereby maximizing your return on investment (ROI).

> Learn more about how to acquire and retain customers profitably

Improvement of onboarding to encourage second purchases

After you have invested all the resources in attracting new high-potential customers, you need to nail the onboarding campaigns and make your effort worthwhile.

If you want to generate a second purchase, you have to ensure that the first customer experience is as high as you promised and as your newly acquired customers expect.

Your onboarding campaign must-haves are:

• Thank you and email confirmation: Immediately acknowledge the customer’s purchase with a thank-you message and order confirmation email, reinforcing their decision to buy from you.

• Welcome to the community: Send a welcome email that introduces your brand, values, and community, helping new customers feel connected and valued.

• Pre-delivery NPS (Net Promoter Score): Gather initial feedback before the product is delivered to understand customer expectations and address any concerns early.

• Educational content: Provide helpful information about the product, such as how-to guides, usage tips, and maintenance advice, to ensure customers can make the most of their purchases.

• Shipping confirmation: Keep customers informed about their order status with shipping confirmation emails, including tracking information and estimated delivery dates.

• Post-delivery NPS a couple of days after experiencing the product/service: Follow up a few days after the product has been delivered to capture feedback on the overall experience and address any issues promptly.

In this phase, your focus is on preventing buyer’s remorse, generating positive emotions, and nurturing trust. All these elements increase the chances of receiving a second purchase from your first-time buyers.

> Learn how to tackle onboarding campaigns from Valentin Radu.

4. Personalize the online shopping experience

Customer data, first and zero-party data, in particular, help you create personalized user and customer experiences on various channels. If you collect customer data and have the tech to create dynamic and timely content and recommendations, your customer experience level will increase, and you’ll see that people become more engaged with your brand.

Think of ways to collect customer data besides the information you capture naturally during a transaction. Find what they like and what they don’t, their needs and expectations, what they value most in a brand, etc. Use surveys, quizzes, preference centers, and feedback forms to discover their likes and dislikes, needs and values.

Try to create a standardized way to collect customer data and incorporate it into your tactics to improve personalization. Make it easy to collect for your team and integrate it naturally into how you communicate with your audience.

Use customer data to create personalized content and product recommendations in real time. This can include personalized emails, targeted ads, and dynamic website content that adjusts based on the visitor’s preferences and behavior.

Personalization is not only a strong tactic that you can use for your subscribers and potential customers to generate the first purchase, but also a vital element in the retention campaigns. You can’t think of VIP treatment without elements of personalization.

Customer engagement maintenance between purchases to prevent churn

Customers don’t churn overnight. Before they leave you for good, there are a series of signals or red flags that you can observe in the customer behavioral data. Think about the customer satisfaction surveys, like NPS (Net Promoter Score) surveys.

The answers that you capture from your customers represent authentic feedback about their experience and are a valuable resource for your churn prevention campaigns. Real-time response from your customer support team plays a vital role in preventing churn.

Another metric you should monitor is the average days between transactions or ADBT. The more days pass without a new purchase, the smaller the chances of receiving a new order from your existing customers.

If you use RFM segmentation, it will be easier to track the dynamics of your segments and make sure you have as few at-risk customers as possible. Churn is, after all, natural for any company, but it becomes problematic when churn could have been avoided.

> Are your customers silently leaving your brand? Find what causes customer churn and how to stop it.

Unified view of customer data

A unified view of customer data helps your teams create seamless experiences with better interactions that keep the customers satisfied. From purchases to the latest calls or conversations on chat, a centralized view helps your teams deliver the personalized interactions customers expect.

Data unification can significantly change the way your teams interact with your customers. The data that you capture in your customer data platform can be used by other solutions that you’re using for your eCommerce, like website personalization or email marketing automated flows. This integration ensures that all customer-facing teams have access to the same comprehensive data, enabling them to make informed decisions and provide consistent service.

For example, if a customer contacts your support team about an issue with a recent purchase, having a unified view of their previous interactions, purchase history, and preferences enables the support agent to provide a more personalized and efficient resolution. Similarly, marketing teams can use this data to tailor their campaigns, ensuring that customers receive relevant content and offers based on their behavior and preferences.

Creating dynamic customer experiences is extremely important for an online business, helping you differentiate through meaningful communication and recommendations when the customers need your help the most. Don’t let all that data go to waste when you have the tools to leverage its immense potential.

Improvement in real-time response based on customer data

When you sync your customers’ responses with your follow-up flows, you are more likely to generate a positive impact on satisfaction levels and retention rates. You need clean and updated data to make the most of those micro-moments and generate interactive experiences.

Think about the real-time response for your customer support team. If you act proactively on customer satisfaction feedback, you can avoid unpleasant situations that could ruin your relationship and lead to negative word-of-mouth.

For example, if a customer leaves a negative comment on a post-purchase survey, an immediate response from your support team acknowledging the issue and offering a solution can turn a potentially lost customer into a loyal one. This proactive approach demonstrates that your company values customer feedback and is dedicated to providing excellent service.

If you identify the problems early, you have a higher chance of keeping that customer close and happy, although you just received a low satisfaction score. If you act in real-time, you can quickly change customers’ perceptions, by showing that you’re sorry for the poor experience, you care about how they feel, and are committed to keeping up with their expectations.

Leverage of a unique set of proprietary data

Building better customer relationships starts at the intersection of data management and marketing automation. You have more than a customer base – it’s a data set unique to your business.

The fact that third-party data has become less and less reliable isn’t necessarily a bad thing. What you know about your customers, gathered through first and zero-party data, is far more valuable than third-party data. It’s a resource that your competitors can’t access, and only you can leverage it to set your online business apart from the rest.

First-party data is collected directly from your customers through their interactions with your brand. Zero-party data is willingly shared by customers, often through surveys, preference centers, or account settings. These types of data provide rich insights into customer preferences, behaviors, and expectations.

Analyze customer data and identify the things that your customers have in common. Use this information not only to build exceptional experiences but also to create a strong community around your brand, a community that shares the same values and focuses on the same things.
As Guido X Jansen said, “Creating a community is one of the few unique things that competitors can’t copy.”

> Learn from Guido X Jansen how to use customer data to stay on top of competition and customers’ minds.

Effective Strategies for Using Customer Data to Enhance Your Business

Effectively using customer data can transform your business by providing insights that drive better decision-making, personalized marketing, and improved customer experiences. Here’s how to use customer data to make the most of the information you collect:

Collecting Data Responsibly

Before you can use customer data, you must ensure it is collected responsibly and ethically. This involves obtaining explicit consent from customers, being transparent about how their data will be used, and adhering to data protection regulations such as GDPR and CCPA. Responsible data collection builds trust and ensures compliance with legal standards.

Centralizing Data

To get a comprehensive view of your customers, centralize all data in a Customer Data Platform (CDP) or a Customer Relationship Management (CRM) system. These platforms aggregate data from various sources—website interactions, purchase history, social media engagements, customer service interactions, and more—into a single, unified profile for each customer.

Analyzing Data for Insights

Once your data is centralized, analyze it to uncover patterns and trends. Use data analytics tools to segment customers based on their behaviors, preferences, and demographics. This analysis helps identify high-value customer segments, predict future behaviors, and understand what drives customer satisfaction and loyalty.

Personalizing Customer Experiences

Use the insights gained from data analysis to personalize customer experiences. Tailor your marketing messages, product recommendations, and content to individual customer preferences. Personalization can be applied across various touchpoints, including email campaigns, website interactions, and social media engagements, to create a more engaging and relevant customer journey.

Optimizing Marketing Strategies

Customer data enables you to optimize your marketing strategies for better results. Create targeted campaigns that resonate with specific customer segments. Use A/B testing to determine the most effective messaging and offers. Leverage lookalike audiences to reach potential customers who share characteristics with your best customers, thereby improving acquisition efforts.

Driving Product Development

Customer feedback and behavioral data can inform product development. Understand which features are most valued by customers and identify gaps in your current offerings. This data-driven approach ensures that new products or enhancements align with customer needs and expectations, leading to higher adoption rates and satisfaction.

Implementing Retention Strategies

Use customer data to develop proactive retention strategies. Identify at-risk customers through behavioral indicators and engage them with personalized reactivation campaigns. Offer exclusive incentives, loyalty programs, and targeted communications to keep your best customers engaged and loyal.

Monitoring and Improving

Regularly monitor the effectiveness of your data-driven strategies and make adjustments as needed. Track key performance indicators (KPIs) such as customer lifetime value (CLV), churn rate, and engagement metrics. Continuous improvement based on data insights helps maintain a competitive edge and drive long-term success.

Ensuring Data Security

Finally, prioritize data security to protect your customers’ information. Implement robust security measures, including encryption, access controls, and regular security audits. Maintaining high standards of data security not only protects your business but also fosters customer trust and confidence.

Wrap up

Many companies search for a customer data platform to improve their view and usage of customer data so they can create more effective marketing and sales strategies. These platforms provide a centralized system for collecting, integrating, and analyzing customer data, offering a comprehensive view of customer interactions and preferences.

Looking at all the benefits of using customer data, there’s no surprise that customer data platforms are so popular amongst eCommerce companies that want to become more customer-centric. By leveraging the insights gained from a CDP, businesses can personalize their customer experiences, improve retention rates, and drive sustainable growth.

Discover the benefits of using a customer data platform designed for eCommerce businesses.