Data Management: Go on a Data Diet...Or Risk Hurting Marketing, Losing Customers

In the effort to better target profitable customers and enable 1:1 marketing, companies have been collecting and managing as much customer information as they can get their hands on. Many industries & leaders, such as credit cards (Capital One), retail (Amazon) and consumer goods (Dell) have built strong franchises through data-driven marketing. Although collecting as much data as possible makes sense for some firms, it doesn’t for others. Hoarding reams of information comes with significant direct and indirect cost as well as missed business opportunity. My experience along with a published study out of the Wharton School of Business can shed some light on the challenges associated with over-zealous data collection.

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Bytes may be small and easy to collect but they could also be costly and tough to use. While storage costs have been declining, the price tag of managing this information has been on the rise in terms of needed labor, training and application software (for analytics, security and data cleaning). Furthermore, operating costs (maintenance, energy and infrastructure) required to support the data warehouse has also been increasing. Not surprisingly, keeping lots of data increases the liklihood that marketers will want to use it through costly and potentially wasteful consumer programs.

In general, the more data you amass the greater the chance of a security beach. These breaches can be an expensive proposition with significant brand risk. According to the Ponemon Institute, a group that researches and consults on privacy & information security issues, each 2008 data breach is estimated to cost $202 per compromised record. The research also found that breeches may cause companies to lose sizable numbers of customers. For example, two firms in healthcare and financial services lost 6.5% and 5.5% of their customers, respectively, after security breeches.

In many large enterprises, collecting and utilizing voluminous amounts of data is a challenge due to: the sheer volume of information gathered (particulary via sophisticated CRM systems); the presence of different IT systems that reduce integration; "siloed" business units that do not effectively collaborate and; a lack of data accuracy and standards that create complexity. Moreover, cultural and competitive factors often come into play. Specifically, managers often feel the need to become data pack rats because they can or because their competitors do. All of these issues combine to reduce marketing program effectiveness by extending execution time, reducing tactical flexibility and increasing program complexity.

For many companies, "less data is more." How can your firm start a data diet?

1. Keep only the data that is needed for forecasting and execution

• Cull old, unused and irrelevant data
• If possible, store information in a more usable and leaner format like a histogram

2. Collect only what is strategic to your business

• Amass what is directly linked to the key business drivers and metrics
• Be realistic. For example, if you don’t need to do 1:1 marketing, you don’t need to keep individual customer information
• Understand the costs & benefits of the data you are accumulating

3. Adopt a cross-organizational approach to data collection and management

• Set and adhere to data standards around file formats, business rules and security
• Connect IT resources, people and processes with your marketing requirements

Clearly, hoarding data with little business benefit and lots of risk does not make sense. How much information you collect will depend on the organization but the decision inevitably will boil down to the value and usability of the data versus the cost and risk of keeping it.