These days, Customer Data Platforms, or in brief CDPs, are one of the most discussed topics in the CX industry. Last time I looked, the CDP Institute counted more than 150 CDPs of different flavors that target different business challenges.

This raises a lot of questions, chiefly: What is a CDP? Which business challenges do companies solve with a CDP and how do they approach the solution, i.e. how do they proceed implementing one?

Let’s start at the beginning. According to the CDP Institute, a CDP is “packaged software that creates a persistent, unified customer database that is accessible to other systems”.

Figure 1: A simple model of CDP functionalities

Functionalities offered by CDPs reach from simple data gathering and unification to the activation and even active usage of information derived from customer data. This already shows the different business challenges that can be addressed with a CDP. It also shows, that the business challenges can be addressed in a way that provides increasing value to the business.

As an aside: A good CDP always bases on a solid foundation of customer identities and the consents that customers have given.

The second important question is how a CDP can or should be implemented. What is a viable approach?

To learn more about these questions, we spoke with Mario Kurmann, Senior Product Manager CRM at Migros Fachmarkt AG in Switzerland. Mario was responsible for the initial CDP implementation and now for its continuous improvement. Migros is one of Switzerland’s biggest retailers. Fachmarkt, as part of Migros, basically operates five independent brands in the areas of sports, electronics, home improvement, furniture with online shops and brick and mortar presences. All these brands, and the Migros group overall, have separate data silos. One more silo is the Migros loyalty program, Cumulus. 

All these data silos were aggregated in different buckets, e.g. data warehouses, then serving different purposes. The basic question that arose from this was: Ho can we work with this treasure trove of data that also includes transactional, surf patterns and behavioral data. 

The objectives

Consequently, the first main objective of the implementation was to bust the silos and to harmonize customer data across these different brands and the loyalty program. The second goal was to then be able to activate the data and to use it operationally, always looking at it with a CRM perspective.

Long term objectives of the implementation are, of course, increased loyalty, more revenue and more precise customer engagement. However, according to Mario, the first implementation had another strategic goal altogether: Learning the capabilities of a CDP by exploring! After all, a CDP is rather a technical than a business component.

As trivial as it sounds, maintains Mario, Migros started with two simple use cases: re-engaging with customers in case of an abandoned shopping cart and personally welcoming new in-store customers to the brands. This with the background of Migros not having a clear customer database with clear and unique customer IDs. Cumulus, for example, works on household level and not with individual customers. How to deal with this is one of the questions that still needs some thought.

The approach

Migros looked at the CDP implementation as a business project, albeit the tool is of rather technical nature. As said above, the team started the implementation with simple use cases that target at improving the customer experience at important touch points via defined use cases.

Talking of the team: The team was deliberately kept slim, too. In alignment with Fachmarkt AG and Migros itself, this team was empowered to approach the topic using ecommerce data, also together with an implementation partner that already implemented the online shops. 

The team maintained close ties with the business units, also educating them what the CDP can help with and where its limitations lie.

The Learnings

Communication, communication, communication

It is very important to have and maintain an alignment with the various stakeholders. The degrees of freedom and the timelines that the project team has as well as any limitations need to be clear to the project team as well as to the management.

Data governance is an important topic, as a CDP is privacy relevant. The availability and usability of the used data needs to be clarified with the legal departments.

It is similarly important to stay in constant conversations with the customers, managing expectations and educating them about capabilities of the CDP and the scope of the implementation while learning about the requirements to fulfil.

Actionable data is not equal to engagement

One of the big early learnings is that a CDP is not an engagement tool. It is essentially a database which helps activating the data. The actual engagement needs an engagement tool. It proved helpful to work with a separate engagement tool that didn’t conflict with other tools that were already in production use for the two use cases. The team chose e-mail as the communication channel. In doing this, the team staid independent of the daily operations, which sped up the project considerably.

Don’t boil the ocean

Starting with small, well defined use cases helped as well. These use cases worked with a small number of upstream and downstream systems. This kept the complexity under control and led to having consistent data coming into the system. This helped in delivering results fast. It also helped in gaining more understanding of the CDP as such.

Know your infrastructure

The ability to work with internal as well as with external partners was another point that increased the ability to deliver and the delivery speed. This way, there is no need to re-engineer the infrastructure and, even more importantly, a trustful relationship is already established.

One little downside

The one thing that was not established early is the harmonization of data, as the ingested data was already quite clean, because of the selection of upstream systems. This is something that will be resolved in later project stages.

The result

In consequence, there was a win for all participants. The use of commercial use cases kept the project effort low while quickly showing results. The project showed good opening rates of the sent mails resulting in increased revenue via an increased conversion rate. This raised the appetite for more.

Based upon the established success and value, the next steps will now tackle more sophisticated use cases including campaign automation and helping customer service. 

This text is based upon the CXChangersTalk with Mario Kurman, If you are interested in the original, you can watch it here

These days, customer experience is one of the biggest topics. Many, if not most, vendors have restructured, reshaped, or just renamed their portfolios to reflect customer experience one way or the other. Customer experience is great, customer experience is valuable.

Now, what is customer experience?

According to Paul Greenberg’s definition, “customer experience is how a customer feels about a company over time”. Bruce Temkin defines customer experience as “the perception that customers have of their interactions with an organization.” Similarly, the Gartner Group defines customer experience as “the customer’s perceptions and related feelings cause by the one-off and cumulative effect of interactions with a supplier’s employees, systems, channels or products.”

What all these definitions have in common is that they are talking about something that is not in the realm of the business and quite abstract.

I often say that good customer experience (CX) is the new differentiator as products and services delivered by businesses are increasingly becoming a commodity. Only few brands can truly differentiate themselves based upon their products/services, price, placement, i.e., the classical tools of the marketing mix. This leaves customer experience as the lever that businesses can and need to work with.

But customer experience is not an end. It is a means. Businesses mostly need to be profitable, which means that the CFO is always on the table when it comes to approving new projects or initiatives, even in important areas like customer experience. The CFO’s main questions are about financial KPIs – and are often not answered in a better way than “everybody knows that good customer experience is good for business”.

This raises some interesting questions, starting with

• Why is it so hard to establish a financial benefit of a CX initiative? Is it so hard, after all?
• What are financial objectives that shall be reached by „good customer experience“?
• Is there a way of linking CX improvements to revenue/profit/cost/margin changes?
• How to find out whether a CX initiative has a positive ROI or achieved ist objectives?

One can easily think of many more questions.

Pressing questions that seemingly no one can answer.

Peter Pirner, formerly domain lead customer experience at Kantar, now independent customer experience consultant and host of the successful German language podcast CX-Talks is someone who has answers.

And now I had the pleasure of talking to him in the inaugural episode of the CXChangersTalks to get some answers to the questions above.

Peter, too, sees that there is a requirement to deliver a prospected ROI for projects that deal with customer experience management. But he cautions that there are a couple of tough questions that the company management needs to ask itself before embarking on a CX project. This is chiefly the question about the basic bias of a company to support the customer experience. Ask yourself: Would you invest even if you couldn’t easily measure an effect on the customer side? Peter maintains that if this question is answered with a “no”, then there is no need at all to think about improving the customer experience as one is talking a bog-standard investment e.g. into an IT system.

Given that the company really wants to improve the customer experience then it needs what he calls a “currency” that helps measuring an improvement of the customer experience and the desired result. This could be that the customer feels more emotionally attached to the business because the sum-total of all experiences leads the customer to the conclusion that they do not feel a desire to try something else or even to buy somewhere else.

A classic measure for this is e.g. the NPS. Peter emphasizes that using an improvement of this measure could already be enough for a really customer centric company.

If it is about calculating an effect in Euros or Dollar then we need to take the next step. This step could base on the concept of the customer lifetime value (CLV). The business now could work on establishing the customer lifetime values of different NPS segments. It is reasonable to assume that NPS promoters have a higher CLV than detractors or customers with a neutral NPS. Still, this needs to be calculated within the finance system. Given this, an increase of NPS promoters will result in a monetary impact that one can offset against the investment. Make no mistake, this is not a simple exercise.

Now, an objection could be that the NPS is not a good measure as the second question “did you actually recommend?” is missing. However, this is does not matter in this case, as the NPS only serves as an indicator for the degree of association that the customer has to the business. In so far it doesn’t matter whether a business uses NPS, CSAT or a hybrid measure. The basic principles of an ROI analysis work with any of them.

The more important question is whether the change already had an impact, as it can take years until customers realize that there has been a positive change – remember, we are likely addressing detractors of neutral persons. In my experience one needs to look at a time horizon of three years. During this time, it is of crucial importance to communicate. Communicate what the assumptions are, what is planned to happen in year one, two, or three. And to monitor whether the assumptions are still true, so that a course correction can happen if necessary.

There may be situations when an impact is visible faster. E.g., if the company loses customer fast. If this can be resolved by a change of the customer experience, then a similar model can be applied. Every customer that does not abandon me is a customer that I do not need to acquire. Of course, the company wants to develop this customer further, but simply, the company saves in customer acquisition cost as it does not need to acquire a new customer.

And the reduction of churn is something that usually can get accomplished faster than elevating happy customers to an even happier level.

So, in summary, we have two basic approaches:

The first one is concentrating on improving the degree of customer happiness in different segments and hence customer loyalty, which usually takes some time to come to fruition. One possible measure to start off from is the NPS, which needs to get related to customer lifetime value.

The other approach is looking at customer churn and reducing that via an improved customer experience – if applicable. This approach is likely to bring faster results and serves as a foundation for the more long-term oriented first approach.

For all of you who want to view/listen to the CXChangersTalk between Peter Pirner and me in original, watch it on my Youtube channel CRMKonvos.