Customer data is readily available thanks to Web analytics, third-party data warehouses, and better customer tracking software. But how much is too much?
According to IDC, the world created 487 billion gigabytes of information in 2008, up 73 percent from 2007. Not all of that is customer data, but too much of it is, according to Eric Bradlow, professor of marketing, statistics, and education at the Wharton School of Business and editor-in-chief of the journal Marketing Science.
"Firms are buried under data, a lot of which they don't need," Bradlow says. "By looking at data minimization, they could save time and money by storing and tracking fewer pieces of information about customers."
Most companies today aren't practicing data minimization. A LexisNexis study, the National Workplace Survey 2009, found that 62 percent of professionals report having to sift through irrelevant data to find what they need, and 68 percent would like to spend less time organizing information. Bradlow says companies can still effectively use predictive modeling and targeted marketing without saving every piece of customer data available.
"Fear is driving companies to keep too much data; they're afraid their competitors will have more information and they'll lose value," he says. "Once you've determined which variables within customer data predict behavior, you don't need the rest. Many companies say, 'If we can keep it we should,' but if it's useless, what's the point?"
Tom Lacki, a senior advisor with Peppers & Rogers Group, agrees. "The lack of having a data strategy is driving companies to collect more and more data needlessly," he says. "Rather than thinking about what they'd like to know to support their marketing, or which touchpoints are most important, they collect everything."
The Peppers & Rogers Group viewpoint on customer data is that every piece collected should help answer one of two questions: what is a customer's value, or what are a customer's needs. "Anything outside of those two objectives may have a legitimate reason to be collected, but more likely than not it's superfluous," Lacki says.
One cause for the massive data increase is that data can expand in three distinct ways. The amount of detail on individual customers can expand, the number of total customers can increase, or the length of time the data represents can be extended. "That third piece is very important," Lacki says. "Data decays rapidly, so it's counterproductive to collect data if it's not current." When companies decide how much information to collect and store, they need to remember this increase over time.
What's not kept can't be stolen
Marketers aren't the only ones dealing with a data overload; security and computer science professionals are as, if not more, concerned about it, according to Bradlow. "When I presented my work to legal professionals at a conference they were fascinated because of the security implications," he says. "The less information companies keep about customers, the less risk and vulnerability for that data being breached."
A decrease in data can not only lower the security risk, it can also lower the risk of violating customer trust, Lacki adds. While an increase in the amount of data alone isn't likely to cause issues for customers, the comprehensiveness of the data certainly can. "Like the Hippocratic Oath for doctors, the first priority of marketers should be 'Do no harm,'" Lacki says. "Put yourself in customers' shoes and ask whether you'd want more and more information about yourself available to be misused."
By focusing on a strategy that includes data minimization, companies can reduce the cost of storing and analyzing data, increase productivity because information is easier to find, and retain the ability to predict customer behavior and create targeted marketing efforts. "The technology out there makes it possible for companies to collect seemingly infinite amounts of data," Lacki says, "but from a conceptual perspective it's hard for marketers to get their heads around how much data is being created versus how much they need."