Most executives when asked would agree that having customer data gives an organization an unbeatable edge over the competition. The thought process goes like this: The more customers I have, the more data I collect, and when I analyze that data, I can use its insights to offer a better product to attract even more customers to collect more data.
Lather, rinse, repeat.
While this line of thinking isn’t necessarily wrong, it isn’t entirely correct, either. In fact, many may grossly overestimate the advantages that their data gives. Establishing a strong competitive position does take customer data—don’t get us wrong—but it takes the right customer data under the right conditions to build competitive defenses.
In short: You need to collect customer data, and you need to do so accurately. But how much of a competitive edge it gives you depends greatly on the accuracy and viability of the data, especially as compared to the type of product or service you offer. Let’s take a look.
A Brief History of Collecting Customer Data
It’s an age-old strategy to collect customer information and use it to improve products and services. For a long time, that was a slow, laborious, and limited process because it involved reviewing sales data, running customer surveys, and even holding focus groups. On top of that, sales data wasn’t typically linked to individual customers, and since surveys and focus groups only collected data from a small subset of customers, the picture was left incomplete.
Then came the internet, customer relationship management (CRM) software, and other technology that could directly collect incredibly detailed customer and prospect information. After analyzing this data, organizations can swiftly pivot according to the results.
All this creates more powerful information than ever before, but it’s not a bullet-proof barrier against your competition. The key is having the right data and being able to use it effectively.
Building A Sustainable Competitive Advantage
The crux is to determine how sustainable the competitive edge created by your data is. That sounds complex, but we’ve broken it down into a handful of questions you can ask to uncover the answers as they relate to your organization and the customer data you’ve collected.
How much value does the customer data and relative to the stand-alone value of the offering?
In short: The higher the added value, the greater the chance it will create a lasting competitive advantage. Some businesses collect high-value customer data, like driver-assistance systems. These systems—think collision prevention and lane departure warnings in passenger vehicles—must be as fail-safe as possible. Collecting data from their customers helps these types of businesses raise the accuracy of their products. On the other hand, smart TVs having software to collect data on what shows and movies are viewed in order to make other suggestions don’t seem to hold a make-it-or-break-it value for users, who are more concerned with size, picture quality, and durability.
How quickly does the company reach a point where more customer data no longer enhances the value of an offering?
The more slowly the marginal value of your data decreases, the stronger the competitive advantage. When you’re answering this question, focus on a customer’s willingness to pay, not by anything that’s application-specific (i.e., percentage of correctly answered chat bot queries, or how often a movie recommendation was clicked).
Think back to the driver-assistance system example. Since those systems have life-or-death implications, the value of even a small percentage point improvement in accuracy of a system like that is very high. Something like a smart thermostat only needs a little bit of data—a few days’ worth at most—to learn a customer’s temperature preferences. Thus, the competitive advantage of more data remains low. When the marginal value of learning from your customer data remains high even after you’ve acquired a large customer base, your products and services will likely have much more significant competitive advantages.
How fast does the relevance of the user data depreciate?
The faster your data becomes obsolete, the less fortified you are against new competition who won’t need years and years worth of customer data to become competitive. Google, for instance, benefits from having years of historical search data to review when serving current users. Remember FarmVille? Few do—and that’s because those who play casual social games like FarmVille will shift their preferences over time to new and different things, rendering historical user data analytics moot for building competitive advantage.
How unique is your customer data? Can it be purchased, copied, or reverse engineered?
One key to building a defensible barrier against competition using your customer data is to have unique customer data with little to no opportunity for substitution. But proprietary data can have drawbacks: Advances in technology can undermine how proprietary said data is. Speech-to-text software used to train to the specific user to become more and more accurate. Now newer systems are training on publicly available speech data that enable it to quickly understand and translate new voices, rendering original solutions clunky and easily overtaken.
Does data from one user help to improve the product or service for that same user or for other users?
In a perfect world, the data you collect will help both the user it came from and other users of your products or services. Still, there is a difference between what data can do for the same user versus a different user. Data from one user can improve a product for that same user by continually customizing the offering, making it stickier for that user. Data from one user that improves products for other users can create a network effect that gives a distinct advantage in attracting new customers.
How fast can user data insights be incorporated?
The faster your learning cycle, the harder it is for your competitors to catch up. This is especially true if you can run multiple product improvement cycles over the course of the average user contract. If, on the other hand, it takes years or multiple product generations for improvements to be made based on the data you’ve collected, you only give your competitors more time to innovate and collect customer data of their own. Your competitive advantage will be stronger when you can leverage the learning from today’s customer data into making more frequent product improvements for those very same users, rather than slower improvements for the future users.
The Right Customer Data in The Right Place at The Right Time
Collecting customer data is key to continually enhancing and personalizing the products and services you offer to strengthen your position and gain a competitive advantage. But to do so successfully, you must ensure that the value of the data you’re collecting is high and lasting, proprietary, and leads to unique product improvements or network effects.
Customer data is what helps your organization stay in the game, and one of the ways you can help tie together data from across marketing, sales, and customer success is by integrating email and your NetSuite CRM to ensure that the data that starts it all off—customer contact records, orders, email chains, file attachments, even calendar events—is automatically collected and associated to the right records. When you empower your CRM with relevant, timely, and accurate data, you’ll see a direct reflection in the success of your business. In fact, 93% of businesses have seen higher customer retention rates since using a CRM platform.
There’s even an easy and intuitive way to make sure that data is kept as up to date as possible in your CRM, and that’s through email integration. Apps like ExtendSync will directly connect your Outlook or Gmail inbox to your NetSuite CRM so you can create, edit, or delete NetSuite records right from your inbox, automatically connect emails by thread or email address to specific CRM records, even save attachments and sync calendar events. All without ever having to click out of your inbox.
Sound too good to be true? You don’t have to take our word for it. See how email integration provided deep visibility into customer communication data for Trinity Displays. Or, try it yourself FREE for two weeks.