Making effective decisions and executing efficient strategies requires time, effort, resources, and most importantly, information. Companies need to capture and leverage data in all aspects of their business, from product development and advertising to distribution and customer support. Data is especially significant for marketers, as it leads to the right conclusions for identifying, engaging, and retaining the right customers. What is data-driven marketing, and why is it so important for businesses to understand?

What is Data-Driven Marketing?

Data-driven marketing is exactly how it sounds - marketing decisions and strategies informed by industry, company, and customer data. Its primary focus is capturing and leveraging information about consumer needs, interests, preferences, and behaviors. There are four different types of data according to where and how they’re sourced. Zero-party data and first-party data directly captures brands’ customer information, while second-party data is sold by other organizations and third-party data is aggregated from multiple external sources.

When used correctly, data should be present in every aspect of marketing and every stage of the decision-making process. This can include physical and digital advertising, social media strategies, email campaigns, and so on. Ultimately, data helps to drive sales, build engagement, and foster loyalty.

Benefits of Data-Driven Marketing

Informs timely, accurate, and relevant decisions

Without data, businesses would lack the information they need to guide their decisions and nurture their growth. Companies and marketers should look to real-world data and case studies, rather than relying solely on theories and instincts. For example, while brands may assume their customers are active on one particular social network, data might tell them otherwise. It can also tell them which email subject lines result in more opens, which website pop-ups result in more conversions, and so on. Data helps businesses learn from the past and present to inform their choices for the future.

Reduces risk of mistakes and misunderstandings

Assumptions and theories are often limited, outdated, and unrelated, as they lack concrete correlation to a business’s operations. Data makes clear connections between a brand’s efforts and performance, making it easier for marketers to identify successes and failures, and reduce the risk of future mistakes. For example, rather than assuming that their recent product release failed because of the product itself, data might tell them that their advertising didn’t reach the right people or that their website’s payment gateway was experiencing issues. Data both guides a company’s initial decisions and acts as feedback on how their decisions affected their business and customers.

Supports segmentation and personalization

To drive repeat purchasing and customer retention, companies need to segment their users and personalize their efforts. Rather than looking at their customers as a collective whole, brands can use data to divide them by demographics, psychographics, needs, and value. They can then create and execute customized marketing campaigns for each of their user groups. For example, businesses might develop different ad copy for customers who value quality, customers who value price, and customers who value reliability. Data helps brands see and understand consumers as individuals who have their own priorities and interests.

Improves customer retention and brand loyalty

Consumers feel more connected with brands that understand their personal needs, preferences, and behaviors. They’re also more likely to engage with brands who recognize their individual journeys than those who treat all of their consumers the same way. This is because data helps businesses identify where customers are on their path to purchase and how to best encourage them to move onto the next stage. For example, they can offer coupons for their favorite products to encourage additional purchases or send targeted emails to educate them about the benefits of their loyalty program. Without data, brands would be unable to fully meet and exceed their customers’ expectations.

Challenges of Data-Driven Marketing

Integration, commitment, and prioritization

As data-driven marketing requires a significant amount of time and resources, some businesses fail to prioritize integrating data into their marketing strategies. For example, they may only look at website traffic or financial KPIs to measure performance, rather than capturing information at every stage of their consumers’ user journey. They might also neglect to leverage the data in their decision-making processes, and only focus on collecting and analyzing it. Brands need to look and listen at every user touchpoint, from their advertising, social media, and emails, to their website, app, and face-to-face interactions.

Data quality and accuracy

The effectiveness of the data collected depends on its quality, accuracy, and relevance. If the information doesn’t meet the six data quality dimensions - accuracy, completeness, consistency, timeliness, validity, and uniqueness - it may lead to marketers drawing the wrong conclusions. Businesses may also incorrectly prioritize quantity over quality, and capture a vast amount of information that isn’t actually relevant. Companies need to outline clear data collection practices and policies to ensure that they’re on the right track.

Privacy concerns and data policies

Governments, organizations, and users have expressed concerns over data privacy, transparency, and control. Customers are especially vigilant about how companies are collecting, using, or even selling their information. As a result, data protection laws like the General Data Protection Regulation (GDPR) and California Consumer Privacy Act (CCPA) have come into effect. These policies ensure that companies are being honest, lawful, and accountable with user data. To reduce legal risks, businesses should focus on capturing zero-party and first-party data, which comes with consumers’ explicit consent and understanding.

Data-Driven Marketing Strategies

Step-by-step overview

The basic steps of a data-driven marketing strategy are as follows:

Define your business objectives: Clearly outline a set of goals that will help you decide what kind of information you need in order to accomplish them.
Determine your data collection practices: Create a plan for how to capture information that meets data quality dimensions and complies with data privacy policies.
Capture and analyze data: Identify tools and platforms for collecting and organizing data, then implement your data collection plan.
Devise and execute your data-driven strategies: Use the data collected to guide your business decisions and establish your marketing strategies.
Measure your performance: Develop analytics reports to gauge the effectiveness of your data and your performance from a marketing, financial, and customer perspective.

Targeted messaging and A/B testing

As mentioned previously, data-driven marketing supports segmentation and personalization, giving customers the individualized brand experiences they’re looking for. Marketers should incorporate retargeting and A/B testing into their strategies to personalize shoppers’ user journeys. With retargeting, brands can use data to track user activity and offer relevant products, services, and deals based on their preferences and behaviors. In A/B testing, brands can test different creatives and copy, then use the resulting data to guide future campaigns with personalization at the forefront.

Multi-channel and omnichannel experiences

If businesses want to make the most of their data, they should implement a data-driven omnichannel marketing strategy. Omnichannel marketing ensures that customers have a clear and cohesive experience across all of a brand’s channels, from their website and mobile app to their email campaigns and social media posts. Data helps companies maintain consistency throughout every stage of their users’ path to purchase and refine their brand voice. Rather than using the same creatives and copy at every user touchpoint, brands can leverage data to determine the most effective strategies for each individual channel.

Data-Driven Marketing Best Practices

Best Practices For Data-Driven Marketing

Utilize data management systems and analytics tools

Businesses collect data from a number of different sources, such as customer relationship management platforms, sales systems, and website and social media analytics. They should streamline their processes by investing in data management software that not only captures information, but also forecasts and analyzes data to better inform their decisions. Predictive tools help companies anticipate and fulfill their customers’ needs, while analytics tools help companies measure and report on their performance.

Incorporate automation and machine learning

Data collection and analysis can be complicated, time-consuming, and prone to inaccuracy, especially when conducted manually. To reduce the chances of human error, brands should automate their processes and utilize artificial intelligence and machine learning when possible. Automation helps simplify the task of capturing, organizing, and leveraging data, such as collecting users’ email addresses or generating unique discount codes. Artificial intelligence learns from consumer behavior in order to better serve their needs, such as tracking their website activity to send them personalized recommendations. Brands should also invest in chatbots to capture data and drive their conversational marketing efforts.

Outline brand values and competitive advantages

While much of data-driven marketing relies on quantitative data, such as views, clicks, and conversions, marketers should focus some of their efforts on qualitative data, too. Gathering industry and consumer insights helps businesses identify their strengths, weaknesses, opportunities, and challenges. Information gathering tactics like surveys, focus groups, and social listening gives companies a clear idea of what users think about their brand and their competitors, which they can then use to their advantage in future marketing strategies. Data can tell them what people are looking for and which brand values and product features to highlight.

Prioritize zero-party and first-party data

Instead of relying on second-party and third-party data, which are of varying quality, reliability, and relevance, brands should focus on directly capturing zero-party and first-party data from their customers. It gives them and their users control over their data and ensures that the decisions they make are based on accurate, timely information. They gain detailed insights about their own users that their competitors aren’t privy to, such as purchase history, survey responses, and product feedback. Zero-party and first-party data also comes with consumer consent and secures compliance with data protection laws.

Capture and leverage first-party data for your marketing strategies

Data-driven marketing ensures that companies are making the right decisions at the right time. It helps them navigate the competitive landscape, nurture brand awareness, and foster customer loyalty. If brands want to prevent legal complications and make the most of data-driven marketing strategies, they should prioritize first-party data. It guarantees that their customers have understood and consented to the collection and use of their information.

3 tier logic’s PLATFORM³ helps brands create marketing campaigns like gift with purchase promotions, contests and sweepstakes, loyalty programs, and more to drive customer loyalty and capture first-party data. Modules like Dynamic Messaging and Data Capture & Analytics provide marketers with the tools they need to make well-informed decisions for growing their business. To learn more, book a demo with our team today.

Complete Guide to Data-Driven Marketing