We’ve all seen the headlines (and the LinkedIn statuses): Consumer and business spending are under serious pressure as we brace ourselves for a possible recession.
But as businesses slash expenses and tighten their belts, many are overlooking one key, cost-saving measure.
In a tough economic climate, improving contact data quality is a solid defensive strategy for organizations trying to protect revenue and profit margins.
Let’s break this down.
Gartner reports that poor data quality costs organizations an average $12.9 million every single year. This figure is almost certainly higher because Gartner’s figure is for all organizations, not just the biggest ones.
A few years ago, Royal Mail calculated the cost of poor-quality customer contact data at almost six percent of an organization’s total annual revenue.
These high stakes in mind, let’s explore specific ways clean contact data can help organizations mitigate the impacts of a possible recession.
Forbes states that acquiring new customers costs approximately five to seven times more than retaining old ones, depending on the industry you’re in. Reasons include the fact that acquisition requires more resources, consumes more marketing spend, and results in a lag before new customers become profitable.
During an economic downturn, wrapping your arms tightly around your customers should be a no-brainer, and marketing plays a key role. Solid marketing communicates the products and services you want to sell and articulates the value your customers will experience. Marketing also builds loyalty, reinforces appreciation, and conveys empathy.
While snappy taglines and eye-catching creative are important, the quality of a business’s contact data (including names, addresses, purchase history, etc.) is the single most important driver of marketing performance.
High-quality data enables a range of marketing best practices, including audience targeting and segmentation, personalization, and campaign timing.
Identifying when customers are ready to buy to deliver relevant messaging at the right time plays a primary role in driving revenue—and it’s dependent on accurate, up-to-date data.
In contrast, marketing campaigns with poor personalization (likely as a result of outdated or inaccurate data) can ruin the impact of marketing messages, often resulting in costly churn.
Validity’s recently published State of SMS Marketing in 2023 report asked consumers about factors that made them grow annoyed with brands’ messaging. The number one complaint was receiving messages not relevant to their needs and interests (34 percent).
While this has created a positive shift towards sourcing zero-party data (data explicitly supplied by customers) to fuel marketing activities, this data is more likely to be incorrect at point of entry and decays faster, making regular database maintenance to ensure timeliness and accuracy even more important.
Economic headwinds mean businesses are trying to do more work with fewer resources. High interest rates and inflation have created a laser-focus on cost reduction.
As a result, budget commitments to data quality (which might be allocated to data management software, headcount, staff training, etc.) are under threat as leaders prioritize higher profile projects and tasks.
As data quality decreases, employee frustration with bad data means tasks don’t get completed correctly (or at all!), creating to a vicious downward cycle of reduced growth and productivity that could even result in them leaving.
In Validity’s latest State of CRM Data Management report, 64 percent of respondents said they would consider leaving their current role if additional resources were not allocated to a robust CRM data quality plan. And the cost of replacing them is significant.
In turn, staff turnover leads back to poor data quality! Changes in workforce exacerbate contact data decay because of factors like incorrect reassignment of territories and data entry errors from new staff who haven’t been fully trained.
Smart businesses will automate these data quality functions, reducing friction and increasing productivity.
Artificial Intelligence is 2023’s hot topic, and it’s highly relevant to this conversation as businesses seek to drive efficiencies and cost savings through automation.
Until recently, AI initiatives were almost prohibitively expensive. But new solutions like ChatGPT and DALL-E 2 are now making it accessible to broader audiences. Marketers are actively exploring how AI can help with time-intensive activities like copywriting and image sourcing.
AI will almost certainly deliver improved data quality, e.g., anomaly detection, assessing relevance, and filling gaps in data sets. CRM will also benefit, with AI-driven applications creating formulas and validation rules.
However, marketers should be aware of AI’s “Achilles heel”—it’s only as good as the data it’s trained on. Substandard data will always result in “GIGO” (garbage in, garbage out!). Poor data quality is the primary reason for AI failure. Other potential AI-killers include shortcomings with data strategy, data availability, data readiness, and data literacy.
Data bias is also a big challenge for AI (e.g., confirmation bias, selection bias, historical bias, etc.). Netflix may know everything about the viewing habits of its customers, but it has far less data on people who aren’t Netflix subscribers!
While businesses are developing AI solutions to deliver efficiencies and cost savings, they need to avoid wasted spend. Data quality is the foundation of AI success, and great data will deliver great AI.
Businesses cutting back on their commitment to data quality may achieve short-term cost savings—but it’s a false economy that sets them up for long-term pain. Poor data means less effective sales and marketing, reduced productivity, increased staff churn, and greater likelihood of new initiative failure—all meaning big costs.
Want to make sure you’re investing for growth instead?
Validity offers a range of data quality and sales productivity solutions, including DemandTools, the secure data management platform for cleaning and maintaining CRM data, and GridBuddy Connect, the data productivity platform that combines your insights into editable, spreadsheet-simple views.
If you’re not already using them, now is a good time to start thinking about making that investment. For more information, reach out to our team of data experts.