Covid-19 accelerated digital adoption last year and as a result, many businesses are struggling with the lack of the right technology to manage the increased volume and complexity of customer data. At the same time, hundreds of business leaders across the globe found that good management of customer data paid off generously. 

Therefore, business leaders are turning to customer data platform to help different teams across their organization with clean, structured and reliable data. 

However, every time we meet a prospective customer for Cadenz, we are often asked “What is the exact ROI of a CDP? How can we measure it?” 

In this article, we have tried to address this question by quantifying the numerous benefits a CDP can have on your business.

 But, before we dive deep into it, here is a disclaimer –

 Disclaimer –  A lot of clients are not prepared to understand the impact of CDP on their business. Such people are divided into two groups –

 The Over-optimistic:

 When we ask clients about what they expect from their CDP implementation, the answers vary from anyone to doubling the revenue in a year to quoting something highly unrealistic to achieve.  Such clients expect CDP to be a magic wand that can change things overnight with no set plan for what they would change in their business process to get that kind of return. Also, many of these clients have no measurement plan to decide which part of the revenue increment came from CDP.  Needless to say, such clients are often found to be disappointed with their CDP investment.

 The Unaware:

While the over-optimistic are generally from senior management, the unaware or uninformed are the execution level directors and therefore are much more common. When asked about how would they measure the impact of CDP implementation, the answer is often ‘no idea’ or ‘how your other clients are doing it?’ People who have lack of information about what they can achieve from CDP often fail to measure the benefits got from it.

How to Measure the ROI of CDP

No two companies have the same expectations from their CDPs and therefore there is no standard method to measure the success of CDP for your business. The good news is that there are many different approaches, and you can choose one that works best for your business needs. The key is to keep changing the measurement metrics as the requirements evolve.

Thus, the measurement of ROI of the CDP depends on exactly what you are trying to do with the CDP. Generally, these can be divided into the following categories:

Tracking Campaign Effectiveness

A lot of companies adapt CDP to improve their marketing campaign targeting and to give a better user experience.  The marketing team uses CDP to power customer experiences like personalized ads, sites, emails, push notifications, and so on.  Thus, a lot of companies end up checking up conversion rates, increase engagement in social media, and so on.

However, the challenge here is that a CDP only shares audience and user-specific attributes, and it is the marketing team that designs campaigns to target those audiences.  Thus, it is very difficult to tap what audience was reached through your campaign. Since most ad campaigns are targeted around product and not audience, this is a trivial task.

Here are few tips that would make it easier to track which campaigns are CDP-powered and which are not:

 Name Your Campaign Based on Audience Targeted – Wherever possible stick to campaign nomenclature that highlights when a CDP audience is used.  Use this taxonomy for each of your campaigns, including direct email, telesales, paid campaigns to under which segment of the CDP audiences converted the best and provide the best ROI

 Use Custom Codes – Some companies use specific coupon codes or promo codes to track their CDP-driven efforts, which works well for measuring the return. You can also go a little advanced and have custom reporting where you look at Lifetime Value and buying behavior of direct-response clients back to prior campaign interactions.

 Use Variable in Tracking Mechanism: If you are using tracking mechanisms, such as UTM, GCLID, or some query string parameters that identify your campaign., you can find a variable to pass to your web analytics on campaigns targeting. CDP-powered audiences.  This will offer increased visibility into your CDP-led campaigns.

Increase in Business Process Efficiencies

 A private bank we worked with automated the process of campaign creating using high-volume and highly segmented customer data. It also automated the entire SME loan disbursal process and used Cadenz to gather external data continuously for effective risk monitoring. Prior to Cadenz, it took a lot of man-hours to go through each customer profile to check if it is fit for loan disbursal.  Also, the campaigns were all manual and it took days for each email and ad campaign to launch.

 So, when it came to measuring ROI, this client measured it in terms of increase in business efficiency and the cost-saving in terms of person-hours saved. The client noted significant improvement both in their business efficiency as well as cost savings.

 This approach works best for clients that integrate CDP deeply into their business processes. And ROI is not measured against one parameter but is measured as a combination of savings in terms of cost, time, manpower as well an increasing inefficiency.  

 Adding New Features and Capabilities

 One of the Cadenz clients was able to send instant (personalized) messages to its client base of 90 million for every transaction they did. While another client, a corporate bank, was able to put in place an early warning system that helped them flag 5% more NPA in the pilot phase itself.  Sometimes, simply being able to do something new or add a new capability to your business operations can bring a lot of difference.

 When dealing with such binary success metrics, it becomes important that you, as a decision-maker, have a clear objective. Also, it is important that you visualize the big picture and see how these new capabilities can unlock additional audience bases or features for your product/business, that was previously inaccessible.

 Think Both Short-Term and Long-Term

 Many companies do the mistake of only prioritizing initiatives that generates results right away. However, CDP is not only about instant results. In fact, much of the CDP value will be realized in the future. So, it is very important to take both the near-term and long-term value of CDP into account.

 To begin this ROI method, start by reviewing your business objectives and your customer needs on a short-term and long-term basis. For short-term goals, look for methods that can quickly accelerate sales and lower the cost per acquisition. Also, using customer information to plan marketing campaigns falls into the short-term goals category. For many firms, it is possible to get back the CDP investments within 1-1.5 years.

 For long-term goals, you need to consider what your customers expect from you. Any upcoming laws or regulation changes that can affect your business? Or is your competition planning something big and you need to change strategies accordingly? In doing all this, a CDP can play a very important role.  

 Total Cost of Ownership

Calculating the ROI for CDP does not only include the one-time cost of buying a CDP. You need to consider the total cost of ownership to know the final returns. Here is how you can calculate the total cost of ownership –

 Cost of CDP

Of course, the cost of CDP is the most expensive part of CDP implantation. However, the good thing here is that CDPs have a very predictable pricing structure and the price doesn’t vary much with different experimentation or customization you want to do with it. With room to experiment, marketers have the liberty to be creative without worrying about high bills.

Maintenance and data enhancement

How much would it cost on yearly maintenance or what additional custom solutions you need in place to be able to use your CDP to access data from all your tools in one place? Good thing is that CDP tools are easy to use and integrate and do not generally need many custom data enhancement solutions.

Professional services and training

 Typically, the CDPs are built to have functional UIs that allow the users to perform complex data activities with few clicks. However, if there are any training costs involved that is a part of owning the CDP. In addition, just like any other solution, CDPs too have a learning curve for them to be properly tooled and provide secure and accurate access to customer data. You need to factor in the cost of marketing team change management and training.

 Summary

 From tracking the effectiveness of the campaigns, taking into account the total cost of ownership to considering both short-term and long-term impact, there are many ways and factors you can take into consideration to calculate the ROI of CDP.

 Strategize well in advance and be very clear about what you want to achieve from your CDP and decide your measuring metrics and approach accordingly.

Leave a Reply

Close Bitnami banner
Bitnami