Treating Each Customer with "Omotenashi": Rethinking CRM from Zero-Party Data (Part 2)

Many companies focus on CRM (Customer Relationship Management) to build intimate relationships with customers and increase repeat business and loyal fans. However, many struggle to see results, thinking, "Traditional point programs and membership tier systems are losing effectiveness," or "We need to rethink our CRM."

This is where the customer experience provided by the company becomes crucial. To deliver "hospitality" that delights customers, it is essential to deeply understand each individual customer. Key to this is Zero Party Data.

In Transformation SHOWCASE, we interviewed Mr. Ryo Shirahige of Dentsu Digital Inc., who proposes zero-party data utilization, over two parts. In the second part, we asked about methods for acquiring zero-party data, building organizations that leverage it effectively, and the essential mindset for utilizing this data.

Rethinking CRM from Zero-Party Data

Q. In the first part, we learned that Zero Party Data is essential for companies to provide hospitality to customers. Conversely, does this mean that if a company cannot demonstrate "this is the customer experience we will provide," customers will refuse to share their data?

Shirahige: I think everyone has had the experience of thinking, "I don't want to provide data to this company." Due to the revised Personal Information Protection Law, obtaining data now requires user consent. That's why when browsing websites, you often see prompts asking, "Do you consent to providing cookie information to this company?" Many people probably choose "Decline" in such situations.

I believe many users feel uneasy because they don't understand why they must provide cookie information to that particular company. Of course, the reason might be stated in the privacy policy, but few people meticulously check that every time. They don't understand what benefits consenting brings, and some even worry that providing cookie information might lead to more unwanted ads. Therefore, when collecting data, clearly communicating the benefits it creates and the services it enables is crucial for leveraging zero-party data.

Q. Are there any successful case studies using zero-party data in CRM or loyalty marketing?

Shirahige: There are examples overseas, but honestly, I feel they're still scarce domestically. I believe this stems from organizational issues within Japanese companies. Many Japanese companies lack dedicated teams specializing in customer communication. If a company has ten departments, each often sets its own sales targets and communicates with customers based on its own judgment. From the customer's perspective, receiving emails or notifications from all ten departments can be bothersome. That's not what we'd call hospitality.

Instead, consolidating customer communication management within a single department should enable timely and channel-appropriate interactions with each customer. Achieving this requires reevaluating the organization itself and thoroughly redefining KPIs.

However, while saying "review CRM" is easy, the work involved is substantial. Everything must change: the organization, KPIs, and service delivery models. This is the bottleneck, I believe, preventing many successful domestic loyalty marketing cases from emerging.

Q. If we're considering communication for each individual customer, the company's approach seems like it would change significantly. If we're tackling CRM starting from zero-party data, it means we have to keep that in mind to the extent that it won't be effective otherwise, right?

Shirahige: Of course, not every company needs to go that far. When clients consult with Dentsu Digital Inc., it's perfectly fine to start with an entry point like, "Our point program is losing effectiveness, so we want initiatives that generate more customer response and increase repeat business." In such cases, possible approaches include sending messages like, "Based on your previous purchase history, we'd like to offer you this recommendation today," to customers who have previously bought products or services. Alternatively, you could send personalized service recommendation emails based on data and preferences. We believe CRM using zero-party data can start with these simple initiatives.

Q. Hearing you speak, I understand that re-examining CRM starting from zero-party data is crucial. What do you think the ideal form of CRM should be?

Shirahige: I believe the most important thing is not "trying a new CRM," but "properly rethinking CRM from the ground up." CRM stands for "Customer Relationship Management," right? That means maintaining the relationship (Relationship) with the customer is crucial. Yet, if we just send sales promotion emails and stop there, it's a waste. I don't think that builds a good relationship with the customer.

If this continues, customers will only demand discounts from companies. What's crucial is fostering customer loyalty. I believe we've reached a point where we need to rethink traditional CRM.

The data you should collect changes depending on the customer experience you provide

Q. Zero-party data reflects user preferences. Are there trends, like apps being easier for data collection or certain formats making it easier to get users to answer questions?

Shirahige: Ultimately, it depends on what kind of customer experience the company wants to provide, so it varies by company. It's also not a simple choice between a website or an app. If the goal is to drive store visits, you need to capture user behavioral and location data. Methods for collecting this data—like geofencing (using mobile device location to create virtual fences and send notifications when users enter an area) or Bluetooth—are diverse. Therefore, the approach to data collection will vary based on the customer experience being offered.

The most crucial aspect is fostering customer loyalty and trust. Therefore, collecting data that doesn't capture the specific characteristics of those customers is meaningless. This information cannot be gleaned from sales data alone, so it's essential to carefully design where and how this data will be acquired.

To deliver a premium customer experience, what psychological aspects of customers must a company understand? What data is required to achieve that? Only after grasping this should the mechanism for acquiring that data be built. I believe this sequence of thinking is essential.

Q. So, you mean discerning the characteristics of each individual customer from the data?

Shirahige: Yes. We often hear about "One-to-One Marketing" (marketing tailored to each individual customer). However, even when it's called One-to-One, sometimes it just means presenting recommendations based on other users' behavior and purchase data. That's simply because customers with similar attributes or preferences were more likely to make a purchase – it doesn't represent true "One-to-One."

What's crucial in CRM is deepening our understanding of customers. To truly understand an individual customer, we must collect data with their consent and then integrate and analyze that data according to specific objectives. That's why I believe we need various types of data, starting with zero-party data.

While zero-party data is a hot topic now, simply collecting data yields nothing. First, companies must demonstrate the value of their experiences to users and obtain data only after users consent. Then, it's crucial to deliver the optimal message to each customer at the right moment. Why not revisit your CRM strategy centered on zero-party data to build better relationships with your customers?