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digital identity

Three Use Cases Show Value in Digital Identity

Who you are online has never been more valuable to tech companies, the government or to companies that are on their way to becoming tech companies. Businesses (should) serve the customer and we now have heaps of data that—when combined—tell us more about what we need to do to serve that customer to the best of our ability.

A unified digital identity is as valuable to an enterprise as it can be elusive and difficult to make real as we store data in a variety of siloed systems. Originally these systems collected and stored data for whatever purpose they were built to accomplish--whether demand-side platforms, point of sale systems, customer relationship management systems or commerce systems. There was no reason to worry about the silos as we built them. But over time, they became their own worlds.

Those who understand the problem that data silos present in forming a unified digital identity have begun to build customer data platforms (CDPs) to allow these systems to speak to one another. What businesses didn’t expect is what data could do when the systems started to talk to one another. Synthesis became achievable and the CDP movement gained momentum as these new applications of data created unexpected value.

Three use cases

A customer’s digital identity is formed when a business can take the information it has in its CDP and couple it with attributes and properties to create a picture of a unique individual. This picture has many applications. From our experience delivering CDPs and desiloing data, we see three major categories of use cases, each bearing obvious and more surprising results.

  1.  Market dynamism: Supply matters as much as demand

We often work with companies to help them create a system that recognizes a likely buyer. That way they can rebalance their media spend, predict demand and invest more toward likely buyers. A CDP can establish a clearer picture of customer buying patterns by uniting the systems involved in demand. But a CDP can also unite systems of supply.And supply matters as much as demand.

Why would you pay the same price for an ad when your supply is 100 units rather than 10? If a product’s quality expires (e.g. food going bad) or the time you can sell it in is close to closing (e.g. a cabin in a cruise ship about to leave port), you might start decreasing prices and offering a deal. You might pay more for ads if you have a lot left to sell, and less when you have hit your target.

But most advertising systems today are blind to supply. This is where CDPs come in. There’s a natural relationship between time, price, offer, cost per impression and supply. It’s easy to overlook this kind of use case when there aren’t connections into the inventory management system. Most businesses buy media against Return On Advertising Spend targets, not yield.

In some cases, we’ve found that inventory is the single greatest determiner of buying behavior. For instance, car purchasing. The car not being in stock is more influential to drop-off in purchasing than any other factor. So, if you know inventory is the biggest factor to weight against any one customer journey, why not reorient media spend around inventory?

Digital identity allows both systems (marketing and inventory) to talk to one another and reveal these use cases. Several of our clients have reoriented media spend as part of an inventory management strategy. Some are reorienting inventory management methods around a media strategy. But this is impossible without CDP.

  2.  Direct to consumer: Know your customers

The Covid-19 pandemic has put a particular spotlight on the next major CDP use case category. When customers cannot meet you on your terms, you better be able to meet them on theirs. But to successfully sell directly to consumers, you have to know enough about their behaviors and patterns to create a sustainable system to serve them.

For instance, free shipping has become mandatory for retailers to compete online. Customers expect to not pay—it’s great for shoppers, but not so much for retailers as it’s nearly impossible to sustain any profit when they have to pay for multiple individual returns. Every time returns are sent in, that free cost is borne by the business.

Retailers that offer free return policies bear the cost of this “perk” if they have data silos (e.g. order management system for returns vs. commerce engine for purchases). If order management systems were in front of the commerce engine, retailers could more easily assign a digital identity attribute to the customers who often buy five dresses and return four. If this were happening in the store you could identify these people straining the system. However, digital ordering allows them to remain anonymous. Digital identity will (and is) changing that.

We are working with retailers to assign something like an Uber rider rating to shoppers. It’s not just to weed out the bad apples - businesses are offering discounts to the people who are responsibly trying on and purchasing clothing. They are identifying frequent abusive returners and charging them shipping. This change alone would make free shipping more sustainable and perhaps even save retailers that are struggling today.

  3.  New revenue streams: Monetize  intent

Our last category is arguably the most tantalizing for a business trying to become a technology platform. BigTech’s core functionality is a two-step method: 1. Capture intent and 2. Monetize it.

You see this category of use case play out in the big “data acquisitions” today. TurboTax spent billions on buying Credit Karma so that it could see the purchases of hundreds of millions of people. Visa purchased Plaid for the same reason for $5.3 billion. TurboTax can use this data to build a customer profile and use it to tell other businesses whether you are a valuable consumer worthy of credit. Visa now has access to the digital purchases of millions of customers, stitchable to their own user graphs.

Businesses that capture customer behavior can create revenue streams previously not possible. And the more predictive or descriptive the data is of a customer’s behavior or state, the more valuable it is. 

Building a CDP to create a new revenue stream, or to provide your business intelligence it can use to offer other businesses insight about their customers or prospects, is an evolution few are able to achieve quickly. Most of those who are succeeding today are businesses that have considered themselves technology companies for quite some time. Telcos, media and personal electronics companies are all building new business models around data they collect.

Use it or lose out

If data is the new oil, digital identity is the light, sweet crude. It’s the most valuable data you can get. It’s the information that enables you to represent the value of another data set by allowing one system to talk to another. It allows a business to put the customer at the center of their strategy—which is essential in today’s marketplace.

We all believe businesses should serve us, but we don’t realize that to serve us better, they need to know us. Businesses can’t take customer-centric action on things they don’t know. Digital identity connects the dots and allows a business to give us exactly what we want.

David Markel
David Markel
Vice President, Enterprise Strategy