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Know Your Customer

Updated: Feb 15, 2021


Financial services businesses are aware that the concept of "Know Your Customer" (KYC) is an institutional ability to draw information from a variety of sources into a situational composition in real time, such that they can prevent risks of fraud, money laundering, corruption and bribery. The idea is to present all relevant information as a means of due diligence so the potential (or actual customer) can be ascertained as “legitimate”.

The concept is for customer-facing resources to "know" sufficient information that is relevant and legal in order to gain “risk advantage”. But isn't this principle the nexus of all sales and marketing efforts? Beyond banking, wouldn't every business want this capability? This common need makes the concept and mission of the Customer Data Platform (CDP) a means to enable the desired position of advantage. Above and beyond a CRM, the CDP is the technical ability to unify, digest, compile and present information from many sources in a way that gives commercial or competitive advantage…to reduce the risk of wasting your time in a non-productive pursuit or of losing to a competitor.

I’ve heard it said that all CDP implementation boils down to personalization, but that seems to me to miss the point a little. Personalization is needed in every marketing and sales pursuit; it is the self-evident domain of all commerce-enabling efforts. So, personalization by itself is not the goal of CDP. I prefer to think the real goal of CDP is the collection of recent, relevant knowledge that provides a way for targets of pursuit (across digital and traditional channels) to be engaged in a way that allows the seller to present sales and marketing messages toward predicted, optimal profitability.

Marketplace Advantage

Knowing a prospect’s or customer’s propensities, history, affinities, behaviors, past transactions, direct communications...can inform the selling or marketing agent how to adjust the value proposition (“the offer”), the pricing (“the discount”), or messaging (“the content”), or the choice of communications medium (“the channel”) to win trust, instigate commerce, and gain loyalty. This of course is a very personal matter, as each marketplace participant has a different mix of drivers that determine how they spend their money and when. Note, these principles are the same for selling to business or residential customers.

So the KYC concept is universal and has been defined in many marketing and selling frameworks over the years, such as knowledge-based marketing, permission marketing, question-based selling, etc. But within every business (as in life itself), information is scattered. It is also perishable. Do you have a single source of rationalized, representative information that can distill the various internal and external data sets into fresh 1-1 profiles and smart predictive actions that provide you with strategic advantage? That’s the domain of the CDP.

The CDP Approach

Even if you knew the data you wanted to bring together, do you have a means to perform the first step-- ingest, cleanse and validate your data? If you are thinking “Data Warehouse”, you are likely traveling down the wrong path. Think more of an operational data store that can associate data at the 1-1 level of each organization or contact. Only a CDP can provide that place of data unification, treatment and computation, which serves as a center of recirculation back to the business as needed, when needed.

KYC is not about the past, which is the focus of DW. The CDP is focused on the future. It’s not about general aggregates. CDP solves predictions and suggestions at the individual prospect or customer level. It’s about making information available and actionable in a way that promotes commerce, and yes this involves the right kinds of personalization.

Knowing the current conditions and drivers that are unique to each decision-maker that cause commercial relationships is the rationale for CDP.

So, what KYC information can we compile that we can use to make target inferences and attempt approaches?

We begin answering this important question by understanding that what we are really looking for is change. It is said, "still waters catch no fish". There must be a contemporary (or recent) change in customer circumstances...or better yet, the successful prediction of coming changes. You need to present a message or a pitch in the most relevant manner before others with competing messages do, and you need to gain more confidence during the messaging process.

Commercial KYC Information Types

Regardless of source, there are only three kinds of data that help you know your customer and gain a sense of how to meet their needs:

1. Inherent: This is who are you at essence. demographics or firmographics. Stable, slow-changing data about the nature of the person or entity.

  • Age, personae, habits, preferences, sex or gender, ethnicity, education, training/skills, origination, primary language, IQ, physical nature, income range, goals, and channel ID's

2. Conditional: environmental or relationship information that is circumstantial. You are who you hang around with, and you are where you are positioned in that group.

  • Your family, friends, location, neighbors, social (and social channel) circles, colleagues, peers, business relationships, and other commercial alliances, job, assets, subscriptions

3. Historical: postings, journals of past interactions. Past communications, behaviors or commercial transactions. These are theoretically “absolutely static” (you can’t change the past)

  • Online and email behaviors

  • All communications across all channels

  • All past commercial interactions: quotes, orders, invoices, returns, shipments across all buying channels

As a seller or producer, what you are looking for is KPI's that summarize this information and in particular, changes to these dimensions of a target, and patterns of change that can predict the future. You want to use this data to formulate a hypothetical prediction about what would cause trust and conversion. Then structure a creative direct or digital marketing campaign or sales conversation with the optimal value, message and process. Adjust to outcomes and repeat.

What is your organization’s “system of record” to know everything you can to improve your sales, marketing and customer service approach? If you are putting all this data into a CRM solution, you may be using the wrong tool for the job. If you have not yet tried to push all this data into a CRM or DW, or if you tired and are struggling, then you need to consider a new application that is built for this purpose. If you don’t have the right tools, it may be time to explore a CDP, and really start to Know Your Customer!

Contact us for assistance in your solution pursuit.

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