Not all data is the same. It comes in all shapes and sizes – structured and unstructured, historical and real-time, spatiotemporal and more – and from a wide variety of sources. This data is used to gain insights into activities both inside and outside of an organization.
The two main sources of information that an organization uses are Internal and External. In this article, we’ll dive into the differences between internal data and external data, the advantages of internal data, the advantages of external data, and the potential disadvantages each posses.
What is the difference between internal data and external data?
To compare internal vs external data and understand when and where each type is most beneficial to use, we must first understand the distinct differences between internal and external data and the unique value that each type of data offers.
Internal Data – The Good, The Bad, & Everything in Between
What is internal data in marketing?
Any data that is under the control of the organization is classified as internal data. It consists of data related to operations and transactions that the organization already currently owns and is pulled from internal databases. In a marketing information system, data from internal sources include: the number of visitors to a website, which ads customers are clicking on, sales trends and metrics, cash flow reports, email open rates, and contact information customers provide during the purchase process.
There are two methods for internal data collection: Primary and Secondary. Primary data collection is conducted via techniques such as interviews, questionnaires, focus group discussions, and direct observations. Secondary data collection involves pulling internal data that someone else owns, such as Salesforce, HubSpot, and Google Analytics.
Some of the primary internal sources where companies typically look to mine for internal data marketing include:
- Transactional data and POS information: consists of financial and transactional data related to the businesses own purchases and customer shopping trends – informs businesses where to cut back on spending to stay on budget, and reveals trends in customer habits and preferences
- Customer relationship management system: CRM systems can mine data such as clients’ company affiliations and geographical data
- Archives: consists of the company’s historical data
- Internal documents: consists of data related to the business’s activities, policies, and processes, including Word documents, PDFs, XML, and even Emails
- Device sensor: consists of data from IoT sensors that the company has placed, e.g. vehicle sensors placed on enterprise fleets; sensors provided to customers that collect data related to sleeping patterns or fitness activities
What are the advantages of internal data?
There are both internal data advantages and disadvantages. One of the biggest benefits of using internal data is reliability. Since this is private data that the organization is responsible for collecting, storing, and maintaining, it is likely to be more accurate and credible than external data. It is readily available for analysis, often free and easy to collect, highly relevant and illuminating, which enables quick decision making.
Internal data is narrow, though, and can lead to poor customer experiences and lost business opportunities if it is the only data being collected and analyzed.
External Data – Why, When, and Where You Need It
What is external data in marketing?
Any data that is generated outside of an organization is classified as external data. This data may be public, unstructured, and/or collected by third-party organizations.
Some examples of external data include: online search queries related to certain products, trending keywords and subjects, social media presence and engagement, real-time financial trends such as company share price, company growth and stability indicators, geospatial data such as property value information, and customer data such as demographics, interests, and hobbies.
There are two main types of external data: public data, such as administrative data, electoral statistics, tax records, census data, internet searches; and private data, which is owned by third-party companies, such as Amazon, Facebook, Google, and Transunion. Some popular sources of external data include: social media, public government data, geospatial and satellite, Google, news agencies, legal institutions, private businesses, web-harvested, and data brokerage agencies.
What are the advantages of external data?
While internal data is highly valuable, it is enriched by the addition of external data. Integrating external data with internal data provides richer insights and a competitive edge. It’s the difference between knowing how just your current customers are behaving vs also knowing how potential customers are behaving.
To rely on internal data alone is to miss out on a wealth of information that can benefit your company. A combination of internal, external, current, and historical data can be used to help predict outcomes, understand customer purchasing habits, anticipate demand, and forecast supply needs, which can all contribute to better market research, better B2B lead generation and lead enrichment, more efficient strategies, optimized expenses and resources, and an overall happier customer base.
Having access to all of the available, relevant data helps businesses guide their initiatives, but only if it is accurate. One disadvantage of external data is its high likelihood of containing errors. This makes it imperative that external data is thoroughly cleaned before analysis. Another challenge is sifting through data to isolate only the data that is most relevant to your needs. This is where an external data platform is invaluable, as it automatically discovers thousands of relevant data signals that will enrich internal data and improve machine learning and analytics.
Internal Data vs External Data in Marketing: Which is Better?
Which category of data is more valuable? They are both valuable; you should use both to have a well-rounded view of your data and a thorough understanding of your customers’ behavior and market trends. Internal data on its own is not enough to make accurate predictions, and needs to be enhanced with external data. The advantages of internal data are undeniable, but external data enriches it in a way that enables the most effective data-driven decisions. An external data platform will help systematically integrate up-to-date external data, improve analysis, expedite time to insights, and help external and internal data work together seamlessly to improve every step of the marketing process.