What is master data management (MDM)?

Ultimate guide on master data management (MDM) & why it’s important

If you’re here, it’s because you are aware of the importance of properly managing your data. You might be a data professional mandated to deliver a priority business initiative. Or maybe you’re a business leader responsible for one or more critical business processes heavily reliant on data. In either case, if poor quality, messy, and duplicated data is holding you back, you’re in the right place.

From building customer self-service apps to enhancing customer segmentation or offering highly adaptable predictive models that drive cross-sells, there are many situations where having consolidated data is a must. But is it critical to manage one type of data over others?

Read this guide to learn the ins and outs of (MDM) Master Data Management, why master data management is important, a concrete list of benefits, how to select the right master data management program, and how to get the necessary buy-in. Start browsing below to learn everything you need!

What is master data management (MDM)?

Master data management (also referred to as MDM) is a discipline that relies heavily on data governance frameworks to increase the quality, uniformity, accuracy, and accessibility of an organization’s data.

MDM can help drive tangible value for some of the most critical business or operational processes (customer success, logistics, sales, marketing, etc.). It helps consolidate core business entities like customers, products, and suppliers, offering a consistent source of business data for accurate reporting and decision-making.

What is master data?

Master data (or a master record) is also known as the “golden record” of information within a data domain – the most truthful, high-quality data. There are different types of data domains for master data, and they are defined by their own set of attributes or unique characteristics. Here is a preview with some examples:

Domain	Attributes
Customer	(Both B2B/B2C) First name; last name; address; postal code; buying preferences, Service-Level-Agreements
Product	Product code; color; size; design; storage (SKU)
Location	Addresses; type of location (e.g., consumer, warehouse, retail location); logistic coordinates (geocoding)

Since it’s your most important data, managing your master records is essential to any data management initiative. Read more to learn about the 3 most common data domains and MDM programs.

Why is master data management important?

MDM has a broader mission that goes beyond governing master data and enabling reference data management. MDM’s ability to centrally merge and govern data from any enterprise system brings powerful business benefits in the areas of operational effectiveness, regulatory compliance, and customer segmentation.

1. Operational effectiveness

Maintaining a unified view of your master data can increase efficiency across many business operations. Enhancing data quality management and consistency leads to fewer errors that can slow down processing and compromise service delivery from your data professionals.

Implementing a master data management program will:

• Streamline workflows
• Reduce IT overhead by automating data management processes
• Increase straight-through processing rates (automated processes done purely through electronic transfers with no manual intervention involved)
• Lead to faster decision-making enabled by a centralized and accurate view of your master data

2. Regulatory compliance

Regulatory compliance requires your company to follow the rules and regulations set up by governing authorities regarding the data you collect. A master data management program can help by improving data governance, enhancing data security, and maintaining accurate audit trails (should your company fall under a data audit).

It also aids in optimizing reporting practices and makes it easier to manage customer consent changes. MDM functionalities like data anonymization are beneficial when maintaining compliance with regulations such as GDPR.

3. Customer segmentation

Customer segmentation involves dividing customers into smaller groups to apply marketing activations more precisely. A master data management program makes this easier by providing a singular customer view that keeps consistent data across all channels.

Having a consolidated, up-to-date golden record of each customer allows organizations to move data easily from their main system to various environments.

They can then enrich those records with more complex attributes from external sources and third-party applications. This significantly reduces the go-to-market time for client-facing campaigns and enables more reliable predictive analytics.

What are the 3 most common master data management (MDM) programs?

Now that we know what MDM is and why it’s important, let’s cover some of the most common types of master data management available to companies.

1. Customer master data management (Customer 360)

Customer master data management (MDM) helps with the processes companies use to maintain customer data across various systems and databases. It typically includes key customer data points such as name, address, contact information, transaction history, etc.

One of the main goals of customer MDM is to generate a 360-degree view of the customers and a comprehensive, unified view of every customer profile.

2. Vendor/Supplier master data management

Vendor master data management (MDM) creates a golden record for a company’s vendors and the people who sell their products. It can contain information like names, addresses, contact persons, payment terms, tax identification numbers, etc.

3. Product master data management

Product master data management (MDM) refers to the critical information a company collects about its products. It can contain items like inventory management, sales, marketing, procurement, and supply chain operations.

Implementing a master data management program may be for you if you’re in an organization with multiple lines of business, with overlapping customers, products, or suppliers. You depend on large volumes of high-quality data spread across multiple systems to run your operations and want to create a single version of the truth from numerous conflicting records.

To summarize, MDM provides value to a data management practice through its ability to:

1. Create and maintain the best version of business information.
2. Connect data from different domains into valuable business views.
3. Make key business data accessible to users, systems, and processes securely and governed.

But having to manage multiple data domains can be a daungting task. And the only problem worse than having data issues is having data issue with your most valuable data.

What happens when master data is left unmanaged?

Like all data, master data needs to be managed to extract maximum value. Redundant master data is confusing, and you are likely to find duplicates of multiple records, even within a single system application or database. For example, a customer record may exist where the names match, but the addresses do not, or the addresses are stored in different formats.

Here’s an example of how missing data, inconsistencies in format, and misspellings can lead to siloed systems creating their unique versions of the same customer:

Four records of Jane Smith exist in three systems. From a human perspective, we can judge there’s probably only one customer named Jane Smith, born on October 12, 1987.

Or could the other record in the CRM system represent a John Smith, born on December 10, 1987? We can’t be sure because one of the records has just one letter for the first name, the other record is missing the phone number, both are missing an ID card number, and their emails don’t match. This could still be Jane Smith with a new email address.

From a business perspective, this classic and systemic data management problem can seriously impact a customer’s relationship with your company, creating:

• Inaccurate sales reports about Jane Smith, whose customer record is duplicated in different systems.
• Inadequate customer service provided to Jane Smith because support agents might have wrong and incomplete contact and product information.
• Increased marketing costs when sales materials are repeatedly and mistakenly sent to Jane Smith.
• Missed opportunities to upsell to Jane Smith because her buying history is siloed and not linked to her customer record.
• Unnecessary reputational damage that comes as a result of all the previous actions not being addressed in a timely manner.

What are the benefits of master data management (MDM)?

To recap what we explained so far, a master data management framework is crucial for categorizing, deduplicating, and consolidating critical business data (products, customers, suppliers, and more). It can help drive tangible business value if it’s properly consolidated, but when left unmanaged it can lead to slow operational processes.

That’s why aligning your MDM strategy with your business objectives and data initiatives is not just beneficial. It’s imperative as it can lead to substantial improvements on both fronts. If you have big business goals in mind, then turning the data chaos in your organization into clarity is a must.

MDM can help you achieve business objectives

Master data management empowers your business to reach new heights by streamlining critical data and allowing you to align it with strategic goals. Through improved data accuracy, visibility, and accessibility, MDM unlocks opportunities for you to:

• Grow market share: By providing a single source of truth for your customer data, MDM can help you better understand your customers and target your marketing campaigns more effectively. This can lead to increased sales and market share.
• Expand customer footprint: MDM can help you expand your customer footprint by making it easier to identify and track new customers. This can lead to increased revenue and profitability.
• Reduce cost & improve efficiency: MDM can help you reduce costs by eliminating duplicate data and streamlining your business processes. This can lead to increased efficiency and productivity.
• Mitigate regulatory and security risk: MDM can help you mitigate regulatory and security risk by ensuring that your data is accurate and compliant with all applicable regulations. This can help you avoid fines and penalties.

Build stronger data initiatives for improved business outcomes

A master data management program serves as the backbone of robust data initiatives, transforming your organization's relationship with data. MDM empowers your business to unlock the full potential of your data by:

• Overcoming lack of trust in data: MDM can help you overcome the lack of trust in data that is often seen in organizations. By providing a single source of truth for your data, MDM can help you ensure that your data is accurate and reliable.
• Solving data silos and integration challenges: MDM can help you solve data silos and integration challenges by providing a central repository for your data. This can make it easier to access and share data across different departments and systems.
• Eliminating data duplication: MDM can help you eliminate data duplication by identifying and consolidating duplicate records. This can save you storage space and improve the performance of your systems.
• Reducing manual tasks and resource shortages: MDM can help you reduce manual tasks and resource shortages by automating data cleansing and integration processes. This can free up your employees to focus on more strategic work.

By addressing data challenges like data duplication, siloed information, and manual processes, MDM fosters an environment of trusted, accessible, and actionable data to help you align business objectives and data initiatives.

From achieving AI readiness to enhancing customer relationships, a master data management framework is instrumental in driving market share growth and operational efficiencies for organizations with large volumes of data.

See the full list of master data management (MDM) benefits here!

5 things you must consider when deciding on a master data management program

The path to a successful MDM implementation has its challenges, and selecting the right solution for a specific business can be daunting. There’s a diverse array of master data management programs available on the market, and picking the wrong one can lead to many headaches.

While there are two most commonly used MDM types (analytical and operational), we will also explain other essential variables that should go into making this decision.

1. Analytical MDM solutions

Analytical MDM solutions are engineered to streamline data for business intelligence, analytics, and reporting purposes. These systems centralize, cleanse, and prepare data to meet the specifications of analytical applications, creating master records and IDs crucial for deep data analysis.

Unlike basic master data management frameworks, a sophisticated analytical MDM not only supplies cleansed master records to downstream applications but also harmonizes interaction data across various sources. This process enriches the data pool, preparing it for ingestion by analytical tools. Finally, it ensures any derived insights can be looped back to enhance master profiles.

2. Operational MDM solutions

Operational master data management is the backbone of day-to-day business operations. They ensure data integrity across critical systems (CRMs, ERPs) by allowing users to manage consent, author records, and publish changes. They excel in real-time, transactional data management, supporting instantaneous decision-making with high reliability, performance, and accessibility.

Unlike their analytical counterparts, operational MDM solutions are pivotal in establishing a single source of truth more easily. They also facilitate real-time data validation, verification, and resolution across multiple domains and vectors. This level of data precision and immediacy is vital for operational systems.

This guide sheds some light on the most widely used MDM types: analytical and operational. We outline their unique benefits and provide actionable insights to choose the best option for your requirements.

3. Al is built on high-quality data

That's why companies are prioritizing MDM & cloud deployments into their data management strategies. Efficiently mastering data into unique records will improve critical business initiatives and allow you to better run data heavy operations.

On the other hand, running vital operations on top of bad data has costly consequences. It can affect customer relations, increase regulatory non-compliance, and create quality control issues and penalties.

Ensuring critical data is ready to be provisioned into any advanced machine-learning model is part of any CDO’s or CIO’s mandate in 2024. Relying on AI-empowered, data-driven decision-making by picking the right master data management solution will give businesses an advantage for years to come.

4. Off-the-shelf vs. in-house

Choosing the right master data management program implies looking at vendors or your IT organization for support. That means choosing between an off-the-shelf package or developing a bespoke in-house system.

Off-the-shelf MDM solutions are prebuilt, extensively tested, and ready for deployment, offering a quick route to data management.

In contrast, in-house solutions are custom-built to fit unique business requirements, offering higher customization but at the cost of longer development times and potentially higher maintenance needs.

5. Deployment options

The choice of deployment between cloud-native, on-premise, or hybrid model for your MDM solution plays a critical role in how effective the implementation is and how well it will integrate with other systems in your data (management) landscape.

Simplify the complexity of selecting an MDM solution with our expert-driven guide. Your journey to choosing the right MDM tool for your data landscape starts here.

What are the master data management best practices?

Let's cover some of the best practices for MDM so you can set your program up for success.

Include the right people in the discussion

Implementing a master data management program can be a major undertaking for organizations, depending on the size of the project. This is also why it can be a challenge to get MDM buy-in from the organization. Increase buy-in by getting the right stakeholders involved from the start. Include them in the discussion and overall process so they’re aware of why it’s necessary.

Make the benefits very clear

To build off including the right stakeholders in the discussion, remember to clearly document what the benefits are for the organization and the individual stakeholder. People are more inclined to give their support on something that will directly benefit them.

Offer training and support on the new MDM framework

Once you get buy-in from stakeholders, put a plan in place to offer the necessary training and support for the teams involved. Establish what the purpose of a master data management framework is, how it should be used, and any other educational opportunities you see fit.

Make MDM an ongoing initiative (not a one-time project)

A master data management program is an ongoing process, not a one-time project that is implemented once and forgotten about afterward. Setting these expectations from the beginning with yourself and others in the organization will ensure lasting MDM success.

MDM readiness checklist

Now that you've gotten everyone in your organization excited about the potential of MDM, it's time to ensure you’re on the right track. For that, we created this MDM readiness checklist you can use and share with your colleagues.

In it, we highlight the most important points from each of the three steps with a summary of the action points and key deliverables.

Every step is crucial for ensuring the successful adoption of a master data management program and can dramatically enhance the effectiveness of your initiative. MDM is not just about technology; it’s about transforming how your organization views and manages its most valuable asset: data. You can do so by:

• Assessing your organization’s readiness for MDM with our 3-step approach
• Implementing robust data governance and management with Ataccama ONE
• Leveraging industry best practices from a leader in the data management space.

Time to get started with master data management

The importance of reliable data management cannot be overstated. If you want to achieve greater market share and operational efficiency, you need to invest in a master data management program.

Ataccama’s master data management software features industry-leading capabilities, embedded data quality and governance, and a native platform architecture that makes it seamless to integrate across various modules.

Get in touch with our team today for more details on how we can support you as your go-to MDM solution!