What is a customer data platform and why should you care?
“CDP”. Just another acronym for marketers and CX leaders to digest, or a genuine technology solution to halt your data despair? We examine.
Ask marketing and CX professionals what their primary work challenges are and ‘making sense of customer data’ will rank somewhere near the top.
Forbes Insight and Treasure Data recently compiled research on 400 marketing leaders to find only 13% were confident of being able to use all of their available customer data effectively.
52% state they lacked the right tools to bring clarity to the data they had.
It’s a familiar story. Customer Data Platform research highlights that marketers still strive for a single customer view yet they’re continually let down by different technologies failing to speak to one another; not to mention the data silos being caused by people doing the same.
Source: Customer Data Platform Institute: ‘Best Practices in Building a Unified Customer Database’
“Marketers demand that their different pieces of software know how to integrate and share data with one another,” says Sean Brown, CTO of Organic, talking to eMarketer in 2017 about the technical requirements of achieving a single customer view.
“It’s putting the right people in place who know what questions to ask, such as: ‘How can the technology we have help us answer those tough questions we have? How can we do that at scale? How can we do that in a way that will change what we put in front of consumers?’
“Today [marketers] know they need a system that can allow the injection of data from other sources. That way, when a webpage is displayed, for instance, it shows the correct thing for each visitor and knows how to do that dynamically.”
Indeed, in a benchmark study last year, ‘centralisation of customer data’ (80%) ranked above ‘improved data quality and value’ (70%) and ‘improved visibility of communications and activities’ (60%) as the most fundamental requirement for marketing professionals today.
“Today’s customers simply assume that your company knows – and remembers – who they are, what they’ve done, and what they want, at all times and across all channels,” says David Raab, founder of the CDP Institute.
Marketers and marketing technologists know that gathering and acting on unified customer information isn’t easy.
“Marketers and marketing technologists know that gathering and acting on unified customer information isn’t easy. In fact, just a few companies have actually achieved complete integration. The rest are battling with technology, strategy, budgets, organisations, staff skills, and other obstacles to success.
“But customers don’t know or care about those challenges. If you don’t meet their expectations, they’ll assume you don’t care about them and take their business to somebody else they believe will treat them better. Whether those other firms will really give them a better experience almost doesn’t matter: once you’ve lost them, you’ll have to fight twice as hard to get them back.”
Historically marketers have turned to CRM, or data management platforms (DMP) to attempt to solve many of their data woes, however there’s a new technology stack in town: the customer data platform – or CDP, for short.
What is a CDP?
According to Digiday, the layman’s definition of a CDP is a system that “combines all of a company’s customer data together to make everything more efficient”. Whilst this looks like a similar proposition to CRM or a DMP, a CDP deals solely in first-party data that a brand collects on its customers.
This data ranges “from sales and customer support to advertising and marketing”. Whether it’s a call recording into the contact centre or cookies on a website, the CDP’s aim is to combine it all in one easy-to-interpret system.
Forbes states that CDPs provide marketing teams with more of a “self-service” approach to customer data; whereas systems like CRM and DMP are often owned and overseen by the IT department, CDPs are expected to be owned by marketers, especially those in the increasingly popular technologist roles.
A CDP is a marketing system that unifies a company’s customer data from marketing and other channels to enable customer modelling and optimise the timing and targeting of messages and offers.
“A CDP is a marketing system that unifies a company’s customer data from marketing and other channels to enable customer modelling and optimise the timing and targeting of messages and offers,” says CMSWire’s Lizzy Foo Kune. “To fit this definition, the CDP must feature a marketer-friendly, web-based interface that enables data collection, profile unification, segmentation and activation.
“CDPs present an alluring alternative to marketers who are frustrated with perceived, and actual, limitations in how their technology handles customer data management and analytics.”
At present the CDP market consists of around 50 vendors, including Treasure Data, Segment and Blueshift, with a market value of around $900m per annum. This is expected to increase to over £3bn by 2023.
How is it different to CRM?
As CRM specialist Jordie van Rijn explains for eConsultancy, it’s the sources of data that separates CDPs from CRM systems.
“CRM systems are built to engage with customers, this is on the basis of historical and general customer data to create a persistent customer profile. They aren’t built to ingest huge volumes of data from other sources.
“A CDP is able to connect all types and sources of customer data, whether internal or external, structured or unstructured, batch or streaming. This allows you to form a much more comprehensive view and to better understand your customers, and act on it even in real-time.”
Marketers should know the difference between CRM and CDP in order to apply it to their specific use cases.
Whilst CRM is largely used as a system for managing customer interactions and internal processes, CDP’s role is to track the activities of customers. As Dom Nicastro further explains for CMSWire, the requirements of CDPs mean they’re not an alternative choice to CRM, but more a technology that will need to work in tandem with CRM:
“It's not about choosing between a CDP and a CRM. Rather, marketers should know the difference between CRM and CDP in order to apply it to their specific use cases. And, ultimately, marketers can make the customer data systems work in tandem for marketing execution.
“Ideally CRMs and CDPs work together with CRM systems benefiting from a diverse set of customer feedback signals consolidated and organised within a CDP. By centralising customer interaction data, CDPs help facilitate intelligent and informed customer engagement across delivery systems.”
Marketers may view CDPs with suspicion – especially those that have previously invested in customer identity systems, marketing dashboards, digital experience platforms and other technologies designed to bring some clarity to customer data.
And customer experience leaders may also be scratching their heads about where CDPs fit into their current role. However, van Rijn explains that many of the questions being answered by customer data platforms fall directly at the door of CX:
- What was the product this customer bought before their current purchase?
- Which segments / target groups does this customer belong to?
- Is this customer likely to churn?
- What has he shown interest in lately?
- What is their (purchase) intent, and timing?
- What is the value and predicted future value of this customer?
- Where do they prefer to interact and create moments?
- What are their preferences and where are they in the customer journey?”
If CDPs really are capable of unifying data in this way, both marketers and CX leaders will need to be invested and work collaboratively to reap the benefits of the technology.
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Chris is Editor of MyCustomer. He is a practiced editor, having worked as a copywriter for creative agency, Stranger Collective from 2009 to 2011 and subsequently as a journalist covering technology, marketing and customer service from 2011-2014 as editor of Business Cloud News. He joined MyCustomer in 2014.