Five differences between CDP and CRM and how to choose the right one for your business

What's the difference between CRM systems and customer data platforms? Here are five key considerations. 

When it comes to technology, marketers have more choices than ever. One of the emerging models is the customer data platform, or CDP. But in what ways does it differ from a more traditional CRM system, and how can you tell which is right for your business?

Let’s take a look at the definition of both options:

• Customer data platform (CDP): A CDP is a system specifically designed to create a customer database that includes complete historical and behavioural data about the customer. This could include website visits, app sessions, and even content affinity. All of this can be integrated with machine learning to send personalised marketing offers to customers.
• Customer relationship management (CRM): A CRM enables you to focus on your business relationship with individual customers. Often wrongly interpreted with just sales, CRM even stores the data of your suppliers, service providers, and customers. It is a tool that can be used by all divisions of your business, from HR and accounts to supply chain management.

What does this mean for marketing teams? Here are five key considerations:

1. Use cases and application

Customer relationship management platforms, although used by the entire organisation, were primarily designed for sales, i.e. managing the company’s interactions and relationship with customers. It is used to store information and inquiries made by potential customers. CRM is used to track transactions, analyse the sales pipeline, keep on top of customer communication, and make notes about customer feedback for future reference. A CRM stores data of customers who have either transacted or communicated in some way with the business.

On the other hand, a CDP combines multiple sources and captures data from social media, apps, point of sale, and ecommerce transactions all into one platform. A customer data platform is used as a tool to design an innovative marketing strategy for the entire business. CDP helps in identifying a segmented audience, and this aids in creating personalised campaigns for them.

2. Multichannel capabilities

CRM solutions typically cannot match customer interactions over different channels. For example, a teenage girl shopping for tennis shoes visits the brand website, clicks a Facebook ad, and then after a few days orders a pair of shoes over the phone. Most CRMs do not have the machine intelligence to pick up on this customer behaviour and track her purchase journey, which could be vital information to target that particular audience.

A customer data platform tracks the customer with their “personally identifiable information” and uses machine memory to associate the customer with their particular method of initiating purchases or making transactions with a business. As in the above example, the CDP can now precisely extract how teenage girls with a particular demographic shop for tennis shoes, at every customer touchpoint. This helps in creating more personalised targeted campaigns for a segmented audience.

3. Capturing data

CRMs cannot pick up offline data. So, let’s say a teenage girl after visiting the brand website, clicks on the Facebook ad, reads a blog on tennis shoes on the company website and then decides to make an in-store purchase. A CRM would not be able to track this customer interaction unless it was manually entered – these solutions focus only on known customers and prospects.

A CDP captures both online and offline data. Since it associates unique personal identifiers such as phone number, email, mailing address, etc., it can give a full 360-degree view of the customer. So, in continuation with the above example, if after a month the teenage girl clicks on another brand ad and orders a tennis backpack online, this entire customer transaction is historically recorded by the platform. Cumulatively, this data can then be run via customer analytic tools to target a particular customer demographic behaviour.

4. Seeing double

CRMs focus on customer transactions and are not designed to tackle multiple data types. So, if a person has transacted via email and then via a website purchase, these data points are often recognised as separate entities, thus creating multiple records for the same customer. This depreciates the quality of data in CRM.

A CDP maintains unified data. So, even if data is being captured from multiple channels, it will be tagged to a single customer. Let’s say a person named “Robert Turner” purchases trousers in-store with the name “Bob Turner,” and then later signs up for a newsletter subscription with the name “Robbie Turner.” A CDP will assign both of these transactions to the original “Robert Turner,” thus avoiding data duplication.

5. Customer identity

CRM data can only track interactions with known customers. No doubt, a lot can be learned about the unfamiliar customers, and targeted marketing to these customers could be done. However, the limitation with CRM is that this can be done only with known customers already in the database.

CDP has the capability to identify both a known, as well as an anonymous customer, and displays a single customer view. This is one of the biggest advantages that CDP offers over CRM.

CDPs and CRMs have some similarities, but in essence, a CDP is a much more complex and comprehensive solution that can dig deeper into available data and go beyond gathering data on existing contacts and customers. The result? A better view of your market and the opportunities that exist – meaning you’re arming your marketing and sales teams with the insights they need to drive results.