Understanding Customer Data Platforms
Original article posted here.
Currently, there is no industry-wide agreed definition of a Customer Data Platform (CDP), however, David Raab, Founder of the CDP Institute, defines a CDP as: “A marketer managed system that creates a persistent, unified, customer database that is accessible to other systems.”
The evolution of CDPs stemmed from customer support and Customer Relationship Management (CRM) systems that are not traditionally integrated but have strong customer identification capabilities. Over the past decade, many brands have developed their own separate databases that can connect to both customer support and CRM systems, creating a full history of each consumer from support to sales. The benefits that have been seen from this approach is what has led to CDPs becoming an industry of their own.
In the right hands, CDPs transform marketing practices by providing marketers with control, centralized and unified data, and performance tracking on a customer-by-customer level.
Marketers regain control
The fundamental problem for marketers is that existing platforms such as CRM systems, tag management solutions and data management platforms (DMPs) require technical skills to set up and manage. Many marketers find themselves at the mercy of IT departments that cannot prioritize marketing requirements over other business needs. This causes a lag between the time the need for a change is identified and when that change is put into effect, therefore, there is a lost opportunity to optimize marketing activities.
CDPs have been designed in such a way that minimal technical skills are needed to either set the system up nor to manage it on a day-to-day basis. Marketers decide which data goes into the system and what information is shared with other systems and they make it happen.
Matching consumer expectation and reality
Today’s consumers demand a unified, omnichannel experience with the brands they know and trust. However, it is almost impossible for brands to create such experiences because consumer data typically exists in silos.
To provide consumers with a seamless and unified experience, unified data is required. A CDP aggregates and integrates data from a multitude of channels and sources to provide a this unified view of every customer on an individual level.
Combining customer data enables marketers to make a number of processes more efficient.
Isn’t a CDP the same as a DMP or a CRM system?
CRM platforms aggregate data related to one particular channel. DMPs often only store web browser cookies linked to behavioral and demographic segments, not individual consumers. CDPs combine data from multiple channels and provide a full picture of individual customers which is much more powerful.
CDPs were designed with marketers in mind, and are unique as they create a complete history of interactions and behaviors across all channels in a centralized location to provide a more robust, in-depth understanding of every individual prospect and customer.
Customer data collected by a CDP may include web and mobile browsing history, purchase history, email, chat, phone interactions with the brand, social media activity (likes, follows etc.) and much more.
Benefits of a CDP
Provides a holistic view of the customer by integrating various customer data sources into a single, centralized platform
Enables faster, more accurate decision-making as a result of robust contextual data that exists when multiple data sources are combined
Allow marketers to turn their data into actionable insights which in turn supports the execution and optimization of personalized customer journeys
By using a CDP, brands can shift control of the customer database to marketing rather than IT
Eliminates organizational data silos and allows decisions to be made based on multiple variables
Challenges
No industry-wide agreed definition for CDPs exists which can be very confusing for brands
Many mobile app analytics firms and tag management solutions are repositioning themselves as CDPs due to the loose definition, which further adds to the confusion
Organisations that currently leverage DMPs may be aware of the need for better, more actionable customer databases but may still fail to understand how CDPs bridge the integration gap
Legacy, siloed channel-focused data sources, are difficult to remove and replace due to complex setups that have been built over many years
While a CDP can solve data challenges and enable a consistent customer experience, it cannot solve organizational challenges, it is important marketing and sales are aligned when implementing a CDP
When to invest in a CDP
Investing in a new piece of technology should always be a considered decision and it should be noted that a CDP is not a panacea. Organisations that will benefit the most from a CPD are those that have existing customer-facing systems that capture useful data about customers but the data is not stored in one centralized location.
If you have customer data that has been collected from multiple systems but it cannot be enhanced with data from external sources or connect items that refer to the same individual to create a single customer view then a CDP is definitely worth considering.
Another scenario where a CDP will drive value is if you have pre-defined customer segments but no underlying details such as details of transactions or web page views. Or, a single customer view but no way to analyze it, build predictive models, run machine learning algorithms against it, and can’t integrate the data into outbound marketing platforms (e.g. email platforms or media-buying systems) or real-time interactions (e.g. website personalization).
Ultimately, the best practice for CDP implementation centers around ensuring the right customer data is being collected, ensuring the data is clean and that internal teams and team members have a clear understanding of who is responsible for various elements of the consumer experience.