Whenever a new classification of marketing technology emerges, there’s alway a period of confusion. Each marketer has a lot of questions to answer. What exactly is this new solution? Do I need it, or is it really just a fancy new term for a tool I already have? How does it fit with my current tech stack? Is everything I’m hearing just hype, or is this an investment I need to make? Needless to say, it takes some time for best practices to shake out and for thought leaders to gain credibility.
One of the newest martech categories to emerge is the customer data platform (CDP). It’s no surprise that it’s making such a splash. We live in a world where consumers and business buyers are demanding that businesses understand them better and deliver more relevant experiences. But what’s the story on CDPs? What are they and what are they supposed to do? To answer a few introductory questions, we’ve compiled a few insights from some of the early thought leaders in this space.
What is a CDP?
A Customer Data Platform is packaged software that creates a persistent, unified customer database that is accessible to other systems.
This definition has three critical elements:
- Packaged software: the CDP is a prebuilt system that is configured to meet the needs of each client. Some technical resources will be required to set up and maintain the CDP, but it does not require the level of technical skill of a typical data warehouse project. This reduces the time, cost, and risk and gives business users more control over the system, even though they may still need some technical assistance.
- Creates a persistent, unified customer database: the CDP creates a comprehensive view of each customer by capturing data from multiple systems, linking information related to the same customer, and storing the information to track behavior over time. The CDP contains personal identifiers used to target marketing messages and track individual-level marketing results.
- Accessible to other systems: data stored in the CDP can be used by other systems for analysis and to manage customer interactions.
—Official definition from the Customer Data Platform Institute (from the CDP Institute’s CDP Basics page)
What’s the history of the CDP?
To manage customer data and analyze it, marketers historically made do with systems built or deployed for them by IT, such as CRM systems and data warehouses. As enhancing the customer experience became a business focus across the organization, big data projects were launched to support deeper customer understanding and more targeted marketing.
Campaign management tools fit the bill for some, but as marketers demand more control, flexibility, analysis capabilities, and platform openness, these legacy systems begin to show their limitations. Marketers are ripe with discontent, which paves the way for a “shiny new thing” in the marketing data and analytics technology category — the Customer Data Platform (or CDP for short).
Sometimes, it seems like the CDP category sprung up overnight. In fact, some CDPs evolved from a variety of mature markets, such as multichannel campaign management, tag management and data integration. Other pure-play, purpose-built CDPs have also launched to capitalize on investor fervor and martech spending.
—Lizzy Foo Kune, Research Director at Gartner (from the Gartner blog)
Can a CDP be created by combining solutions together?
Many people assume that pairing the anonymized data from a DMP with the known customer profiles from a customer relationship management (CRM) system will create the 360-degree customer view they need.
That will not work, and for a few reasons. First, CRMs are largely focused on customer interactions, which limits their ability to address wider business functions beyond marketing. They are also notorious for suffering from data quality issues and lacking the sophistication to support marketing needs, which is why there are other solutions for activities like email, social media marketing and advertising. Most importantly, though, CRM systems cannot reconcile multiple profiles of a single person, device or visitor, which is a critical function of a CDP.
—Steve Zisk, Senior Product Marketing Manager at RedPoint Global (from CMS Wire)
What’s the end goal of a CDP?
It may sound obvious, but consider the reason we want to bring all this data together in the first place — to do something with it. You want to bring all of your data together in one place so that you can truly understand each person who engages with your company. But all of that data is effectively useless if you aren’t going to actually use it.
To use it, a CDP needs to be able to send that data to other systems. Your marketing automation system, your CRM, or any other system you use should have access to this data.
A CDP should also be able to take certain actions on the data on its own — and do so in real time — whether that means triggering a message or personalizing an experience on the web, inside a mobile app, in emails, in digital advertising or through any other channel. A CDP that’s not only a system of record, but also a system of action, can deliver a unique and relevant experience to a person based on all of the data it has amassed.
— Karl Wirth, Co-Founder and CEO of Evergage (from Entrepreneur)
How does GDPR affect CDPs?
CDPs are genuinely well suited to help with GDPR. They’re built to solve two of GDPR’s toughest technical challenges: connecting all internal sources of customer data and linking all data related to the same person. In particular, CDPs focus on first party (i.e., company-owned) personally identifiable information and use deterministic matching to ensure accurate linkages. Those are exactly what GDPR needs. Some CDP vendors have added GDPR-specific features such as consent gathering, usage tracking, and data review portals. But those are relatively easy once you’ve assembled and linked the underlying data.
GDPR is also good for CDPs in broader ways. Most obviously, it raises companies’ awareness of customer data management, which is the core CDP use case. It will also raise consumers’ awareness of their data and their rights, which should lead to better quality customer information as consumers feel more confident that data they provide will be handled properly. (See this Accenture report that 75% of consumers are willing to share personal data if they can control how it’s used, or this PegaSystems survey in which 45% of EU consumers said they would erase their data from a company that sold or shared it with outsiders.) Conversely, GDPR-induced constraints on acquiring external data should make a company’s own data that much more valuable.
—David Raab, Founder of CDP Institute (from Customer Think)
It’s clear that the CDP is a valuable solution in the marketing tech stack. A CDP allows marketers to bring customer data together in one place and act on that data to deliver relevant experiences. In our opinion, though, a CDP that simply aggregates data and passes it on to other systems to take action isn’t a complete solution. If delivering real-time, individualized customer experiences is the goal – as it should be in order to maximize relevance – then the CDP should also include cross-channel, 1-to-1 personalization capabilities.
To learn more about CDPs, as well as the role it should play in personalization, check out this eBook from the CDP Institute.