Understanding Customer Data Platforms: 3 Levels of Functionality

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Understanding Customer Data Platforms: 3 Levels of Functionality

November 16, 2018 by

Even though it may feel like everyone in marketing is talking about customer data platforms (CDPs) these days, the idea of the CDP as a martech category is still in its infancy. There’s a lot of confusion about how to categorize CDPs. Forrester’s Joe Stanhope mentioned in a recent Evergage webinar that he doesn’t consider “CDP” as a category on its own yet. He believes it needs a stronger sense of self before it can grow into its own category. Other industry experts, like David Raab from the CDP Institute, have already outlined a clear definition for the category.

Since Evergage provides a customer data platform, we have spent a great deal of time thinking about the space and what makes Evergage similar to and different from other vendors.

Our view is that there are three principal levels of CDP functionality. And each level builds on the previous level, providing additional, more valuable capabilities.

This classification approach is based on what the CDP allows you to do with customer data. At the most basic level, categorization is based on the ability to store data (Level 1), pass data to other systems (Level 2), and take action on the data (Level 3). I’ll explain each level in more detail in this blog post to help you in your quest to better understand this emerging and often confusing new martech category. And for more insights and greater detail, download our latest white paper, “The Purpose and Value of a Customer Data Platform.”   

First, Some CDP Background

The CDP Institute’s official definition of a CDP is “packaged software that creates a persistent, unified customer database that is accessible to other systems." Based on that definition, you may ask: why do I need a CDP to do that, when many solutions have promised to be a central location for my customer data — specifically my CRM? It is true that the CRM was originally meant to be the primary record of customer information. But CRMs were not built to handle the volumes of behavioral and disparate data that we have access to today.  

Just think about all the data that is captured from a single website visit. The source of the person’s visit. The time of day, the device he’s using, his geolocation. Which pages he visits and for how long. How he interacts with those pages — scrolling and hovering, reading reviews or clicking away from an article as soon as he lands on it — and much more on top of all of this. Each of these data points on its own doesn’t tell you much about this person. But when you can bring it all together in one place, combine it with data from how he has interacted with you in the past and across channels, and apply machine learning or other forms of analysis against it, it creates a clear picture of his preferences and in-the-moment intent.

CRMs weren’t built to store or interpret that type of data, but CDPs can handle such volume and complexity — which is why we’re seeing more and more marketers turn to a CDP.

Level 1: A Unified Database

At the most basic level, there is the Level 1 CDP. These CDPs can bring together first-party customer data from multiple sources and store it in a central location — creating a single view of each customer with a universal ID for each person. This unified profile is essential for a CDP. A system may collect and act on data, but if it doesn’t store it in a central, visible place for each person, it’s not a true CDP.

classifying CDPs

A Level 1 CDP is best for companies that are looking to gain a more complete and holistic understanding of their customers, but not necessarily act on the data. Rather, the aim is to gain deeper insights about customers in order to inform internal research, analysis efforts and marketing campaigns.

For example, a consumer packaged goods company may want to analyze large amounts of customer data in aggregate to spot trends among its customer base, or segment the data to learn about different groups.

While there are certainly instances where marketers simply want to store their data for analysis purposes, others may embark on a long-term project to bring their data together — only to find that the data can’t easily be used because “activation” capabilities weren’t built in from the beginning. In those instances, companies may find themselves with a Level 1 CDP unintentionally, where they would have been better off with a Level 2 or Level 3 CDP.

Level 2: Passing Segment-Level Data to Other Systems

Many marketers are not looking to simply store their customer data, they want to act on it. They want to bring all of their data together in one place in order to more deeply understand each person that engages with their company — and then act on that information to deliver a relevant experience.

A Level 2 CDP not only stores the data, but allows you to send it to other systems for activation and analysis. So rather than keeping your data siloed within the CDP, you can send it to your marketing automation platform, your call center application, your personalization solution, etc.

classifying CDPs

It’s important to note that Level 2 CDPs only pass data to other systems at the segment level, not the individual level. Rather, they store data at the individual level in a unified profile, allow you to use that information to create segments of people based on shared characteristics, and then pass that segment membership to another solution to use to take some kind of action.

This type of CDP is best for companies that are looking to deliver tailored experiences based on segment-level data. It’s also best for instances where a real-time response is not essential — because there are inevitable delays that take place when you need to pass data from one system to another. For example, with a Level 2 CDP, media and publishing companies can create robust segments of customers based on all the data they have brought together in their CDP, and pass it to their email service providers in order to send better targeted emails.

Level 3: Delivering Personalized Experiences

Finally, a Level 3 CDP takes things a step further by taking action on the data itself. Of course, it still connects to other systems to allow you to pass segment-level data for action and analysis as a Level 2 CDP does; but it can also directly affect experiences on websites, in mobile apps, in email, etc.

classifying CDPs

A Level 3 CDP allows you to combine functionality from several different tools into one — as the same system that stores the data (and in many cases, collects the data as well) also takes action on the data, such as tailoring the homepage for different segments. As a result, the right solution can help you cut down on the number of point solutions you use to take action on data stored within your CDP.

A Level 3 CDP is particularly valuable for companies in the retail, technology, financial services and media industries — or any company that can benefit from delivering personalized experiences based on data and insights in the CDP.

Evergage: A Differentiated CDP

Evergage is a Level 3 CDP. By definition, it provides all the functionality of a Level 1, 2 and 3 CDP. Evergage is also highly differentiated from other CDPs at all three levels.

One of Evergage’s most important differentiators is its ability to analyze all of your data. Using machine-learning-powered affinity modeling, Evergage can make sense of all the data you have about a person, helping you understand his interests, preferences, in-the-moment intent, and more. For example, the data can tell you that the shoe category is a retail shopper’s favorite, and that she favors higher-priced items in red and gold. It could tell you that a prospect in the healthcare industry, is at the beginning of her research, and is most interested in a specific blog topic.

Then, Evergage allows you to use that deep understanding of each individual to deliver true 1-to-1 experiences powered by machine-learning algorithms and deliver those experiences in real time – across channels. Such algorithms leverage all the data available on a person to select the most appropriate experience or recommendation. You can develop your own algorithmic “recipe” to guide the algorithm in how it determines that experience. For example, you can tell the algorithm to display the most relevant, recently published articles to each individual based on their preferred topics, or to recommend the most relevant products over a certain price to each person based on their preferred brands, categories and price point.

Read our latest white paper to learn more about Evergage’s differentiators as a CDP.

Final Thoughts

We think the three levels we’ve outlined make it easier to understand the current CDP landscape. If your company is thinking of investing in a CDP, think about which level is right for your needs and what differentiates one solution from the next.

To figure out if Evergage could be the right CDP for your organization, request a demo today.

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