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No matter what sector you work in, the efficient and fast-acting utilization of data is pivotal for success. Whether it’s to forecast seasonal windows, plot out future or live marketing campaigns, or conduct a detailed analysis into your existing customer database, your data needs to be optimized at every point possible.
A customer data platform (CDP) can transform your organization by ensuring that these and many other factors of good data management are implemented. In this informative guide, we’ll explore what a CDP is, as well as how they work, the benefits of using one, differences between a CDP and other data management systems, and much more.
What is a customer data platform?
A customer data platform is a technology that pulls information from databases that don’t traditionally share information and unifies them in one centralized area. This helps to build a unified customer profile by tapping into a variety of different data streams, such as marketing platforms, service software, and ecommerce engines.
Your ultimate goal with a CDP is to create a detailed customer profile that allows you to make pre-emptive and real-time changes to personalized marketing campaigns, based on specific insights from your data. The platform saves you time by pulling all of this information into one place.
How does a CDP work?
Some modern CDPs are able to take this one step further, with machine learning (ML) and artificial intelligence (AI) that is able to use predictive analytics to forecast future trends and customer behavior. Ultimately, the aim of a CDP is to make sure marketing efforts are as relevant to their target as possible.
The full process can be visualized as follows:
- Step 1: Data collection
You’re likely to already have a wide range of data streams, all of which contain valuable information about your customers. A CDP’s first job is to tap into these platforms, engines, and software to draw it all into one centralized place. For some CDPs, this stage might also mean validating and cleaning this data to ensure that it’s accurate and reliable.
- Step 2: Data harmonization
Once that’s happened, it’s time to start unifying this data together. This harmonization process sees information like email addresses and phone numbers paired with anonymous data which they shared through cookies when initially interacting with you. If your customer has engaged with you across several touchpoints, a CDP helps to consolidate and merge these interactions together.
- Step 3: Data personalization
Once you have your fully merged data, you can start to craft personalized approaches to your customers. This gives you an understanding of the most effective way to interact with consumers.
- Step 4: Data analysis
With the entire customer journey laid out for anyone you’ve ever interacted with, you’ll be able to more easily work out wider market trends, as well as effectively segment them into groups. This will in turn help to boost your reach, as well as having a tangible impact on your overall ROI.
- Step 5: Data prediction
If your CDP is capable of doing so, the final stage involves using ML to make predictive assessments about future trends and consumer habits.
What are the benefits of a CDP?
Customer data platforms exist to make it easier for organizations to grow, adapt, and evolve. There are a series of benefits to relying on one of these systems, ranging from evergreen improvements to your daily operations, to in-the-moment fixes which can see you capitalize on live opportunities. Some of the most important benefits are:
Better organization of customer data
Simply possessing a wide range of data won’t necessarily mean that you’re utilizing it properly. A CDP allows you to filter, validate, and silo all your data so that you can make accurate decisions.
More detailed insight and analysis
That accuracy in your data ensures optimization when it comes to any analytics campaigns. A CDP doesn’t always provide you with predictive analytics results (although it is possible), but what they can do is collect, sort, and store the data which you’ll need to make poignant, real-time decisions that help to optimize campaigns – as well as improve your relationships with customers.
Heightened data protection and privacy
Data governance is an often overlooked aspect of a solid CDP. A platform can help to:
Make sure data has been and is being handled properly during the ingestion stage
Allow you to define data usage policies
Categorize your data in accordance with these policies
Check for any policy violations when performing actions
Limit the amount of irrelevant private data you collect
Real-time data updates
Almost every sector or industry requires a flexible and agile approach to consumer interactions. A CDP makes this possible, with businesses able to react to seasonal market trends, as well as customer behaviors at different stages of the consumer journey.
Accurate audience segmentation
The hyper-personalization of modern marketing approaches have only been made possible thanks to systems like CDPs. Accurate audience segmentation allows an organization to group their customers in accordance with their shopping wants, needs, and habits, rather than by more generic factors like age or location.
Why do you need a CDP?
A CDP isn’t just a nice addition to your marketing approach. It can sometimes be a necessity. But when is that the case? If you’re unsure whether your organization would benefit from the introduction of a CDP, consider whether any of the following factors apply to you:
You don’t handle customer data effectively
If your customer data is scattered across a handful of platforms, with different departments responsible for each, a centralized approach to data organization could be transformative. It could be that parts of your enterprise aren’t even aware about the existence or capability of some data streams, or that you have analytics tools which are only being utilized on portions of your data, not all of it.
Your marketing campaigns are not consistently successful
If you find that you aren’t getting the desired results with any promotional campaigns, it could be that you've misunderstood the desires of your consumers. A poor visualization of what your customers' driving motives are usually results from ineffective audience segmentation. A CDP negates this issue.
You want to centralize all your data silos
Siphoning all your data streams into one location makes it easier for every person in your organization to draw on clean and accurate data. This unified approach optimizes campaigns at every level, and ensures that the mismanagement of data is far less of a factor.
You want to access data more easily
Data stored in one place also makes getting access to that information much easier. If you find that you’re regularly needing to ask for or approve the use of internal data, a CDP can help to unify access on an enterprise-wide scale, cutting out this unnecessary approval stage altogether.
You want to provide a personalized experience for customers
It could be that you’re aware you aren’t doing everything you can to capitalize on a personalized marketing approach. A CDP will help you take huge strides towards every aspect of hyper-personalization, ensuring that customers are treated as individuals during every interaction.
Gain control of your data
CDP vs. CRM vs. DMP
There are a host of ways that you can manage your data. Usually, these don’t have to be exclusive. In fact, a CDP can often work in conjunction with other marketing technologies to provide a rounded approach. A data management platform (DMP) and customer relationship management (CRM) solutions are two such examples of a complementary technology.
These types of platforms can sometimes be confused for one and other, because they perform relatively similar functions. In reality, there are important differences between each. Here’s a breakdown of what each system brings to an organization:
CDP
This platform primarily focuses on marketing, used mostly as a tool to draw on information about a customer base for the purpose of hyper-personalized marketing campaigns.
CRM
This tech solution is the vessel through which a company manages their relationship with a customer. Any interactions pertaining to sales, customer support, or any other forms of communication happen through a CRM.
DMP
This platform is primarily designed for the purposes of advertising. A DMP is used to support adverts which are displayed on the web, drawing on anonymous data taken from cookies to target consumers while they browse a website.
All three forms of data management systems can be utilized in tandem to create a rounded and effective approach to conversions.
How do you choose a CDP?
A marketing automation system is another common tool which organizations employ to try and sell products to customers. They typically revolve around sending out automatically generated or scheduled messages to customers, such as push notifications, emails, or SMS texts. While useful, this somewhat more rigid approach to marketing means that messages can at times lack the personalization that a CDP provides.
Marketing automation is often cheaper in the short term than using a CDP, and may also require less hands-on involvement from staff. However, they lack the flexibility to adapt quickly to nuanced customer behavior and don’t possess the ability to provide true omnichannel and cross-channel marketing campaigns at scale. This can quickly see you miss out on revenue over the lifespan of a campaign.
Consider the following when deciding on using marketing automation:
Pros
Cons
Automated communication methods free up time
This form of marketing is not flexible, restricting and limiting a campaign
They tend to target established markets with a proven consumer base
Not all marketing automation platforms are built with complex campaigns in mind
It’s initially cheaper to run than a CDP
Nuanced or subtle customer behavior can often be overlooked
CDP vs marketing automation
Different platforms will place a focus on a variety of factors. This means that while they all offer similar functions, each CDP is built slightly differently. In order to decide what platform is best for the exact needs of your organization, there are considerations you’ll first have to make internally:
One of the most effective ways to drive the right kinds of results is by involving everyone with a vested interest in your enterprise. By pooling together and listening to the views of all major stakeholders, you’ll be able to clearly define what sort of platform works best for your wider organization.
Think about talking to members of the products, customer success, marketing, and sales teams, as well as any partners or leadership figures who have a clear idea of the direction they want the company to move in.
It’s imperative to know what your end goal is when managing data – as well as how you’re going to get there (your use cases). By understanding this, it effectively gives you a “shopping list” when it comes to finding the right CDP. Compare what vendors are offering to your prerequisite of requirements.
Your decision also needs to be based around the existing technical capabilities of your business. While upgrading these facets is a possibility, it also could mean delays to integration processes, on top of additional costs that could impact your overheads.
Prioritizing the features that you must have, or just would prefer is also a key step. Understanding the primary focus of your company will help you align with the optimum CDP for your needs. If a platform focuses heavily on your core requirements, but doesn’t provide as much support for secondary factors, it doesn’t mean you should rule it out altogether.
Once you have a shortlist of options, you can make much more detailed and direct comparisons between them. Approach vendors with your full list of requirements, as well as what your technical landscape currently looks like.
What is the future of CDPs?
CDPs have already proven themselves to be a valuable asset in the marketing approach of any organization. However, the way in which they are utilized in modern campaigns is far from the end of their potential. While nothing can ever be predicted with utmost certainty, here are some realistic possibilities for the future of CDPs.
An emergence of CDP leading names
The CDP industry grew again in 2023, with $2.3bn in total revenue accrued across the year. As this trend continues, expect to see recognizable names making creating and refining CDPs a huge part of their data offerings – resulting in clearly defined industry leaders across the next couple of years.
More pivotal to long term customer success
As CDPs continue to absorb more data, they inherently make themselves intrinsic to the continued success of a marketing campaign. This positive snowball effect means that they’ll become increasingly important for long-term customer success, with a wide array of data on hand for organizations to tap into.
Enterprises looking to buy and not build
Investing in the creation of a CDP platform from the ground up can be timely and expensive. It’s likely that as market leaders continue to hone and perfect their platforms, enterprises will more regularly turn to these third-party, ready-built CDPs.
AI will become more important
CDP databases are a fantastic learning tool for AI programs. In turn, the insight gained from AI analyzing historical datasets could help to generate further avenues to pursue for enterprises relying on this futuristic technology. This symbiotic relationship could help to propel both forms of tech further.
Data quality as a top business metric
While certainly not overlooked altogether, data quality can at times be considered something of a secondary factor when compared to lead or sales generation. As CDPs continue to evolve and change the way we do business, ensuring that data is accurate and reliable will begin to become a major metric for industries which rely on it most, like financial services.
CDP FAQs
We’ve discussed a lot regarding CDPs in this article. However, there could be more you want to know about how they work and the impact they can have on an organization. Browse the following FAQs for further details on this all-important aspect of business data management.
How does a CDP help secure customer data? 
Data security is an important part of the entire technology stack when it comes to a CDP. Strict security measures are taken at every stage to ensure customer data is kept protected, with factors like data encryption, Transport Layer Security (TLS), certificate pinning, and two-factor authentication used at different stages of the pipeline. The centralized nature of a CDP also means that most data is kept internal, without ever needing to be sent or seen by external users.
Is CDP the same as a data cloud?
While a CDP and a data cloud both store and manage a lot of data, they have subtle differences. A CDP will primarily be used for marketing purposes, to draw insight from customer data and respond accordingly. A data cloud unifies data across a number of areas, storing it in one centralized location.
How is a CDP different from a data warehouse?
These two systems are often best when used in sync with each other. Data warehouses are flexible storage systems, which can hold on to data for very long periods of time. A CDP can draw data from this storage system to make the valuable insights and decisions needed for a successful marketing approach.
How is a CDP different from a data lake?
A data lake holds a wide variety of unstructured data, which needs to be processed before it can be effectively put to use. Once this happens, the data can be fed into a CDP in order for the platform to begin drawing valuable insights.
Useful links
We’ve discussed a lot in this guide, but there might still be more you want to discover about CDPs. Browse these handy sources to learn more.