In today’s age, marketers have no excuse for not knowing what their customers want. Data-driven marketing is the foundation of digital-age advertising strategies where marketers are required to deliver the personalized experiences that the consumers are demanding.
So, it does not come as a surprise that customer data platforms (CDP) are gaining rapid popularity among marketers, even though many marketers are not fully aware of the technology and its offerings.
A CDP addresses the key requirement of data-driven marketing i.e. bringing all the customer data together to build a unified customer view. However, CDP is not just that. There are some unique characteristics of a CDP due to which analytics and marketing teams across the globe are preferring CDP over other data systems like a DMP (Data Management Platform) or CRM (Customer Relationship Management).
What Makes Customer Data Platform Different?
A CDP stitches together customer data from different sources to build a unified customer profile so that marketers can work with it.
You can say that there are many technologies that act as a hub for customer data or claim to provide a single customer view. However, in reality, none of these technologies has the potential to stitch together all the customer data and at the same time make it workable for the marketers, except for CDP.
As per Wikipedia, a customer data platform is a collection of software, which creates a persistent, unified customer database that is accessible to other systems.
Let us understand how CDP is different from other platforms like CRM and DMP and what makes it a preferred technology for marketers and analysts.
CDP vs CRM
What is a CRM?
A CRM is a system that is used to build and manage customer relationships. With the help of a CRM platform, customer activity can be tracked and their interactions can be recorded. In a CRM you can store general and historical data in one central location and use that to create a persistent customer profile
CRM platforms are ideal for tracking interactions between your business and your existing (known) customers, which enables better communications and personalized marketing. However, CRM platforms fall short when it comes to deriving and utilizing the intelligence gleaned from your customer data.
Limitations of CRM Tools
CRM platforms have been around for some time now. And while there have not been many modifications or changes in the CRM platforms, the technology has changed significantly.
- With the growing usage of social media, there has been a data explosion where there is a massive volume of data pertaining to each customer, much more than what CRM software was meant to handle.
- Customers interact with companies across multiple mediums and a CRM cannot identify individuals across disconnected touchpoints. It is not possible to use a CRM to integrate a full spectrum of customer touchpoints, preventing one channel from powering the other channel and thus hampering an omnichannel customer experience.
- Expectations in terms of customer experience have changed significantly and today, it is one of the most important competitive differentiators. Thus, the ability of businesses to provide personalized marketing messages has become critical to survival and success.
- It is not possible to set up a CRM quickly and easily create the types of custom audience segments which are crucial to power effective marketing campaigns.
CDP: Giving More Value from Existing Data than A CRM
A CRM is generally used by sales teams and isn’t built to integrate large volumes of data from multiple sources, which is exactly what is needed for mass campaigns. A CDP, on the other hand, is able to integrate all types of customer data (internal, external, batch, streaming, structured, unstructured). This allows the user to create a detailed and comprehensive view of the customer and even act on it in real-time.
Another area where CRM platforms fall short is when it comes to deriving and utilizing the intelligence gleaned from your customer data to its fullest, which is facilitated by CDP. With CDP, companies can make the most of their customer data and leverage it for smarter segmentation and customer journeys, and uncover deeper insights to get additional value from their existing customer data.
While there is some overlap in the functionality of CDP and CRM, the CRM is primarily to support sales whereas the application of a CDP goes beyond that. CRMs are limited in scope than CDPs because they do not (necessarily) provide the integration flexibility and development environment needed to support the complete cycle of customer experience.
CDP vs DMP
What is a DMP?
A data management platform is defined as a central location for marketers to manage data sets like cookies, IP addresses, and mobile identifiers to create targeting segments that can be used for advertising campaigns.
It collects anonymous cookies and is designed to improve ad targeting and retargeting by leveraging insights and creating lookalike models.
Where DMPs Fall Short?
DMPs work primarily with 2nd and 3rd party data and comprise non-personally identifiable information. Anonymity is a way to exchange information in the case of DMP and hence is largely reliant on probabilistic identifiers. As a result, DMPs are unable to perform advanced identity matching.
With the prevalence of ad-blockers and cookie rejectors, the industry has witnessed a diminishing scale of anonymous data. This kind of data becomes less valuable (and effective) with each passing data.
Because DMPs rely on the cookie for data collection, the shelf life of DMP data is typically 90 days, which makes it unsuitable for long-term marketing strategy planning.
CDP for First-party Data and Longer Data Timelines
A CDP uses first-party data to create a persistent customer profile that can be used for targeted marketing campaigns and other areas like credit risk analysis, mass communication, user segmentation, and a lot more. Unlike DMP that uses anonymous customer data, CDP uses customer data to offer personalization.
Audiences created in a CDP are highly customizable, allowing marketers to segregate the customers they need to target in just a few clicks. By using CDP, companies can define custom audiences and criteria for customization as well without having to follow the rigid, pre-define audience type like in a DMP.
Typically, a DMP works by either purchasing the data from a data seller or by having such a large number of users that they can segment and anonymize their own data. One of the best examples of a DMP is Facebook.
Facebook has billions of users and their data. So, Facebook DMP collects user data, anonymizes it, and then sells it to its advertisers. On the other hand, the data collected by CDP can help you create specific campaigns like personalized push-notifications based on the last purchase made by a user in an e-commerce store and so on.
CDPs not only collect and unify customer records across different channels but can also feed data to fulfilment systems, websites, call centres, and other channels to further support segmentation and provide an omnichannel to employees as well as customers.
Another major factor that makes the CDP data more valuable is that it helps companies differentiate between their customers. DMP, however, is inherently an equalizer and not a differentiator. So, if the same DMP is used for you and your competitor, you both will have the same customer data.
Comparison Table – CDP, CRM, and DMPs
1st party data (collected directly from sources)
1st party data (typically requires manual entry)
3rd party data (data obtained from browsing history, cookies, social media, etc)
It contains first-party data and hence verifiable and highly accurate
Accuracy is subjected to any manual error of data entry
3rd party data is unverifiable and thus tends to be inaccurate
Data can be retained for as long as the user wants
Data can be retained as long as the user wants
Data can be retained for 30 to 60 days
Allows real-time data upgrades
Allows real-time data upgrades
Allows only scheduled data upgrades
Can create a holistic and unique customer view
Cannot create a holistic customer view
Cannot create a single customer view
CDP only has access to internal data. The absence of external data does not allow the creation of look-alike audiences
Helps creation of look-alike audiences, i.e. target user similar to your buyers in ad campaigns
Personally Identifiable Information (PII)
Stores PII such as name, age, email address, etc
Stores anonymous identifiers such as cookies, IP addresses, etc
Can be scaled for mass campaigns
Cannot be scaled and used mainly by the sales team
Cannot be scaled
CDP vs Data Warehouse
A data warehouse is basically a collection house for business data that helps an organization make decisions. It is one of the oldest technologies used by companies since 1980 to collect a company’s business data from different channels such as internal applications such as marketing, sales, and finance; customer-facing apps; and external partner systems, among others.
Technically, the data warehouse periodically pulls data from all the channels, and then the data goes through a formatting process to match the format of the data already in the warehouse.
The drawback of using a data warehouse is that is aimed only at data collection with little marketing feel. Also, to use the data in the warehouse marketers have to rely heavily on the IT department. The process from ideation to execution has to go through several departments and often takes a long time.
However, in today’s fast-paced marketing world, the most valuable customer data must be quickly accessible and ‘actionable’, which is clearly not possible with a data warehouse.
With CDP, there are no such limitations. Marketers get complete control over the marketing database right when they need it. The database is updated in real-time and not at some pre-defined time as in the case of a data warehouse. CDP also provides actionable insights based on the customer data allowing marketers to make the most of the data in hand.
CRM, DMP, and in fact Data Warehouses, each come with their own features and benefits. However, if marketers really want to go with the digital age need of data-driven marketing, clearly CDP is the way to go. CDP is like an all-in-one solution that offers you data collection, sorting, formatting, as well as allows marketers to derive meaningful insights for a personalized and targeted marketing campaign.
So while CRM and DMP have been there for a long time, CDP is the future of marketing.