What Is a Customer Data Platform (CDP)?

What is a CDP?

According to the CDP Institute, a CDP, or customer data platform, is “packaged software that creates a persistent, unified customer database that is accessible to other systems.” In application, this means that a CDP is a tool that provides a 360-degree customer view to marketers and allows that view to include data from across the organization. This means that marketers no longer have to look at their data channel by channel or department by department. Instead, marketers access cross-departmental, holistic views of their customers.

Many marketers see this definition and say “We already have our CRM integrated with our marketing platform, so we’re set” or “Our IT department runs a data lake that has this information” or “That sounds nice, but I can only imagine the tech resources we would need to support that.” All of these are fair points that are best answered by discussing why marketers need a CDP.

Why do marketers need a CDP?

Consumer expectations have increased. It’s no longer acceptable for marketers to send the same message to all consumers or even to send the same message across all channels. Consumers expect targeted, relevant messages in order to drive their engagement — and they communicate that expectation with their wallet.

A study by McKinsey found that the “likelihood of generating above-average profits and marketing earnings is around twice as high for those that apply customer analytics broadly and intensively.” Leveraging customer data can have a material impact on the bottom line, and marketers need the ability to do that with real-time, complete data and without requiring IT or engineering to get involved every time they need a new data pull.

To make this a reality, marketers need a platform that collects data, makes it accessible to them, provides insights, and allows them to use their data for their campaigns for timely and relevant messages. A customer data platform provides those benefits and allows marketers to drive more revenue for their companies than the competition.

Why is a CDP different from other tools?

There are key differences between a CDP and other platforms:

• CDPs collect data
• CDPs are accessible by marketers
• CDPs inform data
• CDPs activate data

The holy grail for marketers has always been knowledge and understanding of the market. As Peter Drucker said, “The aim of marketing is to know and understand the customer so well the product or service fits [them] and sells itself.”

In marketing’s early days, this started as occasional, high-cost focus groups, evolved into cheaper and more frequent wide-scale surveys, and now, in the digital world, marketers have the advantage of collecting data constantly as people take action. Marketers have recognized the importance of collecting this data, but most are still figuring out how to collect it effectively and what to do with it (see CDPs Activate Data). This is the role of a CDP.

A CDP is holistic in its data collection. While some marketers have found ways to collect all the information related to their marketing channel, few are able to leverage the data that exists across the entire customer journey. What if, for example, you didn’t just know that someone purchased a pair of green running shoes in a size 10 but also knew that they exchanged those shoes for a pair of blue running shoes in a size 9.5 and could leverage that in your decisioning or segmentation? Or if you knew not only that someone submitted a credit card application but also that you have a new offer that is similar, but better, from a new card provider? This type of information moves marketers from a position of selling to a position of assisting by knowing more about the customer than just what was in their cart. In order to be a CDP, the tool must provide the ability to get all of this information, and more, into one location for a full 360-degree customer view.

Companies have been building data storage, specifically data warehouses, since the 80s. This form of data storage evolved into data lakes and, for marketers, includes DMPs and tag managers. The issue is that most of these are not easily accessible for marketers. To access this data, marketers have to work with their IT or data teams to pull queries, lists, or reports and then manipulate that data to fit their needs. This takes time and resources and can often lead to the data being outdated or irrelevant by the time it is accessed. A true CDP is accessible and usable by marketers so they can access the insights and data they need without having to put in a list request to a data team.

While data is good insights, recommendations based on that data are even better. With the increase in available data, the use of artificial intelligence (AI) and machine learning have become more impactful than ever. Leveraging AI, marketers can now get recommendations for the optimal time to send a message, the channel that’s most likely to drive conversion, and the product(s) to which a customer is most likely to respond. As confirmation of the impact of this strategy, after analyzing 14.9 billion messages, Blueshift found that campaigns using predictive analytics were 116% more effective than those that do not. Said another way, campaigns that allowed AI and machine learning to help them were more than twice as effective; however, it’s not until the platform begins acting on that data with artificial intelligence and machine learning that it can start becoming really impactful.

Generally speaking, many CDPs will collect data and make it more accessible, and several inform data, but few do all of those things and allow marketers to activate that data across all channels on the same platform. Without activation, marketers are able to gather insights but are not able to turn those insights into campaigns or messages. They are the backseat driver who can tell you where to turn but not actually steer the car. Data activation is a requirement for achieving impactful ROI on your CDP.

Data activation means that marketers can gather insights, pull lists, leverage AI, and more to determine their target audience and use that audience in multiple channels from the same platform. Activation is creating an omnichannel marketing campaign around an audience and then using data to know what to message to that audience, which channels will drive the desired outcomes, and when to send the message all within a single workflow and a single platform. This can be thought of as the power of marketing automation being coupled with the power of a CDP. The work that went into collecting, accessing, and informing data comes to fruition in the creation of an impactful campaign through activation.