Feature
The Gist
- Unified customer view. A customer data platform (CDP) delivers a 360-degree customer profile by integrating data from various touchpoints.
- Enhanced personalization. CDPs empower businesses to create marketing campaigns that deeply resonate with their audience.
- Strategic integration. CDPs not only function independently but are also compatible with a range of marketing tools and other systems.
Editor's Note: This article has been updated on February 13, 2024 to include new data and information; the original content was authored by Brian Carlson.
In today's data-driven landscape, understanding and leveraging customer information is paramount to business success. Enter the customer data platform (CDP), a solution designed to unify and streamline customer data from multiple sources.
As businesses grapple with data deluge, the CDP emerges as a tool capable of centralizing this data into a unified customer view. What exactly is a customer data platform, and how does it distinguish itself from other data management solutions? Dive in as we demystify the role of CDPs in modern business.
What Is a Customer Data Platform (CDP)?
A customer data platform (CDP) is a specialized software that collects, organizes and centralizes customer data from various touchpoints in real-time, enabling businesses to create comprehensive and unified customer profiles. Customer data platform software autonomously integrates online and offline data sources — from social media interactions to in-store purchases — to ensure marketers have actionable and timely insights at their fingertips.
Related Article: Exploring Customer Data: Definition, Types & Usage
What Does a CDP Do?
At their core, customer data platforms work by aggregating data from a number of sources — websites, mobile apps, email campaigns and even offline channels like physical stores. This customer data, often scattered and siloed, is then processed, de-duplicated and cleansed by the CDP, resulting in a unified customer database.
Once consolidated, CDP software applies advanced analytics and machine learning techniques to segment the data, identify behavioral patterns and generate actionable insights. Marketers can leverage these data sets to tailor personalized campaigns, enhance customer experiences and drive a higher return on investment (ROI).
What's the Purpose of a CDP?
CDP technology offers businesses a singular, coherent view of their customers by consolidating disparate data sources. CDPs collect data from various online and offline channels, resulting in a unified customer profile that provides marketers with deep insights into customer behavior. The result is the ability to more effectively tailor campaigns and personalization efforts.
CDP vs. CRM vs. DMP: What's the Difference & Which Is Best?
When you enter the world of data management, three acronyms will frequently emerge: CDP (customer data platform), CRM (customer relationship management) and DMP (data management platform). What differentiates the three?
| Platform | Primary Purpose | Data Type | Data Retention | Use Case |
| CDP | Unified Customer Profiles From First-Party Data | First-Party Data: Personal Information, Transaction, Interactions | Long-Term | Personalization, Customer Segmentation, Targeted Marketing |
| CRM | Manage Interactions With Customers | Interactions and Transaction Data: Sales, Service, Marketing | Long-Term | Sales Forecasting, Contact Management, Customer Service |
| DMP | Activate Third-Party Data for Advertising | Third-Party Anonymous Data: Cookies, IP Addresses | Short-Term (Usually 90 Days) | Audience Targeting, Ad Optimization, Media Buying |
- Customer Data Platform: Creates a unified customer profile by aggregating data from multiple sources, ensuring real-time, actionable insights.
- Customer Relationship Management: Focuses on managing customer interactions, capturing sales activities and logging service requests.
- Data Management Platform: Specializes in collecting vast volumes of anonymous online data, chiefly used for targeted advertising.
So, which is best? It depends on your business goal. For a holistic view of customer behavior across multiple channels, CDPs shine. If the aim is to foster deeper customer relationships, a CRM system is your go-to. And if the primary objective is broad-scale advertising targeting, then DMPs take the lead.
What Are the 3 Core Elements of a Customer Data Platform?
MarTech shoppers, beware. Many companies are repackaging their legacy solutions and calling them customer data platforms. However, CDPs must have three elements to meet the true definition, according to the CDP Institute.
The three elements of a customer data platform include:
- Marketers Take the Lead. CDPs need to be managed and controlled by marketers, with limited ongoing technical support from IT departments and external vendors.
- Data at the Forefront. A customer data platform must be a persistent, unified database that can collect and manage customer data from multiple sources and associate it with a customer profile.
- External Accessibility. ACDP tool needs to be accessible by external systems and deliver data to them.
Related Article: How AI and Data Analytics Drive Personalization Strategies
What Are the Key Features of a CDP?
A CDP needs to have an easy-to-use, web-based user interface with certain built-in functionality to be called a CDP, according to Gartner and The CDP Institute. Look for the flowing CDP features:
- Data Collection: A CDP needs to be able to load in data from multiple customer data sources (websites, server data, CRM, email, etc.) in real-time.
- Unification: A CDP should have the ability to consolidate and unify customer profiles of a single person.
- Segmentation: CDPs should have a web-based UI that gives marketers the ability to segment customers into custom audiences.
- Activation: A CDP needs to be able to push segmented data back out to other platforms and external systems like email, mobile, social media and web.
Why Is Customer Data Important?
Today, customer data is the lifeblood of business. It's the key to understanding customer preferences, behaviors and buying patterns. Harnessing this data effectively translates into personalized experiences, deeper customer loyalty, increased retention rates and more. In essence, comprehensive customer data isn't just about numbers and metrics — it's the backbone of meaningful relationships between businesses and consumers.
The Data That Makes up a CDP
CDPs consolidate various data types, each bringing unique insights about the customer. The types of data that make up a customer data platform include:
- First-Party Data: This is data collected directly from your audience. It includes interaction metrics from your website, app usage details, transaction histories and subscription information. Since it's gathered straight from the source, first-party data is highly valuable and accurate. Within a CDP, it forms the foundation of your unified customer profiles, offering a clear snapshot of individual customer behaviors and preferences.
- Second-Party Data: This data is essentially someone else's first-party data that's shared or purchased. For instance, a brand might collaborate with a non-competitive partner to exchange data for mutual benefit. In a CDP context, second-party data can complement and enrich the existing first-party data, broadening the understanding of customer interactions across different platforms.
- Third-Party Data: Gathered from external platforms not directly linked to your business, third-party data typically encompasses broader datasets like market trends, demographic insights or generalized customer behaviors. While its accuracy might be lower than first-party data, its strength in a CDP lies in its ability to fill gaps, helping to segment audiences, identify new potential markets and enhance personalization strategies.
By skillfully integrating these data tiers, CDPs provide businesses with a multi-dimensional, comprehensive view of their customers, enabling data-driven decision-making.
Related Article: 4 Types of Customer Data and How to Use Them
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The Benefits of a CDP
From creating a unified customer view to enhancing personalization and ensuring easy integration, CDPs epitomize the core advantages of leveraging a sophisticated customer platform. Let's take a deeper look at some of the benefits a CDP can bring to modern businesses.
A Unified Customer View
CDPs shine in their ability to aggregate diverse data from multiple touchpoints, from web interactions to in-store purchases. The results in a comprehensive, 360-degree profile of each customer. With this profile in hand, businesses can delve deeper into the nuances of individual customer behaviors, ensuring more tailored interactions and enhancing the customer journey.
Enhanced Personalization
With the amount of data they handle, CDPs allow businesses to develop personalized marketing campaigns that deeply resonate with their audience. But it's not just about what they show; it's also about what they don't. Customer data platforms can suppress ads or materials that may be irrelevant to a user, ensuring each interaction is meaningful and unobtrusive.
Easy Integration
CDP integration with existing marketing tools, such as CRM systems, marketing automation platforms and data warehouses, prevents siloes and ensures data moves fluidly across the business ecosystem. This interconnected setup allows businesses to react in real-time to customer actions — from clicked links to abandoned carts — and refine strategies on the go.
Accuracy, Compliance & Customer Data Protection
Centralizing data management mitigates risks of duplication and inaccuracies. But, more critically, in an age where data privacy concerns loom large, CDPs offer robust data protection features. They ensure that businesses not only stay compliant with evolving data protection regulations (like the General Data Protection Regulation, or GDPR) but also prioritize customer privacy, safeguarding sensitive information and reinforcing brand trust.
Improved Return on Investment
When businesses sharpen their marketing strategies, fueled by rich and accurate data insights, the result is more efficient ad expenditure. With CDPs, brands can pinpoint where their dollars are best spent, yielding improved returns on investment and minimizing wasteful outlays.
How to Choose a Customer Data Platform
With the increasing number of solutions available, choosing the right customer data platform requires a clear understanding of both your business needs and the features on offer. Here's a step-by-step guide to help navigate this selection:
1. Understand Your Data Needs
Before diving into the vast sea of CDP options, delineate your primary data requirements. Are you looking to merge online and offline data? Do you need real-time analytics or predictive modeling? Pinpointing these specifics will help narrow down suitable platforms.
2. Look at Integration Capabilities
Make sure the CDP can seamlessly integrate with your existing marketing tools, CRM systems and data warehouses. A customer data platform that can't communicate effectively with other systems and tools in your arsenal will create more challenges than solutions.
3. Compare Data Privacy & Compliance Features
With data protection regulations becoming stringent worldwide, select a CDP that prioritizes compliance. Data management platforms that ensure compliance with GDPR, CCPA (California Consumer Privacy Act) or other regional data protection regulations will protect your business from potential legal pitfalls.
4. Consider Scalability
Your business will grow, and so will your data needs. Opt for a customer data platform that can scale with you, accommodating more data integration and more complex analytics as your requirements evolve.
5. Prioritize a User-Friendly Interface
A CDP, no matter how powerful, is only as good as its usability. Ensure that the platform you choose has an intuitive interface, offering ease of use for those who aren't necessarily tech-savvy.
6. Think About Support & Training
Implementation of a customer data platform is a significant step, and having the provider's support during this transition is invaluable. Prioritize platforms that offer robust training and support at the onset, ensuring smooth onboarding and assistance when needed.
7. Determine Cost vs. Value
While budget considerations are undeniable, it's essential to weigh the cost of a CDP against the value it provides. A less expensive option might lack critical features, while a pricier one might offer tools that you don't really need.
Related Article: 10 Potential Data Privacy Pitfalls for Marketers
How Other Companies Use CDPs
Industry leaders often adopt customer data platforms as part of their strategies to optimize customer engagement. Let's take a look at how some companies are using these data systems:
- Starbucks: The coffee giant uses its CDP to offer personalized experiences to millions of its app users. By analyzing behavioral data like website clicks, purchase histories and preferences, Starbucks can deliver tailored product recommendations, enhancing its mobile order-and-pay features. This level of customization fosters loyalty and drives repeat purchases.
- Ben & Jerry's: The ice cream brand taps into the power of a customer data platform to segment its audience for marketing campaigns. They differentiate between casual buyers and "super fans," tailoring their messaging and offers accordingly. This segmentation leads to more engaging campaigns and deeper brand connections.
- Macy's: The department store chain harnesses its CDP to understand and predict consumer shopping behaviors. By consolidating customer data from both online and offline sources, Macy's crafts highly personalized email campaigns that increase click-through rates and conversions.
- Airbnb: With millions of listings and users, Airbnb relies on its CDP to collect customer data and maintain consistency in user experience. The platform tracks user interactions, preferences and feedback to develop a single unified customer profile and continually refine and personalize offerings.
- Sephora: The beauty retailer uses its customer data platform to merge online and offline shopping experiences. By analyzing online browsing behaviors, Sephora provides in-store staff with insights that allow them to offer personalized product recommendations when a customer visits a physical store.
These CDP use cases illustrate a clear pattern — despite industry or scape, a well-implemented customer data platform can drive engagement, optimize marketing efforts and create lasting customer relationships.
