Customers interact with brands across many channels—via social media, email, digital ads, direct mail, landing pages, search engines, and more. At each touchpoint, they tell businesses something about themselves, based on the actions they take (or don’t) at that step in their journey to purchase or convert.
All of this data—from both customers and prospects—can be used to create a more effective marketing strategy. But first, you have to collect and interpret it. To do so, many companies use a customer data platform, or CDP.
CDPs collect data in real-time to create thorough customer profiles and a unified view of who your contacts are, based on their activity before and after conversion. Using this data, they help you communicate with customers and prospects, engaging them with relevant content at just the right time, keeping them connected with your business and interested in what you have to offer.
How do CDPs work?
CDPs integrate your data insights
CDPs integrate data from internal and external sources into 1 place, combining known and anonymous contact data to create a single source of truth. They give you far more detailed, granular customer insights than siloed solutions and enable you to enhance the personalization in your marketing.
CDPs connect with your marketing communications
Gaining customer insights is meaningful only if you act on them, and that means learning to communicate better with your customers.
CDPs make targeted, personalized experiences possible by telling you precisely what customers expect at each marketing touchpoint. They integrate with your communication solutions, share the same customer segmentation across marketing platforms, and provide insight into anonymous behavior before conversion so you can engage them with targeted messages from day 1.
How are CDPs different from other solutions?
The fundamental difference between CDPs and other data solutions is that CDPs allow for flexible data structures and the pairing of known and unknown contact behavior. CDPs collect data from known members of your audience, as well as anonymous data from newcomers to provide insights about everyone who is accessing your business.
Other platforms have overlapping functionality with a CDP but their primary objectives are slightly different, and may prove to be useful depending on your type of business and the stage that you’re in:
Customer relationship management (CRM) is used to track customer journeys and gain insight into aggregate and individual customer data. It creates customer profiles based on demographics, buying history, and a record of their experience with your business. A CRM is often a great tool for businesses that are trying to find product/market fit, as it keeps a good record of who you have interacted with and how. It can also be a great fit for businesses that are dealing with a very defined user base.
Data warehousing can be used in tandem with CRM to collect and combine things like transactional data with a customer profile. This type of tool can be useful if you are focused on transactional and purchase data for your business. This type of solution is usually best for companies that have larger amounts of data, but can certainly scale with you if you have data warehousing built out earlier in your business lifecycle.
Data management platforms (DMP) combines data from multiple sources including online, offline, and mobile from 1st, 2nd, and 3rd parties. A DMP alone collects data and becomes powerful when connected to another platform. This type of tool is best for businesses that may have multiple touchpoints for their product and collect user data in each of those touchpoints. So if you have a physical POS System alongside a Sales CRM and tied to a consumer mobile app, you might want a DMP that would tie these data sources together and connect them either to a CDP or an organizational level CRM.
Enterprise resource planning (ERP) systems let you analyze patterns in inventory levels to better understand customer buying patterns. This tool is primarily geared toward the management of your physical inventory. An ERP is extremely valuable for planning your purchasing as well as marketing cycles based on customer behavior. We recommend connecting your ERP to another tool, such as a CRM or CDP, that will allow you to tie together data about purchasing patterns and customer behavior and demographic data so you can make informed production and marketing decisions.
Each of these platforms are powerful in their own way and can even complement a CDP. This is not always an “either/or” decision but often an “and/also” one. Remember that CDPs are unique in their ability to collect anonymous activity, like site visits before conversion. As a decision-maker, it’s important for you to take stock of the goals of your business, the type of decisions you need to make, and the data that will help you make those decisions. That may mean that you need a CDP to get actionable insights that account for all data points at once, and so you have visibility to pre-conversion engagement. In other cases, it may mean combining one of these aforementioned tools with your CDP to get a complete picture.
Here’s a more thorough breakdown of how CDPs stack up against other essential marketing data solutions.
CDPs versus CRM
CRM helps you profile existing contacts and track their journey with you. Customer data found in your CRM includes general demographic and geographic information, as well as information on contacts’ interests and their history/interaction with your business. A lot of this data is collected on an opt-in basis, like through user registration on your site. This data is structured, lower volume and can be manually updated or revised through certain backend connections.
Both CDPs and CRMs handle customer profile data with ease. CRMs are great tools for those who are identifying who their customers are and how they are engaging with them - whether you’re at the beginning of building your business and finding product/market fit, or scaling up, but with a concentrated target audience. CDPs, on the other hand, designed to absorb anonymous contact data—like website engagement—and to connect that same data to known customers upon conversion. This allows marketers to have full-funnel visibility for prospect activity up to conversion. With both tools, you can segment your contacts and send them targeted marketing, but with a CDP, you get the added benefit of segmenting prospects so that you can target them as soon as they convert.
CDPs versus data warehousing
When using a CRM, some businesses might integrate data warehousing to collate high-volume, dynamic information, such as transaction data, and tie it in with customer profile insights.
You should be aware though that use of data warehousing does come with some technical requirements. These tools usually require knowledge of SQL coding in order to access and run queries on the data. This also means that you don’t just get a single view of the data, since it can handle data from multiple areas of the business (outside of Marketing and Sales). If you have someone on your team (or maybe even a team of its own) that can help you manage this tool, it can be a powerful supplement to your CRM.
If, on the other hand, you may not have the resources available to run queries in a data warehouse, or maybe you’re not capturing information in a separate system just yet, then a CDP could be a great alternative for you. A CDP is built to natively handle large volumes of dynamic data, and doesn’t rely on any sort of coding experience to get a view of that data. You may need a bit of developer help to connect your data sources (transactional data or maybe even product data) to your CDP, but once it’s hooked up, transactional data can go directly into your CDP and you won’t have to worry about scaling or ease of access.
CDPs versus DMP
Cookie-based DMPs give you lots of data about individual user behavior: What products do specific users look at? Which ones are they likely to buy? How much time do they spend on your site compared to others? Where are they browsing from?
However, the data that DMPs collect is anonymous, and only stored temporarily.If you connect your DMP to another tool, like a CRM or CDP then you can save this data and make use of it in the future, but on its own, a DMP is not intended to store data long-term.
A CDP, by contrast, allows you to both collect and store data, and has the added benefit of correlating anonymous data with known customer profiles. You’ll have access to persistent records of individual customers alongside their behavior patterns.
CDPs versus ERP
ERP systems are great for tracking product data. This includes data about your supplies and inventory levels. While it isn't strictly customer-centric, product data is key to gauging overall trends. Relative product prices, geographical availability, and inventory levels can tell you a lot about macro-level customer preferences.
ERPs are great at collecting and analyzing data on your back end. However, ERPs aren’t intended to integrate this data with customer insights. CDPs can take your product data and macro-level customer trends and correlate them with customer profiles and behavioral data for individual customers. This allows you to understand customer trends for your products and send targeted marketing to them based on that information.
Why should you use a CDP?
You already have an immense amount of valuable customer data. But when it is siloed across separate platforms, you can’t tap into its full power. By themselves, ERPs, CRMs, DMPs, and data warehousing serve useful functions. Depending on the stage of your business or the makeup of your customer base, you may find that one or more of these tools might be the best fit for you. A CDP can bring these insights together, combining anonymous and known contact profiles, to help you craft the kind of memorable experiences that will drive deeper engagement with your audience. You may need different tools at different stages of your business, in which case, the most important this is to make sure that you’re finding tools that will allow you to easily grow and shift, rather than lock you in to just one system or platform.
Next, we will provide detail about how a CDP can enable you to meet your marketing goals efficiently. Note that any of the above mentioned tools could also enable these results when paired with or in place of a CDP, depending on your business needs.
Create memorable, personalized experiences
In psychology, Kahneman’s peak-end rule tells us that experiences aren’t judged by their length. Instead, we look at the quality of the best part (the peak) and the worst part (the end) of the experience.
For marketers, this is great news: It doesn't have to take years to build strong customer relationships. Personalized, targeted experiences will impress your audience and build a strong connection over much less time and with less investment.
CDPs make it possible by pulling together data about your customers that is collected and stored in separate places, including anonymous data from before they convert, so that you can create personalized, impactful experiences for customers.
Imagine this: A registered customer visits your website and spends some time looking at a pair of jeans before moving on without ever logging in to your site. Your DMP tells you about their on-site behavior. Your CRM contains insights into their personal and social media connections, and also lets you know they've previously purchased several sweaters, but only if you can identify the individual. And your ERP tells you what inventory you really need to move this month.
Your CDP puts all 3 insights together, then connects with your marketing communication to create something magical: A personalized Instagram ad. “Thank you for being a valued customer. Nothing pairs better with our sweaters than these bell-bottom jeans, so we're giving you a 30% discount to help complete your look. Stay awesome!”
This isn’t marketing science-fiction—it’s the power of a CDP. Personalized marketing, driven by data, lets you quickly and cost-effectively establish strong relationships with customers and prospects.
Actionable insights that increase your marketing efficiency
A CDP can help you improve the efficiency of multiple parts of your overall marketing strategy.
- Anonymous activity is integrated with known profiles, which means that you spend less time cross-referencing data that’s siloed across multiple platforms.
- You get qualitatively better insights, allowing you to significantly reduce decision-making time.
- Marketing features are consolidated and this helps you to get a view of all of your data in one place. Whether you pair your CDP with another data management system, or use it as a standalone, it can support your ability to get a complete view of your data efficiently.
CDPs can support and have a measurable impact on your marketing outcomes. The insights generated from a CDP enable personalized marketing that leads to a more engaged audience.
- Increased opt-in rates. Personalization can help you increase opt-in rates for surveys, registration, and other active sources of data collection. Enabling personalized marketing means that you can anticipate lower unsubscribe rates to your content, too, as you’ll be reaching a targeted audience with a message based on their activity and profile data.
- Improved engagement rates. Customers will be more likely to engage positively with your emails, social media posts, calls, and other communications when it feels tailored to them.
- Improved conversion rates. Personalization can directly improve the rate at which your marketing communication converts into tangible value. With messages that feel perfectly timed and tailored, more people will return for abandoned carts, increase their order value, and make additional and repeat purchases.
- Longer customer retention. Rich personalization enables you to craft deep, meaningful relationships with your customers. This translates to measurably longer customer retention rates.
How can a CDP help you reach your business goals?
Before you decide on implementing a CDP, it’s important to set expectations about what it can help your business achieve. Realistically, what are some short, medium, and long-term goals that a CDP can help you reach? Consider the improvements and outcomes above and consider what practical impact they could have on your business.
Also consider how a CDP might pair with another tool in your stack. Consider if you might have an ERP that supports your business or perhaps a DMP that is helping you to collect data. The decision to implement a CDP is not a mutually exclusive one and certainly not a one time only decision. You should continuously evaluate both what your business needs are, what goals you are trying to reach, and the data that you might need to support both. And be sure to find tools along the way that will flex and grow as your business needs do the same.
How do you decide on the CDP that’s right for you?
CDPs are a relatively new development in the marketing world. Nevertheless, there are already a whole host of CDPs out there, suitable for a wide range of use cases. It’s important to know what to look for when deciding on a CDP that’s right for you.
Carefully evaluate your use cases
Before deciding on a CDP, you need to have clarity about what exactly you’ll be using it for. Every business has a unique customer journey.
- How often do you talk to your customers?
- What platforms do you use to reach them?
- How specific are their needs?
Consolidating your data with a CDP won’t automatically achieve your goals. Think carefully about your specific use cases and identify a CDP that most closely addresses your needs.
Vendors provide a range of CDP solutions that address different needs. You need to consider the scale of your customer outreach, the depth of integration with your existing systems, and your budget. If you’re a small business, off-the-shelf CDP solutions can provide considerable value at a low price.
Create an implementation strategy
Actually implementing the CDP requires a considerable amount of planning beforehand. You’ll need to discuss implementation with the key stakeholders: your marketing team, IT staff, and anyone else who regularly interfaces with customer data. Address their concerns and plan out a smooth transition.
You’ll need to plan out integration, too, ensuring that your CDP works with all of your current tools.
- What tools currently handle your customer data?
- What platforms do you use to communicate with customers?
- How do these communicate with each other?
Deciding on the right CDP will take time and careful consideration. But in this data-driven world, a CDP can be an invaluable tool to either pair with existing data tools or to use as a standalone tool in your marketing arsenal.