Customer Data Platform (CDP)

Customer data can improve your marketing efforts, allowing you to create highly tailored messaging. By deepening your relationship with your customers, you can improve their experience with your business and build brand loyalty.

If you’re interested in learning more about what CDPs are, including how they differ from other data management platforms and their benefits, keep reading.

What is a CDP?

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.

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 work by collecting data each time a potential customer interacts with your brand. They gather all the information you’re collecting through social media, email marketing, digital advertisements, landing pages, search engines, and your website to help you understand your customers better.

Let’s take a look at a few ways they integrate and connect with your existing channels.

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:

Here’s a more thorough breakdown of how CDPs stack up against other essential marketing data solutions.

CDPs versus CRM

Customer Relationship Management, or 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 wishing to identify their customers and learn how they engage with them. On the other hand, CDPs are designed to absorb anonymous contact data—like website engagement—and connect that same data to known customers upon conversion. This allows marketers to have full-funnel visibility for prospect activity up to conversion. You can segment your contacts and send targeted marketing campaigns with both tools, but you get the added benefit of segmenting prospects so that you can target them as soon as they convert with CDPs.

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.

Keep in mind that data warehousing comes 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 that can help you manage this tool, it can be a powerful addition to your CRM.

If you don't 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 is a great alternative. A CDP is built to handle large volumes of dynamic data and doesn’t rely on coding experience to get a view of the information you collect. You may need some 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 Data management platforms (DMP)

Cookie-based DMPs give you a lot 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?

The data that DMPs collect is anonymous and only stored temporarily. If you connect your DMP to another tool, like a CRM or CDP, you can save this data and use it in the future. On its own, however, a DMP is not intended to store data long-term.

In contrast, a CDP allows you to 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 Enterprise resource planning (ERP

ERP systems are great for product data tracking. 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 ideal for 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.

Benefits of CDPs

CDP software gives you insight into your customers, including who they are and what they expect from your business. By understanding customer behavior, you can fine-tune your marketing strategy and increase your bottom line.

Here are a few other benefits of using CDPs.

Gain a better understanding of your customers

CDPs help you learn about your customers and allow you to develop data-based, accurate buyer personas. Because all the data you’re collecting through your marketing efforts is integrated into the CDP, you’ll be able to learn everything you can about your customers, including their pain points and the type of communications they want to receive from your business.

You can also learn about the different touchpoints that bring customers to your business and create a better customer journey map to understand their interactions with your brand.

View all customer data in one place

You already have an immense amount of valuable customer data. However, you can’t tap into its full power when it's spread across different platforms. 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 memorable experiences that'll drive deeper engagement with your audience. You may need different tools at different stages of your business, so the most important thing is to ensure you’re using tools that'll allow you to easily grow and shift, rather than lock you into just one system or platform.

Create memorable, personalized experiences

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 less time and with less investment.

CDPs pull together data about your customers that's collected and stored in separate places, including anonymous data from before they convert, so you can create personalized, impactful customer experiences.

Imagine this: A registered customer visits your website and spends some time looking at a pair of jeans before moving on without 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. The CRM 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 need to move this month.

Your CDP software 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.

Increase several marketing metrics

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 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 SMART goals that a CDP can help you reach? Consider the improvements and outcomes above and their practical impact on your business.

Also, assess 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's helping you to collect data. Implementing a CDP isn't mutually exclusive or a one-time decision. You should continuously evaluate what your business needs are, the goals you're trying to reach, and the data you might need to support both. Be sure to also find tools along the way that'll flex and grow as your business needs do the same.

How to choose the right CDP 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 marketing goals. Think carefully about your specific use cases and identify a CDP that most closely addresses your needs.

Compare solutions

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 CDP 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.

Ask yourself the following questions:

• 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.

Wrapping up: Customer data platforms

CDPs can help businesses of all sizes make better use of their marketing budgets by providing access to data to create personalized experiences. By measuring your marketing performance and identifying areas for improvement, businesses can develop more effective marketing strategies to attract new customers and increase customer retention. With customer data available to you at every stage of the customer journey, you can start building effective email campaigns based on how your customers interact with your business.

Using Mailchimp’s all-in-one marketing automation platform, you can use customer data you’ve collected and begin segmenting your audiences based on data, not guesses. Personalizing your email marketing with drip campaigns based on customer data in your CDP can improve customer relationships and boost sales.