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What Is a CDP?

A customer data platform (CDP) is packaged software for marketers that collects and unifies data in a consistent database, linking information from multiple sources to build a single, unified view of each customer. It collects and aggregates information such as a customer’s purchase history, preferences, records of interactions, and more. A CDP links to other systems and collects, manages, analyzes, and shares data to create targeted and personalized marketing campaigns.

Digital assistants use advanced artificial intelligence (AI), natural language processing, natural language understanding, and machine learning to learn as they go and provide a personalized, conversational experience. Combining historical information such as purchase preferences, home ownership, location, family size, and so on, algorithms can create data models that identify patterns of behavior and then refine those patterns as data is added. By learning a user’s history, preferences, and other information, digital assistants can answer complex questions, provide recommendations, make predictions, and even initiate conversations.

CDPs Are on the Rise

The CDP market is growing fast, according to a January 2019 report from the Customer Data Platform Institute. In 2018, industry revenue was up by more than 50%, reaching $740 million. The Institute says that revenues are likely to top $1 billion in 2019.

How Do CDPs Help Companies?

Today’s consumers expect brands to know them and to deliver personalized experiences. Your ability to collect, integrate, and use customer data to improve those customers’ experiences can create a substantial competitive advantage.

A CDP makes it easier to know what customers want, and to even anticipate those wants. This is particularly useful for retailers and industries that deal directly with consumers, where brand loyalty and customer retention are critical. CDPs are widely used throughout the travel, hospitality, financial services, telecommunications, healthcare, and education industries. They’re just beginning to be adopted by B2B marketers.

CDP Investments Are a Priority for Retailers and Direct-to-Consumer (DTC) Brands

CDPs are top of mind for ecommerce marketers, as reported in “How Leading Retailers and Direct-to-Consumer Brands Are Investing in Digital.” According to this report, in 2019, the top innovation investment priority for all ecommerce marketers is in CDPs. 70% of DTC brands and 63% of traditional retailers say they have increased investments in CDPs in 2019.

What Can a CDP Tell You?

Companies are gathering more data from a growing variety of sources: mobile phones, social media, cars, smart speakers, internet-connected TVs, web cookies, and more. All that data is a gold mine for marketers if you can get it in a useful format.

CDPs typically include prebuilt connectors to systems that hold customer data, making data access fast and easy for marketing teams so you can develop an ongoing deep understanding of who your customers are and what they want. Is this particular person a longstanding, loyal, high-value customer? Or is this the first time she’s bought from your brand? You can use this data proactively to develop targeted, personalized campaigns. For example, a coffee chain may target a particular individual by texting him a special offer just as he walks by the shop on his way to work in the morning.

What’s more, a CDP helps you predict what that customer may want tomorrow. For example, based on past activity, that coffee shop may have the customer’s 16-ounce decaf skinny latte ready and waiting for him. It’s about providing the right product or service to the right customer at exactly the right time.

What Kind of Data Is in a CDP?

The type of data an organization collects in its CDP varies depending on the industry and the organization’s needs. Some typical types of data include

  • Personal and demographic data: Name, gender, age, employment information, income level, marital status, number of children, and whether the customer owns a home or rents
  • Behavioral data: Web data (browsing history, clicks, pages visited), interactions at physical stores, and social media data
  • Psychographic data: Details about lifestyle, aspirations, personality traits, preferences, and hobbies
  • Transactional data: Purchases and returns, abandoned cart rates, email response rates, subscription renewal rates, and customer service interactions
  • Mobile and device data: Device IDs, location, in-car systems, smart speakers, and other sensor data
  • Other contextual information such as survey data on how the customer heard about the company and satisfaction ratings on products and services

What Are the Benefits of CDPs?

By centralizing data, CDPs serve as a platform for improving the customer experience. They create a constantly updated 360-degree view of the customer, incorporating data of all types (both structured and unstructured) from every customer touchpoint—including email, social media, loyalty programs, and in-store transactions—as well as existing data sitting in a company’s other internal systems. In the past, lack of integrated data could result in one arm of the company being unaware of another’s interaction with the same customer, creating frustration and dissatisfaction. With CDPs, companies can deliver consistent messages and integrated customer engagement.

With a CDP, a business can precisely target particular consumers, personalizing their experience and helping to cement a lasting relationship that improves retention rates. After all, it costs five times as much to acquire a new customer as it does to retain a current one. Because CDPs collect data directly from your customers, that data is more complete and up to date than data from other sources, making your marketing campaigns more efficient and often more effective. With a good CDP, a company can unify marketing efforts across multiple channels.

Having a centralized platform of reliable, integrated customer data enables you to make better data-driven decisions and could even inspire new marketing programs.

CDPs can also improve compliance with existing and emerging data privacy regulations, such as the EU’s General Data Protection Regulation and California’s Consumer Privacy Act. Such laws often require companies to afford consumers the right to access their data and to have it erased (the “right to be forgotten”). Meeting these requirements can be a burden when different consumer data resides in different systems.

How Does a CDP Work?

The modern consumer interacts with brands in many new ways and through many different channels, leaving behind different information from each interaction. This leaves companies with a collection of different identities in different systems. A CDP ingests this first-party data—data directly from the consumer—from several offline and online sources. It standardizes and transforms the data by matching individual customer identities from each system and combining them into a single consistent and accurate profile of each individual customer. Then it reformats the profile data and makes it available to other marketing systems and applications.

The CDP continues to ingest new data from various sources, maintaining a constantly evolving, up-to-date history of interactions with the customer.

CDP, DMP, CRM: What’s the Difference?

CDPs are sometimes confused with customer relationship management (CRM) solutions and data management platforms (DMPs). All three deal with customer data, but there are differences.

  • DMPs are focused on supporting web display advertisements. Geared to advertising, specifically for campaigns designed to gain new customers, these systems gather data from cookies. Unlike the data collected and aggregated by CDPs, the data collected by DMPs is often anonymized and is usually retained for a short period of time, such as 90 days.
  • CRM solutions use tools and technology to gather customer data that marketing teams can use to build a stronger relationship with the customer. CRM solutions differ from CDP solutions in that they typically do not aggregate or analyze data from multiple sources. However, a CRM solution can use CDP data.

What Are the Capabilities of a CDP?

By creating and maintaining a single, unified database of customer profiles, each with a consistent identifier, CDPs provide a single view of every customer and a reliable source of data for a variety of marketing functions. They connect with other marketing platforms and systems, providing data to support campaign management, marketing analysis, and business intelligence. The analysis of this data can even suggest the optimum next move the company should make to engage or retain a customer.

Because it is designed for marketing and controlled by marketing, a CDP makes it easier and faster for nontechnical people (like some marketers) to access and query the data. Marketing owns the data, so it doesn’t have to request it from the IT department, which can be a slow process.

What’s Next for CDPs?

For all their benefits, CDPs are limited in their analytical and AI capabilities. The next evolution of these platforms is the customer intelligence platform (CIP). CIPs will incorporate anonymous, third-party data as well as first-party data. They will have a layer of intelligence that uses machine learning for predictive models and recommendations, producing more powerful, actionable insights. CIPs can share those insights with any other system, not only marketing systems, and they will leverage the data for sales and customer service functions with more intelligence. This increased communication of data and intelligence among CIPs and other systems will open up new opportunities such as omnichannel attribution, through which marketers can identify and compare the results of marketing campaigns among multiple channels.