What is a CDP?
A Customer Data Platform (CDP) is defined by the CDP Institute as “packaged software that creates a persistent, unified customer database that is accessible to other systems.”
To get started, let’s look at why they are vital to making your customer experiences the most positive they can be.
It’s reflected in consumer research year after year: people are willing to exchange their personal information – what they want, need, and prefer – for a more meaningful customer experience.
It’s about building a mutual understanding: I share with you, and you inform me of relevant opportunities while protecting my privacy. CDPs enable brands to create these holistic, relevant, and respectful experiences, interactions people love.
Selecting the right CDP is just one part of the equation. There’s a lot more that goes into making your CDP investment pay off – and to meeting your customers’ expectations. We hope that’s why you’re here: to learn more about CDPs and how they can, with the right approach, help you deliver amazingly relevant and respectful customer experiences.
Why focus on customer experience?
For brands to succeed, even to survive, they must focus on three principal goals: acquiring customers, growing customer relationships, and retaining customers. In today’s complex, high-speed, multichoice world, meeting and maintaining those goals is impossible without a focus on customer experience (CX.)
McKinsey and Company defines customer experience as “encapsulating everything a business or an organization does to put customers first, managing their journeys and serving their needs.”
When you understand people, conversations and experiences are always better. These richer interactions build trust. And people love to buy from brands they trust. As that trust grows, they become willing to share more information about themselves – which creates the opportunity to deliver even more relevant experiences. Understanding what people want, need, and prefer enables brands to deliver customer experiences so relevant and respectful, people feel confident that they’re finding and engaging with brands on their terms.
“When you understand people, conversations and experiences are always better. These richer interactions build trust.”
What defines great customer experiences?
Recognized
The ability for a brand or organization to accurately, respectfully identify people – visitors, clients, shoppers, buyers, patients, constituents, business partners, etc. – across all touchpoints, online and offline.
Personalized
The ability for a brand to understand people, to vary marketing content based on in-the-moment wants, needs, and preferences of individuals interacting with the brand.
Private and secure
A brand’s commitment to respectful, compliant data-privacy practices and the most current and secure approaches to protecting data.
Which capabilities do brands need to deliver great CX?
1. Identity Graphs
A true enterprise identity solution forms a permanent backbone to a brand’s enterprise business. First-party, enterprise identity graphs hold the identifiers and signals that correlate with individuals. Organizing digital and offline first-party data with third-party insights, the graphs connect and maintain people’s identity across touchpoints, devices, channels, and identity relationships.
2. Data Hygiene and Enrichment
It is critical that data is cleaned, corrected and complete. Brands should add privacy-compliant second- and third-party data to expand its understanding of customers and prospects; it then can enhance the brand’s customer connections with demographics, life events, and other attributes.
3. Unified Single View of the Customer
One critical part of unifying customer data is identity resolution. Identity resolution, or identity stitching, is the process of correctly attributing multiple data points to the same person, and assigning that person a permanent customer ID. A unified customer view is a record that gives a brand a comprehensive understanding of its visitors, customers, prospects, and subscribers based on every interaction that it has with the brand.
4. Data Privacy, Security, and Governance
Data privacy is the protection of personal data from those who should not have access to it and the ability of individuals to change, and decide who can access, their personal information. Data security consists of the solutions, processes and procedures that protect personal data from unauthorized access or corruption. Data governance is the defined policies and procedures for maintaining data security and privacy compliance.
5. Analytics for Customer Journey Optimization
Brands must have the ability to use the latest predictive analytics, custom modeling, machine learning, artificial intelligence, and segmentation techniques to deepen their understanding of their customers – for example, increasing customer lifetime value by identifying which next-best offer aligns with customers’ needs and preferences.
6. Real-Time Personalization
This capability enables brands to vary the value proposition of their products and services, at the moment, based on the unique attributes of people as they interact with the brand – whether on a website, mobile application, call center or in person. It enables the brand to emphasize messaging that resonates with people based on their activities, interests, and opinions.
What part does a CDP play in all of this?
When integrated effectively into a brand’s martech and adtech ecosystem, a CDP is designed to collate, centralize, and support a unified view of data, giving marketers the clarity needed to deliver true relevance. See the figure below.
At a top level – and note that features vary between CDPs – they are designed to help marketers:
- Generate a single customer view across marketing channels.
- Collect and integrate customer data from digital and offline systems – connecting with source systems, such as marketing applications and customer relationship management systems.
- Manage customer views. Combined with an effective first-party identity solution, a CDP can support a true single customer view.
- Create segments for real-time marketing applications.
- Expose data to other systems – including customer analytics and customer engagement platforms.
It’s true that, at its core, a CDP works to unify information about customers from on- and offline channels to support a single view. But a CDP should always be implemented as part of a wider data ecosystem, supported by an effective data strategy, identity resolution, and data management tools. A CDP is only as good as the data that goes into it!
How does a CDP work?
A CDP captures customer data from every interaction and channel—shopping, buying, registration, support, reviews, follow-up promotion, in person, online, mobile, etc.—cleans and structures the data while ensuring privacy and security compliance, unifies that data into centralized customer records and audiences, and provides the appropriate data from those records to appropriate applications and channels within and outside of the enterprise, at the appropriate time.
What’s the history of CDPs?
Customer Data Platform (CDP) was first described by David Raab, founder of the CDP Institute, in an April 2013 blog in which he stated, “It has taken me a while to connect the dots, but I’m now pretty sure I see a new type of software emerging. These systems that gather customer data from multiple sources, combine information related to the same individuals, perform predictive analytics on the resulting database, and use the results to guide marketing treatments across multiple channels. The new systems can also feed sales, customer service, online advertising, point of sale, and any other customer-facing systems. I’ll…hereby christen the concept as ‘Customer Data Platform’.”
By 2016, there was enough interest in CDPs that Gartner produced a Hype Cycle covering the technology and Rabb established the CDP Institute. According to Rabb, the purpose of the institute was to explain the CDP category to potential users, technology companies, media, and others.
Since then, CDPs have come a long way and are now an established market with the blessing of analyst firms like Gartner and Forrester. According to MarketsandMarkets.com, the global CDP market size as per revenue exceeded $4.8 billion in 2022 and is poised to hit around $19.7 billion by the end of 2027 and is forecasted to reach a CAGR of 32.4% for the anticipated period, 2022-2027.
How do CDPs differ from CRMs and DMPs?
“A CRM and CDP have some overlap in terms of functionality, as they’re both data management platforms. But generally, a CRM system is primarily to support sales, while a CDP delivers a more complete view of customer relationships beyond the sales cycle.
CRMs are also more limited in scope than CDPs, as they do not necessarily provide the development environment or integration flexibility to support the full customer experience cycle. CRM systems are more focused on managing customer behavior, business transactions and process management.”
“The biggest difference between CDPs and DMPs is the type of user data they gather. CDPs primarily gather first-party data—it comes directly from an advertiser’s company. For example, if a customer creates a website account to buy something, their purchase history becomes part of that business’s first-party data. DMPs use third-party data, which is gathered by a data collection company through cookies and other secure browsing trackers and then sold to advertisers.
Next, a big point of differentiation is the use of personally identifiable information (PII). PII refers to data that identifies an individual, such as a full name, phone number, or address. CDPs can collect this type of information with user permission while DMPs use anonymized data to comply with privacy laws.”
What are some examples of industry-specific applications, use cases and user journeys?
Financial Services
Goal: Personalized credit card offers shown to a customer visiting a website based on previous products purchased.
Challenge: Sending the best credit card messages to customers across all channels
CDP Solution: It should develop models to predict response to alternative treatments, select best channels, select best timing, and make other choices to determine best credit card-based interactions for each customer. It then should send instructions to delivery systems to execute.
Travel & Hospitality
Goal: Next best action – companion travel offers – delivered as the right message at the right time, in the right channel, improving overall customer experience and engagement.
Challenge: Select the best travel or hospitality product or service for known customers in real time based on their past interactions.
CDP Solution: Receive a real-time stream of travel-minded visitor behaviors and IDs from a channel system; use the ID to find a visitor’s portrait in the CDP; apply rules or predictive models to select the best rental car, tour, dining options, etc., using customer data; send to the channel system for delivery; track behavior during the session and make new adjusted selections.
Telecommunications
Goal: Tap into prepaid and postpaid telecom needs and preferences based on users’ website activity and offer a personalized browser push to revisit the site.
Challenge: Provide customer-level data on mobile payment preferences to the personalization system.
CDP Solution: Specify payment preference data elements to use in personalization; specify list selection criteria; create a list with data elements included and send to the delivery system.
Insurance
Goal: Personalize lead nurturing by following up on an auto insurance inquiry in the call center with a customized offer via email.
Challenge: Decide which channels work best for each customer.
CDP Solution: Analyze the history of interactions by channel for each customer; identify the channels customers prefer and drive messaging through those channels via an API.
Automotive
Goal: Increase engagement and time on site with personalized vehicle content, omni-channel promotion, and by determining in-store readiness.
Challenge: Link optimized online and potential offline data relating to the same customer.
CDP Solution: Ingest data; then use rules and reference data to link online and offline IDs; combine related data into a unified customer record.
“Brands should consider several points when evaluating customer data platforms, such as vendor heritage, experience, flexibility, scalability, and the scope of integration in the enterprise.”
How to select the best CDP for your organization
Brands should consider several factors when evaluating CDPs, such as vendor heritage, experience, flexibility, scalability, and the scope of integration in the enterprise.
It is also important to remember that there are hundreds of CDPs available in the market. Not all do the same thing; some mainly look after the data, and some specialize in decisioning, or analytics, etc. Brands should identify the gaps in their organization and the business goals they want to achieve, and then use these as a guide to evaluate a CDP.
Before a brand begins to evaluate CDPs, it will need to conduct some self-discovery:
- What challenges does it need to resolve? What KPIs will the CDP produce or improve?
- What is the use case prioritization and roadmap?
- What data will fuel the CDP? What are the data origins? How will the brand activate it?
- Is the organization ready to adopt a CDP? What changes will it introduce?
- How will the CDP be rolled out?
- Has the brand identified the right governance model for the CDP’s rollout and operation?
Once those questions are answered, the brand is ready to begin assessing CDPS for:
Step back from the hype to conduct a careful needs assessment. Is a CDP truly the right solution for the use case, and if so, does it include all the necessary capabilities? A brand should start by reviewing its existing technology and identifying the gaps in its organization and data ecosystem and then use this to determine CDP requirements. For example, does the brand need a solution to unify its data and provide a single customer view? Is a next-best-action engine needed?
Is the solution scalable, both from a configuration and software-as-a-service perspective?
Brands should assess their key performance indicators and revenue needed to justify a CDP investment to drive their business forward. They should evaluate the expected payback timing for the investment. Is the CDP being implemented as a foundational, enterprise-level component that must serve the needs of many business units and stakeholders from Day 1? Is the goal to have a CDP that can plug into a brand’s tech stack to drive revenue from 2-3 high value use cases from day one, with the ability to extend to cover new use cases in the future? This decision can mean the difference between implementations that are measured in weeks or months.
Does the brand need a decisioning capability in the CDP to inform the next-best action strategy? A good CDP will ingest and activate real-time data, supporting a single customer view, so brands can act relevantly in the moment.
Can the wider marketing team run and use the CDP, create segments, customer journeys, and other tasks? Some CDPs need more technical expertise – brands should ensure that their technology and internal skill sets align. If not, a brand should consider engaging a CDP service provider.
A brand’s data strategy must support its CDP use case and because aCDP is only as good as the data that feeds it, a brand should explore what data its CDP can manage, making sure the solution can manage data from all systems needed and can provide data governance rules to ensure personal data is used correctly.
Brands must consider whether they have the resources, experience and skills to implement the solution. Will they need third-party technology and services? They should keep in mind that many organizations struggle to realize the full holistic value of a CDP without expert support.
Many CDPs are not designed to support omnichannel analytics and closed-loop measurement use cases. Brands should consider if they have – or require – a solution to achieve this, and whether the declared capabilities of a particular CDP can address all the requirements.
Assessing and weighing these factors is key to deciding the best solution that will align with a brand’s existing technology – and that addresses the full spectrum of the organization’s needs and goals. Of course, this path can be complex, and with many solutions available, it often helps to partner with an objective, experienced expert to help assess potential CDPs.
What are the steps in adopting a CDP?
To ensure planning is thorough and fruitful, brands must define business goals, data strategy, and use cases before selecting a CDP that will achieve its full potential and ROI. Here’s the checklist:
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Secure internal buy in: Can the brand successfully implement, integrate, and optimize a CDP within its data ecosystem? Or is it partnering with an implementation expert who can support these skills? Whichever approach is taken, it’s important to make sure that all staff who take part in the operation of the data ecosystem are on board with the CDP implementation and have a plan to begin fueling the CDP with data. Internal IT teams, stakeholders and partners all need to be involved and briefed and must understand the plan, goals and objectives, well in advance of the implementation.
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Secure external buy-in: Just as the internal team needs to understand the implications of a CDP rollout, external teams and partners must also be on board, aligned and prepared in advance. Brands should allow sufficient time for impact assessments.
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Support discovery: Planning workshops and discovery sessions are important and must include all subject matter experts and stakeholders who will be critical to a successful CDP rollout and its effective long-term use. In these sessions, it’s important that all the stakeholders are on board with the investment, and any concerns, gaps or roadblocks are identified and resolved.
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Assign ownership: To keep the implementation process running smoothly, once all stakeholders understand and are on board with the implementation, it helps to assign key project ownership roles and responsibilities to each subject matter expert per functional area.
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Plan: Brands must establish simple, clear weekly updates, and track how the CDP implementation project is progressing. This should highlight key milestones and give each stakeholder a clear update of the status of implementation, rollout, and use. With the right consideration of project management and framework, implementing and integrating a CDP can be straightforward. Getting it right is key; without effective integration with other data tools, the CDP will not have the insight necessary to perform well. Equally, ensuring the wider team is on board with the rollout, understands use cases and user journeys, and is trained in how to use the CDP is critical for its effective long-term use – and ROI.
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Implement: Not all CDP providers offer the necessary level of end-to-end support, so it is wise for a brand to ensure it has the insight, expertise, and support level it needs for success. Ahead of any CDP investment, experts may be needed to help: Capture use cases, user journeys and other requirements, evaluate solution options based on use cases and user journeys, plan and design based on use cases and user journeys, implement unify and enhance the data, integrate data into right applications across the enterprise, and continually optimize through holistic analytics and closed-loop improvements.
“The ultimate question is whether brands fully understand their customers’ needs and whether they are reaching people with personal, relevant, and timely brand experiences through every channel.”
What are the steps in optimizing/modernizing an existing CDP?
If a brand suspects its CDP investment is not optimized, the right place to start is defining customer needs, the organization’s use cases and user journeys, and data readiness. The ultimate question is whether a brand fully understands its customers’ needs and is reaching people with personal, relevant, and timely brand experiences through every channel?
Here is a brand’s y checklist:
- Have you assessed the current state of your CDP against current and future use-cases?
- Have you assessed your data readiness; are you:
- Do you need help navigating the complexities of privacy, compliance, and data governance in your market?
- Do you need expert help managing platform administration, workflow execution, campaign management and customer journey orchestration, or optimizing your real-time personalization ecosystem?
- Applying hygiene and standardization to your data and any added data
- Expanding your customer knowledge with demographics, buyer propensities and enhancement data?Applying persistent IDs providing holistic, first-person identity across marketing, with household views?
- Do you need help navigating the complexities of privacy, compliance, and data governance in your market?
- Do you need expert help managing platform administration, workflow execution, campaign management and customer journey orchestration, or optimizing your real-time personalization ecosystem?
- Supplementing your analytics capabilities with predictive insights and segmentation?
- Do you need help navigating the complexities of privacy, compliance, and data governance in your market?
- Do you need expert help managing platform administration, workflow execution, campaign management and customer journey orchestration, or optimizing your real-time personalization ecosystem?
How will CDP’s evolve in the next three to five years?
CDPs will continue to scale out from the more traditional acquire, grow, and retain roles to other data ecosystems requiring integration of data across platforms such as: (1) CRM, social media, data warehouses, analytics, etc.; (2) new and/or updated devices and technologies; and (3) emerging tech such as chatbots, voice assistants, and Internet of Things (IoT) sensors and devices.
A thoroughly integrated CDP enables timely decision making without gaps. To meet this requirement, CDPs will begin integrating activation capabilities directly into their platforms, enabling a smoother flow of data-driven enhancements from audience segmentation to real-time decision making and optimization.
As AI and ML tools have become faster and more pervasive, CDPs are also ramping up algorithmic-based automation capabilities. Within CDPs, AI/ML will help identify patterns in customer behavior, personalize marketing messages, create sales content, provide customer service, and automate critical business tasks.
Composable or hybrid CDPs will offer more flexibility in terms of customization and allow for greater control over data management and activation by using a centralized cloud data warehouse and then building segmentation, enrichment, and streamlined activation on top. This hybrid architecture, which is sometimes associated with the concept of “no copy” or “zero-copy” architecture, will become the new standard for most CDPs.
Most CDPs take a privacy-first approach and are implementing features such as data governance and consent management. As the amount of data collected continues to grow, so does the importance of data governance: data quality, privacy, access rules, and security. As a result, we can expect to see increased emphasis.
“AI/ML will help identify patterns in customer behavior, personalize marketing messages, create sales content, provide customer service, and automate critical business tasks.”
What’s next?
CDPs are large, important investments. Treat them accordingly.
Today’s “know-me, understand-me” marketplace requires a holistic single source of customer truth to drive marketing personalization, distribution, and analytics in real time across all interactions. Understanding what people want, need, and prefer in the moment helps brands deliver experiences so relevant and respectful that people fall in love with them. Thus, the motivation for investing in CDPs. But are you getting all the value you can out of your CDP investment?
Ask yourself: Are you a new appliance do-it-yourselfer? When you buy a dishwasher or HVAC system, do you break out the toolkit and start the installation, configure the wiring, and tune it for best performance? Most of us don’t. We know these complex machines, designed to make our lives better, also require a level of expertise to implement, configure, and maintain. For a brand, CDPs can be that way too.
To gain a brand perspective on martech service partnerships, Acxiom commissioned independent research from MTM, an international strategy and research agency to uncover the most common reasons brands work with CDP service partners. It’s a free reference to visit when you are at a CDP crossroads.
