With the plethora of avenues from which they can get information, a buyer’s path to purchase becomes a process that involves several touchpoints and interactions.
When was the last time you searched for something online with the intent of buying? Perhaps you searched for an office desk for your new work-from-home setup? As a buyer, your journey probably looked like this.
- Searched for the “best office desk of 2021” and took note of what you liked
- Visited review sites to see how the desks fared with real-life users
- Checked e-commerce sites like Amazon and retailers’ websites like Ikea or Walmart
- Went to physical stores that sell office desks
Once you’ve decided on the perfect desk for your needs, you do additional research. This may include looking for the best place to buy that specific desk and searching other sites to compare prices or look at alternatives. With each action, you may have started to notice that each experience seems to have become more tailored to suit your needs. Ads become more relevant and marketing emails come across as more personalized.
It seems as if, by some sort of magic, brands know exactly what you want. How are businesses leveraging information like transactional, demographic, and behavioral data to create curated and relevant experiences for consumers?
Marketing has become a complex activity that involves various channels and devices, approaches, applications, and challenges. Furthermore, consumers today have high expectations from businesses. They assume or expect businesses to know who they are and what they want. They expect to be provided with tailored solutions anytime they’re needed and for these to be available across all channels. If you’re unable to meet customer expectations and demands, business growth and sustainability might be difficult to achieve.
Integrating information and acting on key insights are among the greatest challenges that marketers and businesses face today. Traditionally, data comes from a variety of sources and are stored in separate systems that weren’t designed to integrate with other pieces of information. Confined to silos, this makes it difficult for businesses to gain actionable insights that enable them to provide engaging and consistent customer experiences across all channels and devices.
Creating a unified customer experience using customer data has become a top priority among marketers. This is where customer data platforms (CDPs) come into play.
How a Customer Data Platform Can Transform Your Business:
What is a Customer Data Platform (CDP)?
A customer data platform or CDP is software that’s designed to collect and integrate customer data from multiple sources to create a persistent, unified customer database. It stems from the need to have a deeper, more intimate understanding of consumer preferences and to deliver more customized experiences.
Unlike siloed data, which operates in confined systems, CDPs enable other systems to utilize available data to take appropriate action on customer interactions. The problem with siloed data is it doesn’t necessarily translate or share a customer’s experience from one platform to another.
For example, a customer is using a mobile app to interact with your company. This customer expects the interactions they had on the mobile app to translate to experiences with, say, your website or your physical store. Without a unified database, you’ll end up with different datasets for each interaction that are generated from the same customer. This creates a lot of confusion and disconnect, preventing you from creating a consistent experience across multiple channels, which consumers have come to expect from businesses.
CDPs allow these systems to analyze, monitor, and manage data from such interactions. Aggregated data can include behavioral data, product usage data, browsing data, event data, and transactional data.
For a CDP to be considered fully functional, it has to have six core capabilities, as outlined under the Customer Data Platform Institute’s RealCDP program:
- Able to absorb or collect data from any source
- Capture full detail of gathered data
- Store said data for an indefinite period of time—note that this is still subject to privacy constraints
- Create unified profiles of individuals you’ve identified
- Share data with any system as necessary
- Respond in real time to new data that’s made available as well as to profile requests
How a Customer Data Platform Works
A customer data platform collects all of our customer data into a single, unified database. It can create a holistic customer profile from CRM interactions, for instance, and combine disparate databases like service software and marketing cloud systems. This process is called customer identity resolution. It enables systems to stitch identifiers, such as email addresses, physical locations, and anonymous cookies, that are coming from various systems to create a single customer profile.
It will then reconcile this customer profile with the available information you have from your existing customers (like their email) and from website cookies and mobile device IDs. This creates a pathway that maps out the customer’s interaction with your business.
After creating a unified database, your data should be made available in real time so you can immediately respond to consumer needs and start delivering tailored experiences.
Aside from being a tool for collecting data and creating a unified database, a CDP has two other primary purposes:
- Customer data management
A customer data platform has the ability to control data flows, enabling marketers to effectively manage first-party data, consumer privacy, and data rights. CDPs also help you meet consumer and data privacy regulations.
- Customer data activation
Customer data activation lets you take action on consumer’s data, allowing you to use information from customer interactions so you can create more targeted marketing campaigns.
CDPs are capable of automatically updating their databases whenever new data from various sources, such as your CRM and web forms, becomes available. After collection, a CDP can then structure this data to create centralized customer profiles that you can then use to identify and engage with customers, upping their lifetime value.
CDP and Customer Data
Customer data is integral to business and marketing. It refers to information about consumers that businesses collect. This data collection is done in order for businesses to have a deeper understanding of customers, which, in turn, allows them to effectively communicate and engage with them.
Your customers provide you with data through interactions with your business and can be done through various online and offline channels such as your company’s website, mobile applications, and marketing campaigns. Other avenues for data collection include tracking pixels, contact information, customer feedback and surveys, and website analytics.
But why is customer data crucial?
Customers expect to have good service that’s tailored according to their preferences. If you want to win customer loyalty, you need to deliver a seamless, consistent, and engaging customer experience across all channels. This means providing customers with relevant recommendations and personalized communications whenever they need it. Failing to meet these expectations can drive customers away from your business.
What can you do to give them the best personalized service? Use customer data.
Customer data serves as the backbone behind every effective marketing campaign and business strategy. The need to leverage all this data gave rise to CDPs.
Do CDPs just collect all types of data? Not exactly. Customer data platforms primarily collect and organize four types of customer data:
Also known as basic data, identity data acts as the foundation of every customer profile. These pieces of information will then be used as a basis for audience segmentation. Standard or basic data can include:
- A contact’s name
- Email address
- Contact details
- Location information
- Linked organizations
- Demographic data
Descriptive data is more robust and provides you with more in-depth information about your customer. This type of data can include career information, family information, and lifestyle information.
Behavioral or quantitative data provides insight into a customer’s interaction with your business. This can be collected through avenues such as:
- Online interactions with your business, such as free trial sign ups, account logins, and product views
- Transactions, which give you access to transactional information, like data on how much that particular customer spends or how often they make a purchase
Qualitative data paints a fuller picture of your customer. It lets you view things from their perspective and tells you why they do what they do. This information, in turn, allows you to make informed marketing decisions and recognize patterns that may help you improve. Qualitative data covers aspects like:
- Motivation, which examines the intent behind a customer’s actions or what pushed them to perform a particular action
- Opinion, which is essentially knowing how a customer feels or thinks about your product or service
- Attitude, which tells you about a customer’s particular preferences, such as a favorite color or food
Note that data collection and storage is subject to rules and regulations. Each country has a unique set of regulations. To make sure that you’re complying with your country’s requirements on data collection and storage, it’s best to study these regulations and seek professional legal assistance.
Uses for CDP
A CDP is a versatile tool that has a variety of uses. Below are some of the common use cases for customer data platforms:
Businesses can use CDPs to create a more customized marketing approach that would appeal to your target audience. For example, when someone checks out your website but doesn’t complete a desired action like making a purchase or signing up for a newsletter—a CDP can create a unified profile that helps you craft a personalized offer, like a custom email, that can encourage that person to go back and engage with your business.
- Control or Retargeting
You can use CDPs to control who you’re targeting. For instance, by using a CDP, you can have access to a unified profile that tells you about a customer’s behavior, whether they’re a patron or not. If the person is already engaged with your business, you can change your target and strategy and focus on acquiring new customers instead.
- Data unification
CDPs are capable of uniting all your customer data from online and offline sources, allowing you to stitch a unified customer identity from various channels.
- Predictive analytics
CDPs let you utilize data so you can run predictive models and predictive analytics. With CDPs, you get insight into customer behavior and motivations, allowing you to determine their likelihood to interact with your business, make a purchase, and even their likelihood of churning.
- Recommendation engines
Similar to how customer data is used to generate predictive analytics, you can use customer behavior data, such as when a customer bought or returned a product in the past, to run split tests and improve the recommendations shown to the customer.
With data come valuable insights. However, if you’re employing a traditional silo for data, you won’t be able to maximize all the information that you’re getting. A CDP will enable you to leverage different types of data from multiple sources and share it to other systems.
For example, by using a customer data platform, you’d be able to share a customer’s marketing and website interaction data with your sales department so they can develop strategies for engagement.
Key Benefits of CDP
A customer data platform is a powerful tool but what can you gain from using a CDP for your business?
- Streamlined customer data management
CDPs let you streamline your customer data management, which refers to the process of collecting, organizing, and using customer data. Moreover, given that CDPs automatically update when new data is available, it allows for greater flexibility and agility. This ensures that your customer data and customer profiles and segments are updated regularly.
CDPs also promote efficiency, as they allow you to utilize multiple data sources in real time. You won’t have to spend a lot of time manually managing, verifying, and checking your data for duplicates.
- Provides a single view of the customer
CDPs provide businesses with a single view of the customer, or a unified and comprehensive profile of a customer across multiple channels and devices. This eliminates data silos, allowing you to share data to other systems.
- Improved customer experience
CDPs play a major role in delivering better customer experiences. This is because a customer data platform creates a unified database that you can use to create a consistent experience for customers regardless of the channel or device they’re using.
Furthermore, a customer data platform can help you develop more targeted and personalized strategies, while ensuring that your messaging is relevant to your target customers. You can also use a CDP as a springboard for building audience engagement and monitoring and responding to customer behavior.
- Compliance with regulations
CDPs help you comply with privacy regulations such as the GDPR, CCPA, and other privacy laws. A customer data platform helps you respect your customers’ data privacy and, hence, gain or maintain their trust. Additionally, CDPs are great for compliance because it is able to provide you with a history of how and where the data was collected, along with how it’s used.
- Eliminates data silos
CDPs effectively eliminate data silos, which prevent you from making customer data available to all systems within your organization. To thrive, all your data should be available across all systems, whether it’s sales and marketing or customer service.
With CDPs, you have access to a unified and centralized database that’s available in real time and can make informed and immediate decisions.
- Paves the way for more insightful analytics
A CDP is capable of providing you with better insights. This is again because of the centralized database. With a customer data platform, you’re able to better understand customer behavior and create a comprehensive map of their journey. A CDP combines four main aspects that drive customer analytics, which are data collection, data sorting, data storage, and data analysis.
CDP vs. CRM vs. DMP: Which is Which and Which One Do You Need?
A CDP may overlap with other tools or systems, particularly customer relationship management (CRM) tools and Data Management Platforms (DMP), in terms of functionality. This may cause some confusion. However, a CDP is not a CRM system. It’s also not a DMP or even a personalization tool.
CRM vs. CDP
While both CDP and CRM collect customer data, the former creates a unified customer profile using the data collected, while the latter monitor’s a customer’s intentional actions.
Customer relationship management focuses on customer-facing interactions. CDPs collect data on customer behavior in relation to your product or service. CDPs are especially useful for behind-the-scenes roles or non-customer facing roles, which can include marketing and product development.
For example, marketing can use data collected by a CDP to create personalized email campaigns. Your product development department can also use the unified data to improve your product and boost customer engagement.
Furthermore, CRM only collects basic data, unlike CPDs, which collect information that can help you map a customer’s journey. A CRM platform collects data manually and has a very specific purpose. Meanwhile, CPDs are able to gather data automatically through integrations and code snippets. This allows you to collect data from sources like mobile devices or apps into a database, which you can then use and distribute as needed.
Given that CRMs are focused on customer-facing interactions, they’re well suited for improving your interactions between your customers. A CDP is especially useful if you’re looking to gain a better understanding of your customers, their behavior, and their motivations.
So, should you opt for a CRM or a CPD? The good news is, you can definitely use both!
If you want to improve customer relationships, then use a CRM, which you can then complement with a CDP so you can get a fuller picture of how customers engage with your business.
DMP vs. CDP
Now, when it comes to the CDP vs. DMP debate, there’s no right or wrong answer. Like in the case of CRMs, you can use both CDPs and DMPs.
But what is a DMP anyway?
Unlike CDPs, which collect data from both anonymous and known persons, a data management platform is used to obtain and manage data from anonymous data sets. You can get data for DMPs from data sellers or if you have a large number of users. One good example of a DMP is Facebook, which collects user data that they then use to show optimized ads to targeted users.
Furthermore, a CDP primarily uses first-party data while DMPs leverage second and third-party data. A CDP can also store collected data for an indefinite amount of time while DMPs are only capable of storing data for a limited time.
DMPs are primarily useful for creating marketing campaigns if you’re working on acquiring new customers. This is because DMPs use third-party data, which gives you access to new potential customers. Given that CDPs leverage first-party data, they’re ideal for creating highly personalized campaigns for an audience that has already interacted with your business.
Which one you end up using will boil down to what your goals are. However, keep in mind that some of their functionalities overlap.
Regardless of which tool or platform you use, it’s important to note that when collecting and handling data, you should always do so in a legal and ethical manner.
Leveraging CDP for Customer-Driven Marketing
The bottom line is, a buyer’s journey is hardly a straight one, and each journey generates a significant amount of consumer data. A CDP lets you leverage all this data and turn it into actionable insights, allowing you to deliver better, more targeted, and more engaging experiences for your customers.
At the end of the day, it’s all about understanding who your customers are and what they want. Being able to offer them relevant solutions can spell the difference between success and fighting a losing battle.
Frequently Asked Questions
What CDP software can I use?
Some of the most popular customer data platforms you can use include:
Where should I look for CDP service providers?
One of the most reliable databases for finding CDP service providers is the Customer Data Platform Institute’s CDP Service Provider Directory. The agencies on this list provide a wide range of services, from consultancy to CDP implementation and integration.
G2’s list of the Best Customer Data Platforms (CDP) in 2021 doubles as a comprehensive resource for CDP service providers.
What’s the difference between CDP and marketing automation?
Marketing automation systems cover repetitive tasks and are also used for marketing practices such as segmentation and lead targeting. However, while marketing automation does have plenty of benefits, including being a time-saving tool that allows you to focus on other more complex tasks, it also has some drawbacks.
For example, automation is unable to keep up with growing customer channels and, consequently, all the data generated from these channels. CDPs are able to leverage this sheer volume of data, integrate it, and turn it into actionable insights that you can use to deliver omni-channel and cross-channel marketing campaigns.
What common CDP features should I be looking for?
When searching for a customer data platform, you need to look for the following features:
Integrations enable different software types to work together, creating a unified system. When it comes to CDPs, it’s important to select one that works well with your existing stack to ensure that you have a central database that holds all your customer data.
Security and compliance
Aside from opting for a CDP that has robust security settings, make sure that you also check whether or not it complies with data privacy regulations, such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).
A good CDP has the capability to generate robust data and sophisticated reports. Determine if it’s able to generate reports for customer engagement levels across different segments, ROI, and revenue attribution.
Aside from reporting abilities, also consider a CDP’s interface and dashboard. Choosing a customer data platform that has customizable dashboards enables you to focus on specific data and gain actionable insights that can let you craft more optimized and effective campaigns.
This enables marketers to better identify customers, which, in turn, allows them to offer more targeted and customized solutions based on customer profiles.
Other features to consider include persistent data gathering, data enrichment, cross-channel automation, and artificial and machine learning capabilities.