What is a Customer Data Platform?

What is CDP?

Customer Data Platform (CDP), a term coined in 2013. CDPs are:

“A marketing system that unifies a company’s customer data from marketing and other channels to analyze customers to enable modeling and optimizing the timing and targeting of communications. It includes a user-friendly interface that helps activate customer data and enable personalization across multiple channels.”

David Raab, the founder of CDP Institute

In other words, It’s a smart data platform (a packaged software). CDPs are for marketers and don’t require users to have the skills of a developer or IT team. CDPs give users a complete, unified view of a customer’s history and habits. Additionally, CDPs can easily integrate with most technology stacks and systems.

In fact, CDPs were created to address customer demands for a better customer experience through segmentation. Furthermore, to address marketers’ need to launch and optimize omnichannel marketing strategies.

While earlier data platforms like CRM, DMP, and CMS solved some customer demands around personalization and consistent cross-channel experiences, they usually failed in unifying fragmented data sources. As a result, they created data silos and couldn’t make data easily accessible to different departments.

Before CDPs, brands delivered disconnected experiences to their customers. These experiences also didn’t take their context and preferences into account.

What is a Customer Data Platform? (In 60 seconds)

What is CDP in marketing?

CDP in marketing enables you to collect data about each customer across touchpoints and their entire customer journey and store it in a central data warehouse. In short, customer data can include first-party data, third-party data, and behavioral data among others. A data management platform gives you a 360-degree view of customer interactions across your marketing campaigns.

As visitors and individual customers interact more with your brand, their unified customer profile gets stronger. The more content and purchases they make, the better you can predict customer behavior, create audience segments, and personalize their journeys.

What are CDP marketing use cases?

So let’s take a hypothetical real-life example to see the value the right CDP can bring to your marketing campaigns.

Imagine you’re an online shopper on the hunt for a new messenger bag. You’re probably scrolling through social feeds like Instagram or maybe even looking for inspiration on Pinterest. 

Naturally, you’re already on your phone, so you’ll check out multiple sources. Maybe you’ll read a couple of reviews, visit your favorite brands, and comparison shop before making a decision.

Finally, you see a bag that really catches your attention. But you’ve got things to do, so you pause your search and go about the rest of your day. The next morning, you’re on your laptop, but you’re still thinking about that bag.

So maybe you check out a couple of other sites before heading over to Instagram (where you started your customer journey) to buy the bag you liked.

But that’s not the end of the story. You get the bag, and the straps aren’t as comfortable as you expected. So you get on your tablet and sign into your email to start the return process.

Customer journeys are rarely straightforward

If you don’t have a data management platform that’s keeping track of customer interactions across multiple touchpoints, channels, and devices in real time, then you’re limiting your visibility.

Incomplete views of the customer experience opens you up to reactive customer service, instead of proactive customer relationships.

What does a customer data platform solve?

CDPs are ideal for marketing teams with a growing customer base who aren’t tracking customer interactions or using data to create a persistent, unified customer database.

If you aren’t creating 360-degree customer profiles, then you may be in the dark. In short, you may be losing sight of who your customers are, what they care about, and why they may be leaving you for another brand.

Customer data platforms give you a window into your brand health, customers, and customer service. These platforms collect invaluable insights from multiple sources and identifiers to create a single customer view.

Customer data platforms solve visibility issues, siloed data, and marketing automation challenges by giving marketers a powerful yet easy-to-use solution to acquire, nurture, and retain their customers. 

From identity resolution issues from incomplete data sources to an actionable unified customer profile, CDPs enable marketers, sales, and customer service agents to proactively solve customer problems and improve their customer experience.

What qualifies as customer data?

Customer data is information your customers provide when interacting with your website, mobile apps, social media, marketing campaigns, and offline channels.

CDPs can collect data from first and third-party sources like web forms, transactions, email, social media, your website, mobile apps, call centers, in-store activity, and more. 

CDPs work best when they receive detailed and thorough customer data from all channels. If you can’t provide data from wide range of sources, you may miss personalization and revenue opportunities.

The types of customer data CDPs ingest

Behavioral Data: tracks a customer’s actions during a session on a website, an app, or a browser on a mobile device.

• With such data, you can calculate essential metrics like customer engagement, reach, and impressions of a specific campaign.

Demographic Data: a customer’s name, address, contact information, birthday, occupational info, and more.

• In certain CDPs, you can predict a users’ behavior, such as their likelihood to purchase or likelihood to churn, based on such data.

Transactional Data: a customer’s purchases, return actions, information gathered from payment systems like POS, and transactional activities on eCommerce sites.

• This data is vital to calculate principal metrics like customer lifetime value (CLV) and return on investment (ROI).

On the more technical side, to feed the vast amounts of data that CDPs are built for, they use their SDK and ingest data in different formats like real-time data streams, JSON, CSV, and accept SQL queries and even allow API access.  

Following the data collection step, the second pillar of a CDP is the integrations that help you use various types of data within the platform. By integrating transparent systems into execution mechanisms, you can turn this data into gold. 

With the insights you get from this data, you can set highly personalized and contextualized campaigns, trigger specific actions in your customer’s journey, and stitch the customer experience across channels and devices in a seamless way.

Why should you invest in a CDP?

According to the Gartner CMO Strategic Priorities Survey 2021, 39% of CMOs plan to increase sales of existing products to existing customers, and 34% will introduce new products to existing customers in 2021. As the global economy recovers, CMOs are focused on low-risk activities.

That’s not surprising considering how much more expensive it is to acquire a new customer vs. retaining an existing one. CDPs can help you with identity resolution through data collection across desktop, mobile apps, tablets, channels, and social media.

Customer data platforms can also reveal targeting issues. If you don’t have a single customer view, then you may be trying to convince and convert audiences who aren’t qualified to become your customers.

CDPs can collect first-party data

Your CDP can help create and refine your buyer personas. This packaged software collects first-party customer data including:

• Behavioral data
• Demographic data
• Affinities
• Pain points and friction
• Historical purchasing patterns
• Likelihood to purchase (LTP algorithm)

Combined with third-party data (aka cookies), marketers get a clear single view of their visitors and customers can perfectly stage experiences and right time messaging that’s relevant and aligned with each customer’s goals.

CDP vendors expand your ability to retain your existing customers and serve them personalized, cohesive cross-channel experiences that help them form a positive impression about your brand. 

The right CDP gives you the insight and tools to deliver delightful experiences at every interaction. This enables you to become a lovable brand that customers can’t get enough of and can’t wait to tell their friends and family about.

A note on CDP and Customer Data Management

With the GDPR, CCPA, and other data privacy regulations coming into effect, companies are looking for ways to collect and manage customer data in a compliant way.

CDPs provide a centralized platform for storing and managing customer data, making it easier to keep track of consents and stay compliant with the law.

(In order to be compliant with GDPR, companies must ensure that their CDPs have the necessary security and privacy features in place. For example, CDPs must provide customers with the ability to opt-out of having their data collected, and they must also have data encryption capabilities.)

Comparing CDP with other marketing systems

CDP is often compared to other systems like CRM, DMP, and personalization engines (PE). Although some functions of a CDP are similar to these systems, overall, the results that CDPs deliver differ. Many marketers may already be working with some of these data systems to support their goals. While some of these may complement a CDP, some fall short compared to the capabilities a customer data platform can offer.

Comparison chart showing the overlap between CDPs and related marketing technologies