What constitutes a customer data platform (CDP) and what essential elements are required from a system to meet the demands of modern marketing?
Previously in our blog series, "A CMO's Guide to CDPs," we covered marketers’ challenges with creating customer-centric experiences. These challenges – the explosion in the variety, volume and velocity of data; the demand for personalised, omnichannel experiences; the death of the cookie; and requirements for data privacy and protection – are all contributing to organisations’ search for technology to manage customer data.
In this instalment, we share an excerpt from our e-book, “Transforming Customer Data into Insights: A Chief Marketing Officer’s Guide to CDPs,” about what constitutes a customer data platform (CDP) and the essential elements required from a system to meet the demands of modern marketing.
Marketing technology consultant David Raab developed the concept of a customer data platform (CDP) over a series of blog posts in 2013 and later went on to found the vendor-neutral CDP Institute, also developing the first definition of the term.
By 2020, the CDP Institute identified 133 CDP vendors and estimated annual industry revenue at $1.3 billion. While it’s clear that it’s a nascent, growing marketing technology segment, there’s still an emerging consensus about what constitutes a CDP.
The research and advisory firm Gartner has identified four such facets that a technology must feature to function as a CDP: data collection, profile unification, segmentation and activation.
We previously discussed the wide variety of devices and channels with which customers and brands engage. CDPs must not only be able to capture this data, but process and serve it quickly to account for its velocity.
A CDP must integrate this disparate data into a “golden record” or “single source of truth” for each customer, based on their personally identifiable information (PII). The basic task of profile unification is illustrated in the below figure.
Notice that in this example, two different email addresses are provided. A CDP must be able to integrate this divergent or even possibly conflicting customer data.
Profile unification is logistically and computationally demanding. A CDP which unifies this data based on exact matches alone risks discarding huge numbers of customer profiles. Many CDPs use sophisticated statistical models to match disparate pieces of PII based on probabilistic evidence. Identity resolution more generally is used to integrate identifiers from all devices, platforms, and channels to create a unified customer profile.
Customer segmentation is nothing new. The CDP serves to unify and simplify how marketers perform this segmentation. With all customer data integrated into a customer-level record, segments can be defined using information ranging from media engagement to purchase data to call center interaction data.
Finally, the CDP should facilitate driving customers to action through brand interaction. Done right, this goes far beyond the targeted advertisements of data management platforms (DMPs): customers should be driven to action by an omnichannel, cross-journey experience. For example, CDP activation looks like e-commerce showing users different offerings based on their last in-store or online purchases. Or it could be call centre and social media representatives using a particular script based on the identified needs of the customer’s segment.
The CDP Institute reported that the number of CDP vendors increased by 35% in 2020. How can marketers navigate this landscape? Gartner’s four facets offer one framework for evaluating whether a technology meets the requirements to serve as a CDP. But still, these features merely constitute the means of what a CDP does. Its ultimate end is to break down traditional marketing silos and establish customer-centric marketing.
Consumers today are looking for contextually relevant and highly personalised engagement across all touchpoints and channels. They are willing to have trusted brands work with their data in exchange for these experiences, so long as it is done transparently. Ultimately, the CDP offers a marked shift from “interruption marketing'' to “permission marketing.”
The technological benefits of a CDP are one thing. But how do you actually implement this tool in your organization so that it’s used successfully?
To learn about the people, processes and technologies required to adopt a CDP, check back soon for the next instalment of this series or download our e-book now: “A Chief Marketing Officer’s Guide to CDPs.”