Introduction to CDP
Marketing organizations are facing more challenges than ever. There are now more channels to target, higher levels of competition & much more fractionalized audience. The only way to truly have an edge over the competition is to deliver highly targeted, intent-based content & messages. In order to personalize marketing for the customer, the marketing & operational systems need to talk to one another. With many organizations using between 10-30 marketing technologies, the amount of data being collected is growing at an exponential rate. But there’s limited integration among the systems, causing data silos. Data resides with one system or organization, rather than being shared in a collaborative manner. This results in data inefficiencies, inconsistencies, and a reduced ability to use it for insightful analysis. Marketers are starting to realize the data problems and the importance in implementing a comprehensive data strategy to better control end-to-end customer experience.
That’s why Customer Data Platforms are gaining popularity as a highly valuable marketing tool that helps create a unified data platform for marketing organization to enhance customer journey. The industry is currently experiencing huge growth, with cdpinstitute.org stating that the number of CDP vendors and employment have both doubled in the past year, while funding has increased by $280 million (29%). The total revenue for CDP vendors is expected to exceed $1.2 billion by the end of 2019.
“86% of CMOs believe that they will be able to own a complete, end-to-end customer experience by 2020.”
Given the magnitude with which CDPs have the potential to transform the marketing industry and customer engagement, it is important for marketers to understand how this can become part of their marketing toolkit.
What is a Customer Data Platform?
A Customer Data Platform is a marketing system that seeks to unify customer data into a system that creates a persistent database that can be accessed by other systems. The original definition provided by David Raab defines a Customer Data Platform as “a marketer-controlled system that supports external marketing execution based on persistent, cross-channel customer data.” This process creates a 360° view of the customer from the marketing perspective. This enables organizations to implement data-driven initiatives. Since many of the marketing technologies are in siloes, the CDPs enable marketers to tie the data together between the systems in real-time, enabling them to segment & target their customers better.
How Does a CDP Work?
Despite the many capabilities and functions of a Customer Data Platform, the premise on which they work is fairly simple. They function by pulling data from multiple sources, cleaning it, and re-structuring it in a way that makes it available to other marketing systems for personalized marketing activities. Depending upon the capabilities of a specific platform, they may also have additional functions such as advanced data analytics, content marketing, predictive capabilities, etc.
Some of the key capabilities (as per definition by Raab) that CDP need to provide include:
- The ability to personally identify customers and their contact information.
- The ability to load and store the client’s customer data.
- Accept inputs from multiple data sources and different formats.
- The capability to link data from different sources to the same customer.
- The ability to make the data available to external systems.
- Allow for marketer control.
- The ability to apply processes that make the data more useful for marketing.
Given the scope of functions these platforms provide, they are incredibly robust and can greatly simplify the personalized marketing process.
How is a CDP different from a DMP or a CRM system?
There may be a tendency to believe that a Customer Data Platform provides the same functions as a Data Management Platform (DMP) or a Customer Relationship Management (CRM) tool, but this is not the case. In fact, organizations use CDP in tandem with DMP & CRM tools.
|Type of Data||1st party data (Known IDs)||1st party data (Known IDs)||3rd party data (Anonymous data)|
|Real-Time Data||Yes (e.g. website/app behavior)||No||No|
|360-degree profile view||Yes (ability to integrate data from various systems)||Limited view||No|
A Data Management Platform (DMP) allows organizations to target anonymous audience based on 3rd party data. It helps identify potential individuals based on demographic data including age, gender, salary, etc. based on the behavior or data provided on 3rd party sites. This data is not persistent data (i.e. you can’t pull up the past data), is temporary and contingent upon the lifespan of a cookie, which usually is around 90 days. They usually have limited ability to integrate with 1st party data.
CRMs are one of the most frequently used customer engagement tools, and they do capture persistent customer history. However, like a DMP, they only capture data from a limited amount of transactions, usually direct transactions and interactions. They are typically not managed by marketers.
Customer Data Platforms, on the other-hand, stores 1st party data that is assimilated from various 1st party sources such web and mobile, CRM and other offline data sources, transactions and other behavioral data. It can also integrate with 3rd party data platforms in order to further create a 360-degree view of the clients. Customer Data Platforms (typically owned by marketers) are real-time and allow marketers to take an action immediately when a trigger occurs. Also, since the data is persisted within CDP, marketers can look at the past data and create custom audiences as needed with a lot of flexibility.
So, DMPs and CRMs are only capable of providing a snapshot of a part of the customer profile, and sometimes for a brief period of time. Whereas a CDP provides comprehensive and persistent customer profile.
When a CDP is integrated with a DMP, it can provide a significant value to organizations to not just understand customer based on the 1st party data, but also the 3rd party data. The below diagram displays an example of various profile data that can be leveraged for campaigns when as CDP & DMP is combined, leading to a highly personalized customer experience.
How is the CDP market evolving?
The Customer Data Platform market is currently characterized by huge growth and rapid deployment. The number of data sources has grown astronomically, which is providing the opportunity for CDPs to integrate these sources quickly and in real-time. According to David Raab at cdpinstitute.org, 27 CDP vendors collectively generated more than $300Mn in 2006 and is growing to touch $1Bn by 2019. The total funding across all businesses exceed $1.2Bn at the start of 2018 with over 4000 enterprises deploying CDPs within their organizations.
|As of:||One Year Change|
CDPs are starting to implement Artificial Intelligence & Machine Learning capabilities within. They are starting to recognize patterns and make recommendations. Overtime, their predictive capabilities is expected to become more accurate, leading to better value recognition from CDP investments.
“Our old friend segmentation is not going away in this new CDP led world, in fact, segmentation becomes more powerful and more important with any CDP.”
Who are the Notable Vendors in the CDP Space?
Though there has been explosive growth in the Customer Data Platform industry leading to an influx of new vendors, there are several established industry leaders that are worth mentioning.
Relevance of CDPs
Why is a CDP Important to my Business?
There are many data tools available and many marketers might be wondering why they need a CDP. Here are a few reasons to why enterprise marketing teams will need a Customer Data Platform (CDP):
- Growing martech fragmentation: With more marketing technology investments, the more the probability that these systems are not talking to each other. A CDP can become a single point of integration among existing as well as future marketing tools.
- Data driven marketing: Gone are the days when customers purchased or interacted with a company through one, linear channel. This necessitates the need for brands to better understand customer behavior across multiple channels and implement an omni-channel campaign. This can only be done with a unified and comprehensive customer profile.
- Real-time personalization: With marketers wanting to personalize the customer experience in real-time, CDP can provide them the right capabilities to segment & act on the right audience based on their personae & behavior.
“Unless you deliver highly targeted, intent-based content, the right people aren’t going to see it. Personalized content has proven time and again that it drives more conversations, but if you don’t make the conversion process seamless, your prospects will give up before they’ve even begun.”
— Will Waugh, MarTech in 2018
What are the benefits of a CDP?
Customer Data Platforms enable businesses to take their marketing to the next level. Below are some of the benefits:
Complete Customer View
A CDP provides the comprehensive, accurate, and persistent customer profiles that make customer engagement much easier. It allows for the raw customer data to be organized in a meaningful and actionable way for marketers to make informed decisions. The system reduces redundancy and inaccuracy and ultimately serves to maximize efficacy of any marketing strategy.
Improved Advertising ROI
Since CDP provides the ability to segment audience in a targeted way, the return-on-investment by leveraging Customer Data Platforms for online advertising can be significantly increased. When CDPs are integrated with DMPs, you can gain more insights by integrating 1st party data and 3rd party data, leading to a substantially increase the effectiveness of online advertising.
Simplifying Customer Data
Many marketers are currently tasked with the challenge of synchronizing the data from many sources and organizing it in a way that provides insight into customer behavior. A CDP automates this process, allowing marketers to focus on creating the best marketing strategies possible, rather than getting bogged down by the data itself.
Real-Time Web Personalization
In addition to customizing advertisements, a CDP allows you to create a personalized customer experience directly on your website. But this can only be done when you have the capacity to receive real-time information about the visitors, which can be implemented with a CDP.
Consumer Insights via Data Mining
By tying up & mining consumer behavior across various channels, businesses can gain significant insights into consumers. This enables marketers to experiment & test various hypothesis and gain better results, thereby making marketing organizations more agile.
Which companies are using Customer Data Platforms (CDPs)?
There are thousands of companies that have already implemented CDPs, although it is worth seeing how different enterprises are using the CDP:
Providence St. Joseph Healthcare
Providence St. Joseph Healthcare is pioneering in how it could leverage Tealium Customer Data Platform to tie online & offline data in order to provide its patients a seamless experience, all within the confines of HIPPA compliance. By integrating patient’s online behavior with call center CRM, the support reps are able to provide a seamless experience, while quickly resolving the customer challenges.
City of Hope
As one of the top cancer treatment and research center, City of Hope is using Lytics Customer Data Platform to implement a multi-phase rollout for email campaigns, web personalization, A/B testing and more. CDP is enabling the marketing organization to segment the audience at a broad level and provide them relevant content & information.
After merging with Continental Airlines, United Airlines implemented Ensighten CDP to improve data quality and enhance their customers’ experiences. The company reported several benefits, including an 8-digit ROI within ten months of implementation, and a much more efficient ability with their market agility.
With teams spread across the globe, 3M had the challenge of data silos across business groups. Using Tealium Customer Data Platform, 3M was able to build inter-organizational relationships by creating a streamlined & consistent experience. Using CDP, 3M was able to collect needed data, segment customers and act upon it.
Netherlands Board of Tourism and Conventions (NBTC)
The Netherlands Board of Tourism and Conventions adopted Blueconic CDP in order to effectively create continuous communication with individual users and has reported several notable outcomes. The organization was able to see an increase of 4.5% in conversion rates for website banners, the absolute number of travel bookings increased and they gained additional, valuable insights into its anonymous site visitors to provide an enhanced experience.
As a leader in digital, mobile payments, Venmo was looking to improve customer experience. In order to overcome challenges such as the presence of data silos, poor data quality, redundant engineering cycles, and large sizes of their app. With the implementation of mParticle’s CDP, the company has unified many functions and profiles, leading to a reduction (by half) on vendor costs and a rate of 30% increased user engagement. Learn More
Why Not Build a Big Data Solution in-House Similar to a CDP?
Businesses can build a solution similar to a Customer Data Platform in-house, but the build decision should not be taken lightly. Organizations with dedicated and talented developers may be in the best position to attempt this, but even then, the result tends to be far more expensive and much less integrated than a vendor-based solution. Off-the-shelf CDPs already provide multiple integration connectors with other systems and have built identity resolution capabilities which stitch visitors across various devices into a single comprehensive profile. They also have artificial intelligence and machine learning features that can help to score customers based on their level of engagement. These features would be expensive to develop in-house and should be undertaken only after a thorough evaluation of CDPs in the market, if do not meet the business requirements.
Getting Started with CDP
How Long Does a CDP Take to Implement?
While laying out a Customer Data Platform strategy, it’s a good idea to plan multi-phase release with each phase showing clear RoI. This allows the businesses to show the value quickly and get buy-in to implement a more comprehensive solution using CDP. Typically, it takes about 1-2 months to get the initial use-cases implementation. As you start integrating more data sources, the value that Customer Data Platform provides can be further enhanced.
Unfortunately, there is no hard and fast rule when it comes to implementing the complete solution and the length of time can vary greatly depending upon the overall scope of work. This is typically contingent upon the scope of their current data capturing methods, integration complexity & output requirements. Additional components that may create complexity and lead to a longer implementation period include data cleansing, unique business rules, identity merging needs, detail of data attributes, any custom calculations and machine learning models that may need to be created.
How much does a CDP Implementation Cost?
As with the time of an implementation, the cost is also highly variable upon the scope of the project and size of the company. In order to get a true idea of the cost, it is worthwhile to review a few Customer Data Platform providers that meet your data criteria and contact them for quotes. The following aspects need to be considered while determining the cost of implementation:
|Assessment Costs||License Costs||Implementation Effort||Ongoing Costs|
|Proof-of-Concept Effort||CDP Product License (generally recurring)||Product implementation costs||Data quality management|
|Vendor Evaluation Effort||Related Products, as needed:
||Integration between various systems||Data sciences – reporting, visualization & recommendations|
|Data cleansing & unification scripts||Ongoing enhancements & integrations with new systems|
Depending on the business needs of the organizations, the effort varies greatly across these various areas. Let us provide you a customized quotation for the overall CDP implementation for your organization.
How can I measure RoI on a CDP?
In order to calculate the RoI of a Customer Data Platform, businesses need to look at various costs & benefits that a CDP can bring to the table. First, understanding the value of your audience profile is important. This data enable businesses make take better decisions leveraging data. CDP allows you to create better initiatives, such as advanced segmentation, better media buying choices, personalization that better meets customer needs, enabling automation, and many others. It is important to realize cost savings attributable to these functions.
Additionally, remember to think of the near and long-term benefits, rather than focus on the time it takes to recoup the cost along. A CDP should be part of a long-term strategy to engage customers. Finally, recognizing that AI, automation, and the advancement of predictive analysis can contribute to a longer-term plan should be a part of the RoI equation.
cdpinstitute.org provides a great model that highlights how businesses should measure RoI on CDP:
How Do I Prepare my Organization for CDP?
There are many different actions that can be taken at an organization in order to prepare for the implementation of a Customer Data Platform. If you are uncertain where to start, a good first step would be to talk to any vendors you are considering for the project and determine their recommendations for specific actions.
Additionally, there are a few things that can be done to help the process go much more smoothly. The first is to gain organizational alignment from top to bottom. Getting leadership buy-in across various departments before the selection of CDP is critical to its success.
Other important step is to identify which data needs to be included for assessment and which data should not be included. The data points are significant because they ultimately determine what your customer profile looks like – essentially defining the information you need and filtering out what you don’t need to create an efficient interface. Business rules are also tricky because they are highly individualized by the company itself. Identifying these up-front will prevent problems and inconsistencies in data collection and analysis later.
How do I Evaluate CDP vendors?
The next step in Customer Data Platform adoption is to evaluate vendors to determine which of them are the best fit for your business’ specific needs. Since a CDP is a long-term part of infrastructure, it is crucial to find a vendor that will meet your current and future needs. One way to get a good idea of the products available is by performing a Proof of Concept (POC). Vendors often provide a trial period of their product in order for potential customers to test their different capabilities, and if this is available, it is a great idea to leverage this opportunity while determining the best option.
“Each organization is going to use their customer data differently, so it is necessary for your CDP to be flexible and customizable to these diverse needs.”
— Sheila Lindner, Octacom
Another great step would be to evaluate the vendors on different aspects of their product and performance. A comprehensive list may include some or all of the following topics:
- Data Ingestion and Storage
- Data Quality and Enrichment
- Identity Unification
- Data Segmentation
- Reporting Capabilities
- Data Actioning
- Data Security
- Performance and Scalability
- Business & Pricing Evaluation
This whitepaper on Customer Data Platform Vendor Evaluation provides a detailed look at the 10 broad areas and what questions organizations should ask vendors while evaluating the CDP vendors.
Who are the Experts within CDP Space?
As the Customer Data Platforms are becoming more popular, marketers are looking for key industry thought-leaders to help navigate this new frontier. While this is by no means a comprehensive list, there are a few people listed below who can provide great knowledge and insight into CDPs:
David Raab, Founder at CDP Institute and Raab Associates
“The greatest need is for proficiency in understanding what new technologies can really do, so you deploy them effectively.”
Scott Brinker, MarTech
“CDPs are the data layer for a digital marketing hub. That’s enormously helpful for coordinating multiple technologies across a best-of-breed stack.”
Jeff Lunsford, CEO of Tealium
“We are helping marketers do something they’ve never been able to do before, not without investing heavy resources in data warehousing projects.”
Venu Gooty, Data-Driven Marketing Practice Head at Element Solutions
“As organizations look to use data to make better business decisions, Customer Data Platforms are now becoming a must-have instrument within the marketers toolkit.”
Robert Romano, VP of Digital Strategy at NGDATA
“A customer data platform aggregates and integrates data from a multitude of channels and data sources to provide a comprehensive source of truth about every customer on an individual level.”