What Is A Customer Data Platform (CDP) & Why It’s Important

February 2, 2018
Top 10 Things a Customer Data Platform (CDP) Should Do For You

Updated: 13th December 2018

It’s become increasingly clear that data, not applications, is the new hub of digital marketing. This may help explain why a new category of solution, the customer data platform (CDP), is getting so much attention recently.

There continues to be strong interest from large brands in CDPs, which include enterprise tag management, mobile tag management, omni-channel data collection, profile creation and activation, and privacy enforcement.

What Is A Customer Data Platform?

A CDP is a marketer-controlled system that uses persistent, cross-channel customer data to support external marketing execution.

A customer data platform is an integrated customer database managed by marketers that unifies a company’s customer data from online and offline channels to enable modeling and drive customer experience.

The platform represents far more than just the latest point product, but rather has the potential to serve as a lynchpin of the entire marketing technology stack, unifying rich sources of first-party data into unique profiles, then making them actionable across many of the programs so important to marketers.

The CDP provides the connective tissue between multiple point execution tools and among them to integrate the marketing stack and enable orchestration across the web, mobile, email, social and so forth.

Data unification and cross-device identity resolution are among the most important CDP criteria.

The purpose of the CDP is to unify customer data, linking identity, behavior, purchase, and demographics into a single record. This includes dynamic, contextual, persistent and trusted identity data.

Key features of a customer data platform

There are some key features and benefits to using a strong customer data platform. We have detailed our top ten below:

  • Single source of truth for fueling your revenue streams – A CDP should be a force multiplier in enabling and optimizing existing marketing and advertising efforts around personalization, recommendations, attribution, targeting, re-targeting, media-mix modeling, advertising efficiencies, customer service, and many other business functions.
  • Provide a holistic view of your customer journey – Customers begin their journey across multiple touch points, digital and traditional. A CDP should contain a data layer that is anchored by intelligence that is first party to a brand. Brand specific first-party intelligence should be collected from onsite, offsite and offline journeys and used to create actionable customer profiles and segments to enhance the customer journey.
  • Ability to collect and own every digital and non-digital activity of your customer – Your CDP should be driven by first-party data intelligence and have the ability to stitch customer interactions across devices (e.g. a phone or wearable), platforms (e.g. desktop and mobile) and channels (e.g. paid, owned and earned). You should own your data and not have to rent it back in order to drive your business. An external DMP or DSP will not provide data that is first party to a brand.
  • Fuel real-time decision making – The customer journey is constantly evolving and customers make split-second decisions. Your CDP should provide near real-time data collection and dissemination of that intelligence to fuel your next marketing campaign, optimize your conversion funnel, re-appropriate ad buys, feed into your call center workflow, and fuel many other decisions and capabilities.
  • Enable turnkey integration capability with other marketing and advertising technologies – A CDP should enable your business to ‘speak’ with your customers regardless of where that customer might be in the customer journey lifecycle at any moment in time. The ability to integrate with technologies such as advertising solutions, email providers, mobile platforms, video delivery engines and other marketing solutions is critical. First-party data collection capabilities enable standards for such integrations.
  • Deliver enterprise privacy solutions, including identifying and preventing data leakage – A customer’s journey produces a lot of information that is collected digitally and non-digitally, housed in a CDP. Valuable data about your customer can leak from your web property through a variety of ways. A CDP should be armed with enterprise-level privacy capabilities to monitor and curtail dissemination of customer data, and enable product teams to automate opt-in and opt-out choices for customers.
  • Be vendor agnostic – Owning your data using a first-party data collection engine enables you to control your destiny. A CDP should be designed to be vendor-agnostic especially since the marketplace introduces new products and services that are in sync with the ever-changing customer journey. Data standards created by using a first-party data collection engine and housed in the data layer enables a CDP to be vendor agnostic.
  • Offer detailed enterprise workflow, providing access and permissions based on role – A CDP is your single source of truth and intelligence within the CDP will be sought after by various functions with an organization. A data layer that ingests omni-channel, multi-platform and IoT data require a robust, visual, user-friendly workflow tool that should be used by a technical marketer. Organizational access and permissions should be managed through the same tool.
  • Enable raw and/or aggregated data visualization and extraction – For a robust CDP to be leveraged regularly to influence business decisions, both in marketing and across the organization, it should contain either its own visualization capability and/or the ability to plug into any third-party visualization tool. Extraction and ingestion capabilities through APIs, SFTPs and user interfaces are ways to enable internal customers to use information to influence business decisions.
  • Scale and flexibility of data space to fluctuate with your business – The ability for a CDP to grow with the customer journey is critical. The growth in Internet of Things (IoT) devices alone promises a tsunami of new interaction data. One of the most efficient and effective ways to scale is to host your data in the cloud. Cloud services enable your business to focus on driving revenue and ROI while allowing other experts to manage storage services, extraction, and ingestion processes (ETLs).

The recognition and market acceleration of the CDP represents not a replacement, but an important expansion of the role of a tag management system. A TMS is a necessary foundation of the modern-day CDP because of its ability to collect, manage, act and own first-party data from a variety of sources.  In addition, deep integration with a larger marketing eco-system is key components of enabling personalized, real-time and revenue-influencing customer journeys.

Conventional tag management versus customer data platform

Conventional tag management used JavaScript tags, which only capture web data, or perhaps web plus some other digital channels. Some tag management vendors have added other data collection techniques, but in those cases, I think “tag management” isn’t the most accurate description.

In any event, CDP incorporates all data sources, so I see tag management is a subset of a full CDP. You might also ask whether enterprise tag management itself creates a persistent database or simply captures data and feeds it to a database.

The answer probably depends on which tag manager you’re looking at. It’s certainly not essential for a tag manager to include a persistent database.

How does a CDP differ from a DMP (data management platform)?

Again, you could argue that a DMP is a subset within a CDP, since it only captures some types of data (mostly cookies and associated attributes) and offers only limited access. Most DMPs don’t include personal identifiers such as name, email address or phone number, although more are starting to. Sometimes those identifiers are attached to cookies and sometimes they are kept separate. Most DMPs also lack the more advanced segmentation and data preparation features found in CDPs.

How will the CDP evolve?

The reason the CDP has become more widely used is that there are more MarTech specialists within marketing departments, and those people are aware of the need for a CDP and are capable of operating one. That’s quite a new development.

CDPs will become more powerful, especially in terms of managing more types of data (video, devices, mobile apps, locations, etc.) and matching more types of customer identifiers (moving beyond e-mail addresses and cookie IDs to mobile device IDs, and “things” such as smart cars and thermostats. Ironically, the old-school phone number is now gaining increased importance as it becomes a mobile phone number used to send text messages and connect with mobile apps.

What is 3rd party data and why companies are using it?

For those of you that are new to this terminology, 3rd party data, is information about audiences that you do not own yourself but purchase from another company to make advertising to your customers and prospects more relevant. DMP’s place tags on sites to collect this behavioral information.

Companies can use 3rd party data to augment a customer’s proprietary 1st party data with actionable information. Traditionally, a company’s analytics and data solution was limited to their own site or mobile solution. The key word here is limited. As customers traveled across the web and other key channels such as mobile, social and even offline in a store, the company had no visibility. This new customer journey was too complicated for the current solutions so DMP’s developed networks to track audience behavior and sell this behavior back to customers in the form of 3rd party data to make advertising on their sites and other sites more relevant.

Another reason is that ad networks work more efficiently with a DMP or data aggregator and can move quickly to deliver ads to audiences based on stored profiles. It fills ad inventory across sites with more relevant ads.  A win-win.

Collecting 1st party vs 3rd party data

We have long known that customers demand a more contextually personalized experience. The customer journey is complicated and it is the agile marketer that is able to adapt to the ever-changing behavior.  However, our approach is different than the 3rd party data focus and enables customers to dramatically expand the breadth and depth of their 1st party data across all their online and offline channels including site, mobile, social and even in the store.

This enables the marketer to have a complete and timely picture of where their customer is in their journey to deliver content and messaging at an individual level to drive conversion.

Delivering relevant 1:1 marketing demands a 1st party strategy that can track customers anywhere and anytime and the ability to take action on this data at the right time.

You own your own 1st party customer data

Take action at a 1:1 level. Leverage your 1st party customer data to optimize your individual customer’s experience or integrate with any application to drive your desired outcome.

Your 1st party data can then be sent to the DMP’s to maximize the effectiveness of your offsite advertising programs. But you can also leverage that data to optimize your customer experience on your site, work with multiple DMP’s across networks to expand your reach with a unified 1st party data set.

Delivering a personalized experience based on behavior is the goal. The key, however, is to leverage your 1st party data.  Collect, own and act on your own customer data and push this insight to the DMP. Not the other way around.  Over the long run, you will see the true value in owning versus renting.

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