From Data Chaos to Customer Bliss: How Customer Data Platforms Transform Your Business in 2024
Imagine this: you walk into your favorite store, and the salesperson not only remembers your name, but also your purchase history, preferred brands, and even your last conversation about that new hiking jacket. That’s the power of knowing your customers on a deep level, and that’s exactly what Customer Data Platforms (CDPs) can do for your business.
CDPs are like the ultimate matchmaker for your customer data. They gather information from all corners of your business – website visits, email clicks, app interactions – and unite them into a single, detailed profile for each customer. It’s like finally breaking down those data silos and creating a complete picture of who your customers are and what makes them tick.
But CDPs aren’t just about collecting dust. This real-time understanding of your customers unlocks a treasure trove of benefits. Ready to personalize marketing campaigns that resonate? Check. How about crafting targeted recommendations that keep customers coming back for more? Double check. So, ditch the guesswork and get ready to deliver exceptional customer experiences – all thanks to the power of CDPs.
“Systems of insight” may include tech like your customer relationship management (CRM) platform, ecommerce platform, and analytics solution, while “systems of engagement” may include tech like your marketing automation platform, advertising platform, and customer service solution.
Depending on the CDP, these systems of insight and engagement may be native or external (bonus points when they’re native). Either way, a CDP ties it all together, eliminating data silos in the all-important layer of your tech stack that powers customer engagement.
But that’s just the nutshell version. Although CDPs have been around for over a decade, the term still means something slightly different depending on who you’re talking to—and what type of CDP they’re talking about.
OK, so what does a CDP actually do?
According to the CDP Institute, a vendor-neutral organisation dedicated to helping companies manage customer data, a CDP is “a packaged software that creates a persistent, unified customer database that is accessible to other systems.”
Let’s break down each of those components:
- A packaged software: Marketers purchase, implement and control a software from a vendor or agency.
- Unified customer database: A CDP captures data from multiple systems, both internal and external. Through a process called identity resolution, it attributes customer information to a unique profile, or single customer view, and stores this information so that a business can track customer behaviour over time.
- Accessible to other systems: A CDP is not a closed system. The data in a CDP is accessible to other platforms for analysis and/or to help manage customer interactions. Think of it as a data pipeline—different types of data can flow in and out. You can access the data through APIs, database queries, and file extracts.
Essentially, a CDP collects data from a variety of sources and then merges that information into a single customer view or profile. The CDP consolidates, and de-duplicates where necessary, customer information—ideally, without an IT team intervening and doing it for you.
“Personalisation is a topic we’ve talked about in our industry for the last 7-8 years, but it’s still a pretty hard vision to achieve just because data is all over the place and brands don’t have a true understanding of their customers,” says Olivia Yuan, co-founder of Shopify-focused agency Tomorrow.
“Effectively, everybody has the same end goal—to create a clear picture of what their customers are doing and who their customers are,” agrees Justin Ragsdale, VP of business development and corporate strategy at full-service digital agency IM Digital. “But data is being siloed out in all of these different platforms, which creates really a muddied profile of who the customer is and what they’re doing.”
CDPs have been instrumental in evolving the way brands interact with their consumers and evolving the way we think about the customer experience.
In other words, a CDP can usher your business into the future of online commerce—and help you build the experiences your customers are looking for.
How it works: 7 core features of a CDP
Because the definition of a CDP varies from business to business, the CDP Institute assembled a list of core features all CDPs not only share, but must have in order to call themselves a CDP.
According to the CDP Institute, a software must do the following in order to qualify as a CDP:
- Accept all sources: A CDP takes in data from all sources (online and offline) and formats (structured, semi-structured, and unstructured).
- Retain all detail: A CDP stores any input data without losing details.
- Maintain persistent data: A CDP retains all ingested data for as long as a user specifies (subject to regulatory constraints).
- Unify profiles: A CDP creates unified customer profiles based on all data related to the same individual customer (subject to regulatory constraints).
- Manage PII: A CDP manages personally identifiable information (PII) such as name, address, email, and phone number in ways that comply with privacy and security regulations.
- Provide external access: A CDP gives other systems access to any data in the customer profiles via API connections, webhooks, or database queries.
- Extract segments: A CDP allows users to select customer segments and send information with specified data elements to other systems.
How does a CDP improve decision making?
Imagine your own heart. Some pathways take blood in. Others pump out now nutrient-rich blood, oxygenating all the cells that power your body.
A CDP is like that. Data flows into it, and what comes out is actionable, “nutrient-rich” customer insights. It’s the anchor of your omnichannel tech stack—the heart that enables you to build the experiences your customers want, so you can move your business forward.
As your single source of truth, a CDP provides a 360-degree view of your customers. You can view customer information from almost every touchpoint along the customer journey—emails, SMS, web, mobile, social media, loyalty programs, and in-store transactions—as well as existing data sitting in other internal systems, such as Enterprise Resource Planners, Customer Relationship Managers, or Data Management Platforms.
Once it collects those millions of data points, a CDP stitches together a comprehensive view of your customers or prospects by merging and de-duplicating records. When you inspect your unified customer profiles, the data is clean, reliable, and compliantly collected.
Plus, you get the most up-to-date view of your customers—if you’ve got a good CDP, the data you’re using to inform your marketing campaigns and automations is both real-time and historical.The fun part comes when you get to do cool things with that data—like creating highly specific segments of your audience so that you can send messages or create experiences that are personalised to someone’s behaviours and interests (more on that below).
7 massive marketing wins with a CDP
For ecommerce brands, all of that is a huge deal. Why?
Here are 7 benefits of a customer data platform, according to the experts:
1. Maximise the value of the data you collect
For years, Facebook, Twitter, and Instagram were the place to go to build your business. But 2021 saw a marked shift in this paradigm when Apple’s iOS 14.5 update built a walled garden around iOS users—and significantly reduced social media’s targeting and marketing attribution capabilities as a result.
When Google eliminates third-party cookie tracking in 2024, reaching consumers via paid and performance marketing will become even more of a challenge for marketers—and a strong foundation of zero- and first-party data will be more important than ever before.
The most effective marketing strategies combine zero-party data, or information your subscribers and customers hand over voluntarily, and first-party data, which is based on observing customer behaviour on your website and owned channels.
Both kinds of data are crucial for gaining a holistic understanding of your customers in a way that replaces fleeting buyer interest with long-term customer loyalty. And while a CDP ingests data from anywhere, which inherently means it also collects third-party data, “it’s still focused primarily on zero- and first-party data,” says DelPizzo.
That strong foundation then forms the basis for delivering personalised experiences not only through your own channels (more on this later), but also lookalike audiences and retargeting.
“Let’s say I just made a purchase at your business. You don’t want to retarget me, because you don’t want to spend ad dollars on someone who just converted,” DelPizzo explains. “With a CDP feeding you data that tells you I just purchased, you can exclude me from that ad campaign and improve your return on ad spend (ROAS).”
In other words, owned and paid marketing don’t need to be mutually exclusive. A CDP unlocks the full potential of all your zero- and first-party data, so you can strengthen every touchpoint throughout the customer journey—without invading consumers’ privacy.
2. Break down data silos
For many brands, the marketing technology stack is complex, redundant, and overly expensive—and that’s reflected in the customer experiences they can, and cannot, create.
Ragsdale says the biggest data-related challenges his clients face revolve around data transparency across departments.
“Within the organisation, teams are collecting data from many different channels—from the website, from email, from contact centres,” he explains. “And each of these teams need that data in order to execute their function within the organisation. But what we’re seeing is that each team has just a fragment of the customer journey within their purview.
Marketers and tech teams that use separate point solutions for things like data storage, marketing activation, and data analysis are working in an unstable, inflexible technological environment that forces them to stitch together several solutions, increasing the complexity of their processes and making the customer journey less cohesive.
The result is a Frankenstack—a conglomeration of different technologies, whether built in-house or tacked on through acquisition, that are loosely tied together and create massive overhead for maintenance and usage. That may include:
- Enterprise resource planning (ERP) system
- Analytics platform
- Data management platform (DMP)
- Customer relationship management (CRM) system
- Ecommerce platform
- On-site personalisation tools
- Marketing automation platform
- Reviews platform
- Loyalty platform
- POS system
This kind of stack is in serious “technical debt,” DelPizzo says. “From an engineering perspective, it’s been really hard for all these systems to integrate with each other”—meaning marketers can never be confident that all their data is connected, accurate, and up to date.
Through pre-built integrations, open APIs, webhooks, SDKs, and other sophisticated methods of data collection, a CDP “solves that pipeline issue,” DelPizzo says, “getting data from one place to another more effectively.”
In other words, a CDP is not just one more platform you’re tacking on to your tech stack. It figures out where there’s overlap between the data from all these different tools, and then combines, consolidates, and normalises it in one place.
If a CDP is doing its job, it’s the piece of your tech stack that makes all the other pieces live up to their full potential.
3. Unify your data into a single customer view
A big reason “getting data from one place to another more effectively” matters so much, DelPizzo says, is “getting a single view of your customer across all their interactions across your entire brand.”
“The challenge is uniting all of that data together so that each team member can see the entire customer journey, instead of just seeing a portion of the customer journey,” Ragsdale agrees. “We want to embrace the entire customer journey and be able to unite that data across the different touchpoints we’re providing for customers.
Kunle Campbell, co-founder at Octillion Capital Partners, an acquisition platform company liberating commerce founders with hassle-free exits, calls the single customer view the “holy grail” for digital marketers and brand leaders.
“If personalisation is the ‘nirvana’ for marketers in today’s omnichannel reality, then having as much congruent information as possible for each customer is paramount,” Campbell writes. “The single customer view should be your dashboard to beat all dashboards: a single dashboard that displays all the personal data for a given customer.”
How do people navigate your website? What actions do they take before they bounce or buy? Where are they in the funnel? Whether they’re shopping in store, they’re shopping online, they’re engaging with your loyalty program, they’re talking to your customer service team, or anything in between, DelPizzo explains, “a CDP pulls all that data together into one single view, painting a cohesive picture.”
“That’s super, super valuable,” DelPizzo adds. “With a unified, holistic view of your customer, you can speak to them more accurately and more effectively.”
4. Continuously learn about your audience
With a single customer view, you suddenly have much greater visibility into each individual customer—which translates to “understanding your audiences really effectively,” DelPizzo explains.
Whether that means insights into how different demographics engage with your marketing across channels, their purchase history across categories, what’s making them convert, and even how they’re likely to behave in the future, a CDP can be that bridge.
For example, Ragsdale says, “if I understand not only what and where a customer is buying, but also intimate details of their conversations with a customer service agent, that data could be critical to understanding, ‘OK, should I be offering this customer an incentive? Should I be segmenting this customer differently?’”
“We really need to build that 360-degree customer view so that we can understand who our customers are and what they’re doing, and then deliver them what they need,” Ragsdale adds.
A CDP gives you the insights you need to understand what kind of outreach and communication works best for different slices of your audience—and that level of sophisticated segmentation is crucial for increasing customer engagement and reducing customer churn.
“If you think about these well-known companies like Amazon, Netflix—all these brands where you’re aware of how personalised your experiences are, out of that there’s been a lot of recognition that you need a software to understand all those different identifiers and sources and touchpoints you’re having with your customers,” points out Nick Kobayashi, group product manager at Klaviyo.
If you don’t have a CDP, “you’re probably not collecting that data, which means you’re not listening to your customers,” Kobayashi says. “A CDP fills that need, not only in terms of being able to collect and unify all that data, but also in terms of the analytics capabilities to understand those insights and enable you to build more persona-driven, insights-driven segments.”
5. Orchestrate and deliver personalised omnichannel marketing
Lately, something Kobayashi hears frequently from brands is that they want to become “more lifecycle-driven, instead of running ad-hoc campaigns and automations.”
“That’s where segmentation becomes really important,” Kobayashi explains. “You need the tools to identify where the trends and opportunities are, based on all your customer data.”
Otherwise, Kobayashi says, “you are most likely running very generic marketing or advertising campaigns, where you’re basically using a list instead of the kind of dynamic segmentation that would lead to personalisation. They’re not very personalised or focused on someone’s actual interests.”
And that’s a mistake. Companies that excel at personalisation in marketing generate 40% more revenue from related activities than average players, according to McKinsey & Company—and while 71% of consumers expect personalisation from the brands they interact with, even more (76%) get frustrated when they don’t get it.
“For years, we’ve been preaching to our marketing teams, ‘You have to send the right message to the right person at the right time,’” Ragsdale points out. “What CDPs have changed is the way we look at managing that experience. So not only am I sending the right message to the right person at the right time, I’m also looking at the right channel, the right specific kind of content, and I might even be looking at the right price point for that particular customer.”
“We’re really taking it to the next level in terms of providing the best possible experience for our customers,” Ragsdale adds. “And that’s only possible with a CDP.”
Remember, too: “One of the biggest challenges brands face when it comes to monetising their CDP is that they’re able to paint a clear picture of their customer, but they lack the ability to take action on the insights provided by the CDP,” Ragsdale explains.
A good CDP not only activates your data in real time, but also takes care of marketing automation activities for you, rather than sending data downstream to another piece of tech.
6. Drive up key marketing metrics
Long-term, a CDP elevates your marketing efforts, resulting in “incremental performance gains,” DelPizzo says.
That could mean improvements in customer lifetime value (CLTV) and revenue, as well as “retention because you’re using your first-party data to its fullest potential, and decreased acquisition costs because you’re being smarter with your acquisition marketing,” DelPizzo explains.
And smart marketing is a self-perpetuating cycle, because it reveals which channels and methods deserve more budget allocation in the future.
“Based on everything you’ve implemented,” Kobayashi says, “a CDP helps you see what’s working and what’s not working, and then optimise your marketing strategy moving forward.”
7. Improve operational efficiency and save money
Because multiple teams, from lifecycle and performance to sales and customer service, can access the centralised information in a CDP, it’s not hard to see how all of the above translates to improvements in productivity and efficiency—both within teams and between them.
Historically, for example, when the Citizen Watches marketing team wanted to build a segment based on women who purchased a watch in the last 12 months, they had to reach out to a separate team. “That slows us down,” Cowell says. “Whenever we have to stop and involve another team, it delays the process by hours or even a day.”
“That’s not a situation we’d like to be in,” Cowell adds. “We’d like to be in a situation where we can just pull the data from one place and be able to trust the integrity of that data.”
Bubs Naturals, meanwhile, has “very few employees in house,” says co-founder TJ Ferrara. “Having them reach into too many different systems creates a lot of confusion. Consolidating platforms and creating some efficiencies internally would help us grow a little bit more.”
By reducing “time spent on maintaining integrations, changing integrations, resolving identities, and de-duping profiles,” DelPizzo says, a CDP frees up bandwidth to devote to strategy and crafting consistent, cohesive experiences—at scale.
Essentially, “you’re doing more with your data in fewer systems, so you’re going to save a lot more time,” DelPizzo says.
And money. In addition to making your attribution and reporting more accurate so that you’re confident you’re prioritising the right stuff, when you implement a CDP, “you’re lowering your overall expenses from development while building more internal efficiency,” DelPizzo explains. “So it’s time saved, cost saved because of time, and reduction in overall operating costs.”
Ragsdale summarises the potential time and cost savings of a CDP this way: Without one, “there’s the cost you’re paying for licenses on these different platforms. But then there’s also the cost of becoming an expert on different platforms, the cost of managing the integrations between the platforms, and the cost of manually extracting data and insights and plugging them into other platforms.”
“When you bring all those things together,” Ragsdale says—“the return on investment (ROI) from reducing those manual labour costs and reducing those technical licensing costs, juxtaposed with the added ROI from the ability to deploy these personalised campaigns and experiences for your customers”—the value of a CDP is “almost unquantifiable.”
CDP benefits FAQs
Who uses a customer data platform?
CDPs were originally intended for marketers. But often, due to steep technical learning curves and custom development needs, they are co-owned by IT or engineering and development teams. CDPs also serve data privacy and governance purposes, which are often owned by IT, too. But since the ultimate goal of a CDP is to improve marketing, a CDP should be accessible and user-friendly enough that marketers can use and maintain it on their own, without relying on developers or data scientists.
What are the key functionalities of a CDP?
A CDP is a software that pulls all customer data together into a single view of the customer; resolves identities between data sources; and activates (or sends) data either natively or across other external systems for marketing, analysis, and other downstream business functions.
What are the CDP use cases for B2B?
The primary value a CDP provides to a B2B brand is account-based marketing, in which multiple individuals are associated with a single account. CDP use cases for B2B brands include B2B analytics, churn prediction, next-best-action recommendations, sentiment analysis, hyper-personalised omnichannel campaigns, and more.
Choosing the right CDP in 2024
In 2024, Here are some notable trends and platforms in the CDP landscape:
- Segment: Segment stands out as a versatile CDP, supporting user analytics data ingestion and distribution to third-party applications. Its strong partner ecosystem and account team contribute to its success. Organizations appreciate the ability to activate audiences across multiple marketing endpoints.
- Emarsys: Known for automated omnichannel customer engagement, Emarsys empowers businesses to tailor their interactions across various touchpoints. It’s a robust choice for organizations seeking seamless customer experiences.
- Optimove: With a focus on predictive segmentation, Optimove helps companies understand customer behavior and preferences. It’s particularly beneficial for organizations aiming to enhance their marketing strategies.
- FirstHive: FirstHive caters to manufacturers, offering features that expand advertising reach. Its capabilities extend beyond traditional marketing, making it a valuable asset for businesses in this sector.
- Lytics: Lytics excels in expanding advertising reach and enhancing audience targeting. Its international data privacy management features ensure compliance while delivering effective marketing campaigns.
Remember that choosing the right CDP depends on your organization’s specific needs, goals, and industry context. Evaluating user reviews, integration capabilities, and alignment with your business objectives will guide your decision-making process.