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What is a customer data platform (CDP)?

Widely recognised as the next step in marketing technology, a customer data platform (CDP) is the solution to the problem of disconnected customer data systems. A CDP is the key to delivering the right engagement for the right person at the right time and personalising every customer touchpoint from marketing to sales to service.

The customer data problem

To understand the benefits a CDP can bring to your business, first it’s important to understand how disconnected customer data is holding you back.

The proliferation of channels and data types has resulted in a customer data boom. This plentiful data is typically collected by separate, or siloed, systems that can store but not interpret it.

Customer data spans everything from anonymous ad impressions to known purchases, product usage, and customer service interactions. There are three main types of customer data:

  • Behavioral: Generated by a customer’s interactions with a company using devices connected to the Internet. This kind of data tracks which sites are visited, apps are downloaded, or games are played.
  • Demographic: Socio-economic information such as age, gender, population, race, income, education, interest, and employment.
  • Transactional: Documents an exchange, agreement, or transfer that occurs between organisations and/or individuals. Typically has either commercial or legal significance and can include transactions such as purchases, returns, payments, signups, reservations, and subscriptions.

The problem with siloed customer data is that it makes it difficult to understand who your customers are, what they’re doing, and what they want. Without data-driven insight into the core of your business, decision making is limited and less effective.

Each category of customer data can be used to improve engagement with new and existing customers. In order for customer data to be useful, however, it needs to be removed from the silos, unified, and accessible.

How a customer data platform can help

Simply put, a customer data platform is the solution to the customer data problem. It’s a unified database that centralises customer data from all sources and is accessible to other systems. Far from simply aggregating that data, a CDP is designed to analyse this multi-source data and provide insights, recommendations, and a holistic view of each customer that’s based on data from every stage of the buyer’s journey.

Customers expect and demand personalised experiences and the only way to deliver that is to improve your understanding of what they want and need. A CDP provides a foundation for that deeper understanding and can be used to improve and enrich all customer touchpoints:

Marketing customer profile: Deliver targeted approaches across all channels with relevant content and campaigns that raise the likelihood of conversion, increase marketing ROI, and provide a competitive advantage.
Sales customer profile: Create detailed segments and personalise sales engagements with contextual information such as loyalty status, buying frequency, spend, and recent purchases to optimise each sales opportunity.
Service: Equip customer service representatives with 360-degree customer profiles so they can provide proactive, omnichannel support that leaves customers feeling understood and valued.

The benefits of using a CDP app

A customer data platform app can deliver numerous benefits to your organisation in addition to the ones listed above:

  • Flexibility and agility: CDP apps give you greater flexibility to respond to consumer behaviour and technology trends, which are always changing. You can build a technology stack on a solid data foundation that works seamlessly with the other systems you use.
  • AI and machine learning: Unless you have a dedicated team of AI experts in-house, advanced AI and machine learning capabilities such as natural language processing, predictive recommendations, and intelligent insights are cost-prohibitive to develop and implement yourself. These capabilities are built into some CDP apps and provide the added advantage of more accurate predictions and insights that would otherwise be impossible to spot.
  • Greater efficiency: CDP apps easily integrate the data from disparate sources, are more reliable than custom systems, and are easier to update. Whereas a proprietary system is resource-intensive and requires constant maintenance and troubleshooting, a CDP app centralises audiences and business rules so they can be applied across all the tools you use. This saves time and requires less ongoing effort from IT to maintain and update the solution.
  • Data accessibility: A CDP provides a central, accessible, and useful source of customer data that can be utilised by multiple departments to help grow your business. From marketing to sales, customer service, and business intelligence, a CDP provides the single, accurate source of truth you need to drive growth.

What makes a CDP different

While a customer data platform shares some similarities with other customer data solutions, it’s important to understand how a CDP differs from the other systems you might already be using.

The difference between a CDP and CRM

While CDPs and customer relationship management (CRM) solutions both collect customer data, a CDP formulates a unified customer profile compiled from multiple online and offline data sources. A CRM only stores what’s known as first-party data, or the customer’s direct interactions with the company.

The difference between a CDP and DMP

CDPs aggregate personally identifiable information such as names, mailing and email addresses, and phone numbers on both anonymous and known people. Data management platforms (DMPs) only work with what’s known as third-party data, or anonymous online data like cookies, devices, and IP addresses.

A CDP adds to the functionality of CRMs and DMPs by integrating the data from first-, second-, and third-party sources. This means it incorporates CRM and DMP information to provide a comprehensive view of each customer so you can find all the information you need from a single application.

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