CUSTOMER DATA PLATFORM
[THE MARKETER’S GUIDE]
What is a Customer Data Platform (CDP)?
If you’ve heard the term “CDP” but don’t know just what it is – you are not alone.
The term “CDP” has generated considerable coverage in modern marketing over the past couple of years, but it has never been more relevant than right now. Essentially, Customer Data Platform software is a web-based interface that consists of three core components – a database, the ability to connect to multiple channels, and a marketer-friendly interface – that help drive marketing and sales initiatives.
What You Will Learn Here
There are other platforms that contain some of these capabilities, but not all (and not to the same degree). That’s why nailing the true definition can be so confusing. However, with over 20 years of innovation in marketing, analytics, and technology under our belt, and access to a vast network of experts, we not only know what a CDP really is, we’ve figured out what sets the best Customer Data Platform apart from the rest.
With so much disparate information out there, we sought to do more than simply define a CDP and its capabilities. Plenty of other marketing companies and media outlets have already attempted to do that (with varying degrees of success).
Instead, we want you to know exactly what a CDP can do to substantially enhance your company’s customer base, form (and build) legitimate, lasting consumer relationships, and increase profits.
After we break down exactly what a CDP is, we’ll move on to how you can (and why you should) utilize this highly advanced – yet incredibly practical and accessible – technology to not just attract new customers, but identify and retain the most valuable ones that drive your business.
What a CDP is [and What it Does]
Make no mistake. There is no shortage of customer data. The true problem is that much of it is disorganized and incomplete. As a result, businesses struggle with ways to efficiently sort through it all and consolidate it into something useful, actionable, targeted, and personalized..
Customers tend to be fickle, spontaneous, and impatient. Today, customers simply do not interact with brands in a linear fashion. Instead, they come into contact with numerous ones across a multitude of channels (web, social, email, mobile, tablets, and other addressable media) at any given time – generating a multitude of data points along the way.
These days, a firm grasp of the Customer Experience (CX) is viewed as a critical way to stand out from competitors. CDP software utilizes an intelligence model that sifts through these scores of fragmented data, extracts what is relevant, and uses it to form unique, up-to-date customer profiles, build relationships, via data-based personalization, and ultimately increase sales.
Gartner defines a CDP as a marketer-friendly, web-based interface that integrates four core capabilities:
- Data Collection – Autonomously collect/sort an unlimited amount of first-party, personalized data from various sources.
- Profile Unification – Synthesize profiles at the individual level and conjoin customer characteristics to specific identities.
- Segmentation – Develop and regulate rule-based segments. This can include propensity models or automated segment discovery.
- Activation – Send segments (with instructions) to actualize email campaigns, mobile messaging, advertising, or any other channel activity. Specialized components may include next-best recommendations/actions, multivariate testing, dynamic creative optimization (DCO), and testing/self-optimization functions.
In addition, a CDP can be piggybacked onto any pre-existing system mentioned above, in a specialized manner that unique to the client and its needs. Other functions include analytics, reporting, tracking, and BI (Business Intelligence). With such a versatile set of tools, the unpredictable becomes legible.
CDP vs Other Platforms
People often ask about the differences between a CDP and other marketing platforms. The most prominent queries are how a CDP compares to a CRM (Customer Relationship Management), a DMP (Data Management Platform), and Data Warehouses and Lakes. This can create some confusion, especially since they all seem relatively similar on the surface.
In reality, there are a number of clear-cut distinctions that differentiate a CDP and make it stand out from the rest. Other systems – like the ones listed above – were designed with comparable goals in mind, but with differing (and generally fewer) functions, scopes, and capabilities.
CDP vs CRM
While a CRM works to connect with consumers and utilize data to form customer profiles (like a CDP) – they simply are not designed to filter enormous quantities of data from so many sources. They also limit the amount of detail of ingested data, lack advanced identity matching capabilities, and restrict outside access to their internal databases.
Essentially, CRMs work well for targeted tasks within specific channels, but lack the depth and versatility to fully manage modern customer data like a CDP.
CDP vs DMP
Meanwhile, a DMP mostly utilizes 3rd party data sources (anonymous, mass audiences, no PII (Personally Identifiable Information), while a CDP largely employs 1st party data (specific, tied to actual individuals and their personal behaviors in real time). For DMPs, these pre-built audiences are used to enhance targeted display ads. On the other hand, a CDP uses predictive analytics to discern patterns, simplify data, and put it to use.
DMP data is also cookie-based, which means that a typical DMP profile only lasts for about 90 days before terminating. A CDP employs persistent, finely detailed, real-time customer profiles for unlimited amounts of time.
CDP vs Data Lake/Warehouse
Data Lakes and Data Warehouses are specially-developed IT endeavors that typically cost more time and money to install than a CDP. Oftentimes, data warehouses are updated at designated periods, unlike CDPs – in which data ingestion is an ongoing process.
Also, since data warehouses are designed and run by IT teams, marketers have to frequently depend on the IT Department, which slows down the whole process. While technical participation and know-how is still necessary with a CDP, it is much more accessible overall. Therefore, marketers can directly access and run a CDP much more smoothly and efficiently.
Classifying Your Customers [With a CDP]
In Gartner’s 2017-2018 CMO Survey, marketing leaders said they invested two-thirds of their budget in supporting customer retention and growth through digital marketing.
One of the reasons why this is so important is because there are different types of customers (i.e. gender, income, interests) who are always at different stages of purchasing and skipping across multiple platforms. By identifying who these customers are (through response, engagement, and conversion data) understanding their tendencies, and tracking their buyer lifecycle, a CDP increases Customer Lifetime Value (CLTV) and transforms variables into certainties.
Strike While the Iron is Hot
It isn’t enough to simply understand the browsing and buying habits of current and potential customers. For many, in order to initiate a sale, you have to reach the right customer, at the right place, at the right time.
We’ve come to the point where efficiently measuring consumer behavior across such a wide array of available channels simultaneously is beyond the realm of human capability.
That’s where a CDP comes into play. It utilizes the most advanced forms of artificial intelligence (AI) and machine learning to sift through and unify an incredibly extensive array of data across all channels and devices not just quickly – but autonomously through predictive analytics.
Applicable statistical techniques include logistic regression, advanced data mining techniques, and neural networks. These can be used to model your best customer behavior and suggest which actions to take on a personal level. As the software ingests more data over time, the system continues to learn on its own and enhance its recommendations.
With a centralized, granular, complete, 360-degree customer view now in place, a CDP can create a feedback loop that develops a specific, singular customer profile. From there, it calculates buyer potential and takes proactive action to maximize purchase probability through automated decision-making.
The One-Time Buyer
With the incredibly high bar set by mega-retailers like Amazon, Walmart, and Target, many retailers are struggling and in dire need of an innovative, yet effective way to form personalized and lasting relationships with their customers. Additionally, subscription-based platforms – from Netflix to Dollar Shave Club – have experienced a meteoric rise by essentially guaranteeing year-round customer retention.
This leads to a critical conundrum: Can traditional retail/e-commerce companies find ways to not just attract new buyers (which is already incredibly costly), but retain them in a manner similar to modern subscription businesses?
With so many purchasing options out there that can be accomplished with a simple swipe of a finger or the click of a button, consumers are – by and large – extremely fickle.
The truth is, most retail buyers do not come back after their first purchase – about 75 percent to be exact. This means that most of a retailer’s customer base contributes little to negative profit. To put it lightly, this is not a recipe for sustained success – especially since it costs so much to attract most of these one-time buyers in the first place.
The MVB (Most Valuable Buyer)
On the other end of the spectrum is the MVB. These customers, while only making up about 15-20% of a company’s total customer base, typically account for more than three-quarters of all revenue.
These are the loyal consumers who are willing to spend more money, more often than the rest. Obtaining a one-time buyer is basically equivalent to gaining a subscriber, except they are not spending a fixed amount over a structured period of time – like $9.99 per month. In fact, there is nothing holding them back from spending as much as they want, as many times as they choose.
Great businesses are built on great customers, and MVBs form the backbone of any successful business. With an all-encompassing, 360-degree, multi-channel view of consumer behavior, a CDP can help you find prospective MVBs, develop them accordingly, and continue to identify more along the way.
In a 2018 Forbes Insights/Treasure Data Survey, 44% of organizations reported that a CDP was helping to drive their customer loyalty and ROI.
Here are some other highlights of the survey:
- 93% anticipated that employment and analysis of customer data in decisions and campaigns would create a noticeable shift in their ability to meet disruptive and competitive challenges.
- 53% said that the transparency provided through CDP platforms enabled their teams to react more quickly to changes in markets or customer preferences.
A CDP can prevent the dreaded churn by automatically identifying shifts in their status across and strategically reaching out to fading customers before they fall into attrition. One way this can be done is by employing ESP (Email Service Provider) functions to send a special offer for your product or service at a premeditated moment. This act of “rescuing” fading or inactive customers is extremely critical – because once you lose a buyer, you’ll have to fight twice as hard to win them back.
A CDP’s RFM (Recency, Frequency, Monetary Value) scoring engine classifies customers and sends the right follow-up message at the right time. The best CDP’s go far beyond RFM, and calculate near-time or real-time model scores, for every customer, predicting their likelihood of purchase or attrition.
Real Life Customer Journeys [The “Customer” in CDP]
Within each moment is an opportunity. When those moments are captured and managed in an intelligent, methodical fashion, a CDP enables you to transform transactions into relationships.
We spoke with a few model consumers who fall into the MVB category and were willing to share why.
The first is a man in his mid-20’s who is an avid sneaker collector (“sneakerhead’). For him, footwear goes far beyond mere practicality. He was an avid basketball fan as a child, which branched out into a heavy interest in sneakers over time.
In high school, he always made sure he had two or three solid pairs to choose from every morning. At the time, that was all he could afford.
But once he entered the workforce and began earning a respectable income, the scope and price of his purchases increased drastically. Eventually, he developed an entire closet just for his sneakers – many of which were rarely used – if at all.
“To me, it’s a lifestyle,” he said. “It’s part of my identity, and I feel like I’m a member of a community. It’s a culture.”
The second is a woman in her late-20s who considers her closet to be the centerpiece of her upscale city apartment. It is a sizeable walk-in filled with a wide variety of high-end designer outfits and accessories – each for different occasions.
While she always had good fashion sense and liked to dress well, her fascination with fashion truly took root while shopping for business outfits at her first job. She bought what she could afford at the time, but looked forward to when she could shop freely without limitations.
After a hard-earned big promotion, she started branching out and expanding her horizons. She followed all of the latest trends, and developed an impressive collection of dresses, tops, pants, jackets, handbags, and footwear.
“Fashion is more than just a hobby,” she said. “What I wear affects how I carry myself and how I’m viewed by others. I’m on display everywhere I go.
“It literally applies to any situation,” she added. “Whether I’m at work, out with my girlfriends, relaxing at home, or dressed up for a special occasion. When I shop, I’m rewarding myself and celebrating who I am.”
Equipped with a CDP, any retailer could easily identify either subject as a current or potential MVB. From there, they could monitor purchases and channel activity, gauge/influence brand loyalty, and deliver targeted, timely updates on the latest releases and promotions in order to actively increase the likeliness of another transaction.
For instance, if either consumer regularly demonstrates an affinity for one particular style or category of a product, they can actively respond by offering corresponding product suggestions for the next purchase.
An elite CDP helps to paint accurate, intricate portraits of your buyers. By knowing exactly who you are selling to, you are ahead of the game. In turn, the odds of securing and/or retaining MVBs skyrocket.
Is a CDP Right For You?
Many companies are dealing with customer data issues. In 2017, ClickZ referenced a recent Campaign survey of over 100 global CMOs and marketing executives. When asked what they felt were the biggest challenges currently facing marketers, they found some pertinent results:
- 57% felt hindered in their ability to carry out broad digital information.
- 22% felt their data and analytics capabilities were lacking.
- 13% were unable to improve targeting and personalization.
- 10% endeavored to build better marketing automation.
- 9% wished to better understand their customers’ journey.
Clearly, properly grasping and implementing customer data is a considered a key problem in the field. However, a CDP is the most practical under a particular set of circumstances.
One factor to take into consideration is cost. CDPs employ a vast set of sophisticated, cutting-edge technologies. This requires investing a substantial amount of time and money. Generally, most CDPs fall in the realm of six figures per year.
In addition, your company should be large enough and possesses the standard customer-facing systems and staff to properly utilize/analyze the technology. While it is a powerful tool, a CDP’s true effectiveness depends upon how it is designed, implemented, and managed.
However, if employed the right way, the benefits can easily outweigh the costs. A CDP lessens the amount of time and money necessary for gathering, filtering, and activating data while actually increasing its utility. In fact – with the best software – the resulting spikes in sales can pay for the for product multiple times over.
Simply put, a CDP’s function is to collect, cleanse, organize consumer data, and transform it to become highly actionable. In fact, it can process any kind or class of data currently available without limit. But it is more than just a multi-channel database and interface – it has become an interactive and innovative analytics and intelligence model.
With a clear, coherent customer data strategy, the right implementation tools, and a proper cross-functional team in place, a CDP can hasten, strengthen, and broaden your organization’s marketing framework.
Businesses do not just want to collect, assemble, and assess data. They want to apply it into something useful and generate concrete results. They want to grow their customer base, develop real, personalized, lasting relationships with their buyers (MVBs), and maximize revenue.
At BuyerGenomics, a well-educated client is our best customer, and we’ve poured our experience and resources into this piece to that end. If you picked up even one or two new insights, you’ve succeeded today. Not everyone completes reading an entire work of this scope. If you did, you’ve done what most readers do not, and distinguished yourself in the process. Congratulations — knowledge is power.
You can accomplish all the goals – and more than you would expect – from a CDP effectively, intuitively, and swiftly.
To request a demo, click here.