Write down the phrase ‘customer data platform.’ If you’re not familiar with this concept yet, you will get to know it during 2021. Customer data platforms (CDPs) represent a critical step towards using data more effectively to manage customer needs within a company. In fact, not just needs but everything relating to your customers – now and in the future. Whether you want to reduce churn, upsell more effectively or reach new business, a CDP will be central to making anything around customers a reality for your business1.
“There is a lot of excitement around customer data platforms, says Neer Rama, Force Solutions Product Manager at thryve. “Several big names are releasing CDPs to enhance their services. Salesforce released Customer 360 last year, and there are CDPs in development from major vendors such as Microsoft and SAP.”
What is a CDP?
TechTarget defines a CDP as “a type of software application that provides a unified platform of customer information that can be collected, viewed or accessed by other systems.”2 A CDP is also distinct from data warehouse because it’s offered as a service, and from data management platforms as it ties data directly to customer identities. Thus, instead of building an elaborate data system to track customers, companies can plug their data into a CDP service and get results faster.
CDPs are cloud-based platforms, so they inherit the same capabilities as other cloud services: flexibility, predictable costs, scaling deployment, easy modification, and massive scope for integration. It’s this latter attribute that makes CDPs particularly revolutionary, says Riaan Bekker, thryve’s Force Solutions Manager:
“With a CDP, you can plug in multiple different data sources, building a much deeper and more relevant profile of a customer. It’s this combination of data and integration where companies struggle to gain traction. Building such a data system yourself is a lot of work and requires a lot of money. We’ve seen other examples of how the cloud gets around these problems, such as integrated risk management or financial management. CDPs now do the same for customer insight.”
Trends in the market reinforce this enthusiasm, including acquisitions of CDP startups and announcements of new CDP services.3 The rush to adopt CDPs relates directly to the challenge of how to best use customer data.
CDP vs CRM
Astute readers might note that a CDP sounds vaguely similar to a CRM (customer relationship manager) platform. The two are not the same, said Rama, but they share similar characteristics, and one enhances the other.
“If we look at Salesforce, that is the world’s biggest CRM provider. But it’s been using platform systems to expand and enrich Salesforce services so that users can include automation and analytics. The crucial piece, though, is data. A CRM needs access to customer-specific data and services to enhance its own services – that’s where a CDP comes in. You could see the CDP as the big enabler behind a modern CRM. But it’s also a standalone technology that gives different people key customer information. A CDP brings customer data together in smart and usable ways, which systems such as a CRM can leverage further.”
CDPs can scrub and organise data, create unified ‘single view’ records of customers, gather and collate external data such as social media sentiments, and make those records available to whoever needs it, from marketing teams to product designers. Surveys such as from Forrester found that a company with a CDP enjoys 2.5 more customer lifetime value.4
2021’s star technology
The term ‘CDP’ was first coined in 2013, initially as marketing software that also supported some other business applications. But by 2016, the CDP has distinguished itself as a powerful standalone application that brings customer identity to data management. Suited for everyone from small businesses to large enterprises, CDPs have come of age. Add in 2021’s pressure to retain customers despite tight budgets and challenging market conditions, and the CDP’s prospects look set for explosive growth.
“CDPs are becoming more popular because they fix basic but important problems around data management and customer centricity,” says Bekker. “They make it a lot easier to create a customer-centric data environment that is secure and accessible, and affordable. The fact that these are platforms means the companies using them need far less investment in equipment and skills to finally create a single source of truth about their customers. And that info doesn’t sit in a silo, unlike previous systems that usually became the domain of a specific department.”