A customer data platform is software that pulls in multiple data streams into one consistent database that helps to organize and manage customer data.
Whenever a company collects data on a customer – whether it’s in a point of sale (POS) or customer relationship management (CRM) system, a website or social media interaction, an email or customer service communication, or any other channel – all that information can be aggregated and stored in a customer data platform (CDP).
CDP software is among the most valuable digital tools available due to its capacity to integrate with a wide variety of external sources and piece together data across a large number of touchpoints. By doing so – and by intelligently associating the right interactions and transactions with the right customer profiles – it is able to construct a persistent, consolidated customer database accessible to the whole organization.
What is the purpose of a customer data platform?
To understand the purpose of a customer data platform, it helps to look at some third-party definitions.
Gartner describes a CDP as “a marketing technology that unifies a company’s customer data from marketing and other channels to enable customer modeling and to optimize the timing and targeting of messages and offers.” As this makes clear, aggregating customer data is critical for reaching the right audience with the right promotions, advertisements, and campaigns at the right time.
“A CDP is an out-of-the-box solution purchased from a third party vendor, rather than being built in-house”
But there’s more to it than that. The Customer Data Platform Institute defines a CDP as “a packaged software that creates a persistent, unified customer database that is accessible to other systems.” By “packaged”, it means that a CDP is an out-of-the-box solution purchased from a third party vendor, rather than being built in-house.
This is important, because packaged software is generally designed for native integration without requiring a heavy lift from IT and developer teams. This greatly reduces the cost, risk, and downtime associated with homegrown solutions. That said, CDP solutions are still highly customizable and designed to integrate with the other tools in your tech stack, and marketers can set their own parameters around the collection, segmentation, and orchestration of data as they see fit.
By collecting customer data from e-commerce platforms, email marketing, social media profiles and activity, website, web forms, CRM, and transactional systems, the CDP builds unique profiles for every customer and unifies them in a single database. Any department across your company can use these insights and analytics to inform their strategy.
Most often, CDP solutions are utilized by marketers to drive messaging that has been personalized according to the customer’s individual needs and preferences, or to retarget engaged consumers with recurring ads to stay top of mind.
What are the benefits of customer data platforms?
All organizations understand that silos between teams, campaigns, and departments pose serious problems. They hinder productivity, communication, and collaboration. They may even undermine the customer experience if marketers have to make decisions based on convoluted, contaminated, or incomplete data, which is segregated in disparate channels.
A CDP is designed to break down silos by storing all customer data in one place, unifying unique profiles, and using the power of analytics to derive behavioral patterns and predictions. This in turn uncovers new upsell and cross-sell opportunities.
A customer data platform does more than that, however. By stitching together interactions, communications, and behaviors across a range of channels, a CDP also provides insight into customer sentiment so that your marketing teams can take a more tactical approach to establishing, nurturing, or rehabilitating a relationship.
More strategically, a CDP helps marketers paint a picture of their ideal buyer so they can target prospective customers and retargeting existing ones. They can also help you make informed predictions about your ideal buyer’s behaviors and align your marketing initiatives accordingly.
Why is a customer data platform important?
Customer data platforms are important because first-party data is important, and that’s precisely what this technology collects.
Being able to yield insights directly from customers’ site traffic, social media activity, and subscriptions is invaluable, as it provides an unaltered and unfiltered look at what they’re doing, saying, and buying.
Too often, marketing teams have to resort to third-party data to inform their strategies, which is typically amassed through cookies and trackers and sold or shared between businesses. Unlike third-party data, first-party data is produced by your customers only, and used solely for their benefit.
This relates to another reason why having a customer data platform is important: compliance. Strict data privacy regulations such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act grant consumers the right to access the personal data that companies capture and store, and they have the right to be “forgotten”, or to have that data erased. That is extremely difficult to comply with when data is siloed across multiple information stores, but a CDP makes it simple.
By setting up your organization to have organized, clear, and consolidated customer data, CDP solutions can streamline both your marketing efforts and your data compliance.
What are some of the key features of a customer data platform?
The Customer Data Platform Institute has outlined four distinct criteria that all CDP systems must meet:
- First, they need to be able to ingest real-time data from any source.
- Second, they have to capture the full detail of all the ingested data.
- Third, they need to support indefinite (and compliant) data storage.
- Fourth, they must be able to share data with systems that require it.
Most leading platforms offer vendor-neutral solutions that enable connections to and from all external systems. They also also have the sophisticated data management capabilities required to unify both structured and unstructured customer data by matching IDs in other systems.
Above all, the best CDP systems are user-friendly for marketing teams and other business units. While additional resources may still be needed for some of the more advanced functionalities, a well-designed CDP doesn’t require any complex IT or data science involvement, making it easy for teams to execute strategic campaigns from beginning to end.