Thought Leadership

CDP vs. CRM: What’s the Difference?

Customer data platforms (CDPs) and customer relationship management (CRM) software have similar functions but differ in their primary purpose. Let’s start by understanding each one of them separately.

What is a Customer Data Platform (CDP)?

A CDP is a system specifically designed to create a customer database that includes complete historical and behavioral data about the customer. The information could include website visits, app sessions, and content affinity. All of this can be integrated with machine learning to send personalized marketing offers to customers.

What is a Customer Relationship Management (CRM) system?

A CRM enables you to focus on your business relationship with individual customers. Often wrongly interpreted with just sales, CRM even stores the data of your suppliers, service providers, and customers. It is a tool that can be used by all business divisions, from HR and accounting to supply chain management.

So, what are the key differences between CDP and CRM? Here are six of the most common differences:

1. Application

Although used by the entire organization, CRM platforms were primarily designed for sales, i.e., managing the company’s interactions and customer relationships. It is used to store information and inquiries made by potential customers. CRM is used to track transactions, analyze the sales pipeline, keep on top of customer communication, and make notes about customer feedback for future reference.

A CDP is a powerful tool businesses use to design innovative and effective marketing strategies. A CDP can identify and segment audiences based on their behavior, preferences, and needs by collecting and analyzing customer data from various sources. This segmentation enables businesses to create personalized marketing campaigns that resonate with each audience group, increasing engagement and conversion rates. With a CDP, businesses can better understand their customers and deliver targeted messages that drive results.

2. Data Source

A CRM system stores data of individuals who have made a purchase or communicated with the business somehow. On the other hand, a CDP integrates multiple sources and captures data from various channels, including social media, applications, point of sale, and e-commerce transactions, all in one centralized platform.

3. Customer Journey

CRM solutions typically cannot match customer interactions over different channels. For example, a teenage girl shopping for tennis shoes visits the brand’s website, clicks a Facebook ad, and then, after a few days, orders a pair of shoes over the phone. Most CRMs do not have the machine intelligence to pick up on this customer behavior and track her purchase journey, which could be vital information to target that particular audience.

A CDP tracks the customer with their “personally identifiable information” and uses machine memory to associate them with their particular method of initiating purchases or making transactions with a business. As in the above example, the CDP can now precisely extract how teenage girls with a specific demographic shop for tennis shoes at every customer touchpoint. Understanding the specifics helps create more personalized targeted campaigns for a segmented audience.

4. Data Capture

CRMs cannot pick up offline data. So, after visiting the brand website, a teenage girl clicks on the Facebook ad, reads a blog on tennis shoes on the company website, and then decides to make an in-store purchase. A CRM could not track this customer interaction unless manually entered – these solutions focus only on known customers and prospects.

Alternatively, a CDP captures both online and offline data. Since it associates unique personal identifiers such as phone number, email, mailing address, etc., it can give a full 360-degree view of the customer. So, in continuation with the above example, if the teenage girl clicks on another brand ad and orders a tennis backpack online after a month, this entire customer transaction is historically recorded by the platform. Cumulatively, this data can be run via customer analytic tools to target a particular customer demographic behavior.

5. Data Duplication

CRMs focus on customer transactions and are not designed to tackle multiple data types. So, suppose a person has transacted via email and then via a website purchase. In that case, these data points are often recognized as separate entities, thus creating multiple records for the same customer and lowering the data quality in CRM.

A CDP maintains unified data. So, even if data is captured from multiple channels, it will be tagged to a single customer. Let’s say a person named “Robert Turner” purchases trousers in-store with the name “Bob Turner” and then later signs up for a newsletter subscription with the name “Robbie Turner.” A CDP will assign both transactions to the original “Robert Turner,” thus avoiding data duplication.

6. User Profile

CRM data can only track interactions with known customers. However, the limitation of CRM is that targeted marketing can only be done with only known customers already in the database.

CDP can identify both a known and an anonymous customer and displays a single customer view. This capability is one of CDP’s most significant advantages over CRM.

CDPs and CRMs have some similarities, but a CDP is a much more complex and comprehensive solution that can dig deeper into available data and go beyond gathering data on existing contacts and customers. The result? A better view of your market and the existing opportunities means you’re arming your marketing and sales teams with the insights they need to drive results.