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What is a Customer Data Platform? Definition of a CDP, Benefits, Best Practices, and More

Marketers are increasingly eyeing customer data platforms (CDPs) as a solution for managing the myriad and disparate sources of data that today’s companies gather and generate about their customers and prospects. The need for customer data platforms emerged as the volume of data continued to expand dramatically, leaving marketers with a sense of data overload and no practical way to successfully integrate those data points to ensure that decisions are driven not just by a few data points, but all available data in context.

Definition of a Customer Data Platform

David Raab, Founder of the Customer Data Platform (CDP) Institute, defines a customer data platform as “a marketer-managed system that creates a persistent, unified customer database that is accessible to other systems.”

What is a customer data platform?Consumers demand a unified, omni-channel experience with the brands they trust, but it’s impossible for companies to create a truly omni-channel experience when their data exists in silos. To create that seamless, unified customer experience, you need unified data. That’s where a customer data platform comes in, aggregating and integrating data from a multitude of channels and data sources to provide a comprehensive source of truth about every customer on an individual level.

A CDP isn’t the same thing as a CRM database, nor is it an ordinary marketing or data management platform. Designed with marketers in mind, a CDP is unique in that it focuses on creating a central location for all customer data, including everything from buyer personas to web and mobile browsing history, email, chat, and phone interactions with the brand, social media behavior (follows, comments, likes, etc.), and more. While other data-focused platforms, such as CRMs or social media analytics solutions, focus on aggregating data related to one particular channel, a CDP brings together the complete history of interactions and behaviors across all channels to provide a more robust, in-depth understanding of every individual prospect and customer.

Benefits of Customer Data Platforms

According to Gartner, customer data platforms are gaining widespread attention from marketers due to the promise of “providing a holistic view of the customer to help execute and optimize personalized journeys.” Perhaps more compelling, however, is the idea that by leveraging a CDP, companies can shift control of the customer database (once managed by IT) to marketing, according to CDP Institute Founder, David Raab.

What marketers want most of all from their data are actionable insights, and that’s where CDPs really make an impact. Integrating multiple data sources traditionally was a time-intensive, laborious, and often imperfect process. As the need to eliminate data silos became obvious, some vendors offered customer profiling tools, making it possible to generate reports on-the-fly that combined various data sources. While this marked an improvement, these platforms fall short of providing a consistently available, always-integrated single source of customer data.

By integrating myriad customer data sources into a single, centralized platform, gleaning truly actionable, data-driven insights is faster, and those insights are more accurate, thanks to the robust contextual data that exists when multiple data sources are combined. Thanks to CDPs, a single source of truth about every individual is always available, making it possible to drive all decision-making in the context of all available data. Eliminating silos and weighing decisions based on multiple variables is no longer an afterthought; it’s the foundation.

Challenges of Customer Data Platforms

Despite growing awareness of the need for fully integrated, multi-channel customer data, many companies are still relying on siloed, channel-focused data sources. As the number of channels through which customers can interact with brands continues to rise, in tandem with consumer demand for a seamless, cross-channel experience, these companies are failing to meet their customers’ expectations.

Companies already utilizing database marketing solutions may realize the need for a better customer database, but they may fail to understand how CDPs bridge the integration gap. Traditional database solutions, however, fall short in effectively tracking customers across devices and channels, relying on third-party cookies and other tracking tools that make it difficult to distinguish individual consumers to accurately attribute behavior. That’s why many companies relied on segmentation rather than an individual customer profile to target marketing activities, but segmentation fails to meet consumer demand for a highly personalized, cross-channel experience.

It’s also important to remember that a customer data platform can solve your data challenges and facilitate a seamless customer experience, but a CDP won’t solve your organizational challenges. Be sure to address marketing-sales alignment and other organizational hiccups as you implement a CDP.

Best Practices for Leveraging a Customer Data Platform

According a study performed by Raab Associates Inc., Guide to Customer Data Platforms, CDPs have several unique characteristics that set them apart from traditional marketing databases and solutions:

  • Personally identified customers – With a customer data platform, each customer is identified by a unique identifier (which may be a name, postal address, email address, or other unique information) to effectively track an individual’s interactions and behaviors consistently across channels. CDPs must be able to link activities and interactions from external data sources to individual customers using this identifier.
  • Integration of multiple types of data – Whereas many traditional systems focus on one or a few types of data, such as website visits, order history, or social media interaction, a CDP must accept and integrate multiple data types in multiple formats. Additionally, CDPs should easily accommodate the addition of new data sources. Customer data platform unique identifiers
  • External data availability – One of the most important features of customer data platforms is that the data must be readily available to external systems used for marketing execution and analysis. CDPs should provide attributes relevant to marketing execution, such as predictive modeling scores or other actionable insights.
  • Marketing control – Unlike other database solutions, customer data platforms put control of the customer database in the hands of marketers. That means they require little technical expertise and don’t force marketers to rely on IT for the management of customer data.

Customer data platforms are a valuable solution to the challenges marketers face in delivering those exceptional, personalized customer experiences. To leverage the technology to its fullest potential, companies should:

  • Ensure that the data they’re collecting is in line with business goals and KPIs. In other words, you still need to be mindful that you’re collecting the right data about your customers.
  • Eliminate redundancy. The best, most useful data is clean data, which is achieved through data normalization, cleansing, and deduplication.
  • Determine who is in charge of the customer experience. Having a comprehensive, single source of truth about your customers is incredibly useful, but your team members should have a clear understanding of who is in charge for which facets of the customer experience.

Additional Resources on CDPs and Customer-Centric Marketing

For more information on CDPs and customer-centric marketing, or to learn more about NGDATA’s next-generation customer data platform, visit the following resources: