The Benefits and Reasons to Use a Customer Data Platform (CDP)

As we laid out in our 2023 top digital marketing phenomena article, the upcoming cookieless world is bringing a lot of changes. Due to the increased focus on privacy and first party data, and the subsequent increase in data gaps, one of the emerging needs in digital marketing for businesses is an investment in a customer data platform (CDP). CDPs are relatively new so let’s start by talking about what a CDP is, why it’s important, how a CDP uses AI, and how it’s different from other marketing systems.

What Is a CDP?

A Customer Data Platform (CDP) is a type of software that collects and organizes data from various sources, such as website interactions, email campaigns, and customer service interactions, to create a comprehensive view of each individual customer. This data can then be used to personalize marketing and sales efforts, improve customer service, and inform product development.

Why Is Having a CDP Important in Marketing?

CDPs are important because they allow businesses to have a more complete understanding of their customers, which can lead to increased customer loyalty and sales. Additionally, CDPs can help businesses comply with data privacy regulations, such as the General Data Protection Regulation (GDPR).

What Problems Does a CDP Solve?

CDPs have several features and benefits that provide businesses with the tools to solve business-level problems often faced by companies today.

One of the main challenges businesses face is having a fragmented view of their customers, with data spread across multiple systems and touchpoints. Because of this, the primary benefit of a CDP is its ability to bring together customer data from multiple sources and create a single, unified view of each customer. This allows businesses to gain a deeper understanding of their customers and to deliver more personalized and relevant experiences.

Another challenge with customer data is that it can often be inaccurate, inconsistent, and outdated, making it difficult to make informed and timely decisions.

The CDP ensures that customer data is accurate, consistent, and up to date, improving the reliability of data for analysis and decision-making. More than that, it also automates and streamlines data management processes, reducing manual effort, decreasing human error, and enabling businesses to focus more time and effort on delivering value to their customers. Because of this, businesses gain better customer insights and can make informed and timely marketing and sales decisions based on data.

Finally, businesses struggle to understand their customers and deliver relevant omnichannel experiences by collecting and integrating customer data from multiple touchpoints, such as websites, mobile apps, email, and in-person interactions.

With a CDP, businesses can deliver a consistent and personalized customer experience regardless of the channel, device, or location, improving the customer journey and driving business results. This, in turn, leads to increased customer engagement, loyalty, and ultimately, revenue.

What Are Use Cases For a CDP?

CDPs have a wide range of use cases, as they provide businesses with a centralized, unified view of customer data, enabling them to deliver personalized and relevant experiences. Some common use cases for CDPs include:

1. Personalized Marketing: CDPs can be used to deliver targeted and relevant marketing messages to customers based on their behavior, preferences, and purchase history.
2. Customer Segmentation: CDPs can be used to segment customers based on specific criteria such as behavior, preferences, and purchase history, allowing businesses to deliver more targeted and relevant experiences.
3. Customer Insights: CDPs provide businesses with insights into customer behavior and preferences, which can be used to inform marketing and sales strategies.
4. Data Management: CDPs automate and streamline data management processes, reducing manual effort and errors, and enabling businesses to focus on creating and delivering value to their customers.
5. Cross-Channel Marketing: CDPs integrate with other marketing tools to create a seamless customer journey across multiple touchpoints, improving the overall customer experience.
6. Data Privacy and Security: CDPs provide robust security and privacy features to ensure that customer data is protected and complies with privacy regulations.

How Do CDPs Leverage Artificial Intelligence?

CDPs make use of artificial intelligence (AI) to enhance their functionality and capabilities. For example, AI can be leveraged for predictive modeling, enabling CDPs to analyze customer data and predict future behavior, thereby enabling businesses to deliver more targeted and relevant experiences.

CDPs also use AI for personalization, where customer data is analyzed to deliver personalized experiences to customers based on behavior, preferences, and purchase history. AI is also leveraged for customer segmentation, helping businesses to group customers based on specific criteria for more targeted experiences. Additionally, AI can be used for customer analytics, lead scoring and nurturing, campaign management, and fraud detection.

Additionally, CDPs can integrate with AI-powered chatbots to provide customers with immediate and personalized support. Overall, AI plays a critical role in making CDPs more effective and efficient in managing and leveraging customer data.

How Is a CDP Different from Master Data Management or Marketing Automation Systems?

Master Data Management (MDM), Customer Data Platforms (CDPs) and marketing automation platforms are all technologies that help organizations manage and use data, but they have different functionalities and use cases.

• MDM is a technology that helps organizations create and maintain a single, accurate, and consistent view of data across multiple systems and applications
• CDP is a technology that is specifically designed to manage customer data and CDPs collect and unify customer data from various sources to create a single view of the customer
• Marketing automation systems automate and optimize marketing processes such as website monitoring and email marketing

Is a CDP the Same as a Customer Relationship Management System?

A CDP and a Customer Relationship Management (CRM) system are related but distinct technologies, each with their own set of capabilities and use cases.

A CDP collects, unifies, and activates customer data from various sources such as websites, mobile apps, social media, email, and offline interactions:

• CDPs drive personalized, data-driven marketing efforts and allow marketers to make data-driven decisions
• CDPs integrate with many other systems

A CRM manages customer interactions and relationships:

• It stores customer information to support sales, marketing, and customer service
• It helps to track leads, opportunities, and customer interactions

See our tips for lead validation and working with CRM data to learn more about our (un)Common approach when leveraging CRM data to improve digital marketing results.

What Is the Future of CDPs?

The future of CDPs is characterized by an increasing focus on privacy and data security, as well as the integration of artificial intelligence and machine learning technologies.

As customer privacy concerns continue to grow, CDPs will need to ensure that they are fully compliant with data protection regulations and have strong security measures in place to protect customer data.

Additionally, the use of AI and machine learning technologies will allow CDPs to provide even more sophisticated and relevant customer experiences. For example, AI-powered CDPs will be able to analyze customer data in real-time to deliver highly personalized and relevant interactions.

In the future, CDPs will also continue to play a critical role in helping businesses to build a single customer view, which will be essential for delivering omnichannel experiences and driving customer engagement and loyalty. Overall, the future of CDPs is characterized by an increased focus on privacy, security, and the integration of advanced technologies to deliver better customer experiences and drive business results.

What’s Next?

That covers the basics of CDPs and how they’re different from other business and marketing data systems. In our next CDP post, we’ll cover implementation, ROI, and recommendations to consider.

Contact us to learn more about our uncommon approach to using data and technology to drive excellent results in digital marketing.

Interested in how to rev up your customer acquisition efforts in our new privacy-centric world? Come to our panel discussion with speakers from Meta, Morgan Stanley, and more on February 28, 2024 at Vuka in Austin, Texas.

Want to learn more about how we’re helping clients with the upcoming cookieless world? Check out our uncommon approach to programmatic advertising or how to upgrade to GA4!