The Complete Guide to Customer Data Platforms

Did you know that an average business uses more than 17 applications for collecting and storing customer data? What’s even more interesting is the fact that an average business receives data from more than 28  different sources. Due to this, 70% of the time is spent on finding data and only 30% is spent on analyzing that data, as shown by the statistics. You might be wondering what’s the solution to this problem? It is a customer data platform. If you are interested in learning about what it is, how it works, its advantages, and its different types and use cases then you are at the right place. In this article, you will learn everything you need to know about customer data platforms ( CDPs ).

What is a Customer Data Platform?

A customer data platform ( CDP ) is basically a software or technology which consolidates customer data from a wide variety of different sources and stores it in a centralized customer database. It could be data from New York hosting dedicated servers, CRM system or ERP system. The goal of the customer data platform is to enable businesses to personalize marketing campaigns and send targeted promotions and offers to the right customer at the right time.

There are three different types of data that are usually stored in customer data platforms:

• Demographic (Name, date of birth, and address)
• Behavioral (Collected from website, apps, or live chat)
• Transactional (E-commerce and POS)

What are the Advantages?

There are many advantages of customer data platforms. Some of them are as follows:

• Ability to create unified customer profiles
• Develop a better understanding of the customer journey
• Deliver a more personalized customer experience
• Increase customer satisfaction
• Predict customer behavior
• Simplifies data management and automation

What are the Different Types of Customer Data Platforms?

There are four common types:

• Marketing cloud CDPs

This type of customer data platform works in conjunction with customer relationship management systems as well as email service providers to deliver a more unified view. In most cases, vendors of this type of customer data platform are usually well-established cloud hosting or dedicated hosting providers. 

• Marketing data integration CDPs

This type of customer data platform puts more emphasis on data operations and comes preloaded with powerful data manipulation and governance capabilities. Their focus is usually on collecting first-party data so they need to be paired with data visualization tools for data representation purposes.

• Customer data platform toolkits and engines

If you want to build your custom made solution tailored to your particular business needs then you should definitely check out customer data platform toolkits and engines. Yes, it might require a lot of technical knowledge to pull this off but in the end, you will get a customizable solution that fulfills your business requirements in the best way. If you have a highly skilled and experienced IT or development team, customer data platform toolkits and engines give you more control and customization options than any other type of customer data platform.

• CDPs smart hubs

The core focus area of this type of customer data platform is the personalization and execution of marketing campaigns. With this type of customer data platform, you can send highly targeted, personalized offers at the right time based on user behavior. This can drastically increase the chances of converting prospects into customers. If you couple it with the right data visualization tools,  you will be able to grow your campaigns widely.

What are the Differences Between Customer Data Platforms and Customer Relationship Management?

Most people might confuse CDPs with customer relationship management systems and I don’t blame them. A customer data platform shares a lot of similarities with customer relationship management but also some key differences which set it apart.

One of the most obvious differences between the two is that a customer data platform helps you manage customer data while a customer relationship management system is focused on building and nurturing customer relationships. Even though both collect customer data, the customer data platform looks at customer behavior and their interaction with their product or service while customer relationship management systems are responsible for managing customer-facing interactions.

What are the Differences Between CDPs and Data Management Platforms?

Another closely related system that most people tend to confuse CDPs with is data management platforms. The primary reason for this is that both of these systems use data to create target audiences for marketers. There are three main areas where customer data platforms distinguish themselves from data management platforms.

• Data usage
• Customer identity usage
• Data retention

As mentioned before, customer data platforms use first-party behavior data which is usually collected from the website or apps, subscription data or data from a customer relationship management system. On the flip side, data management platforms use third party data. This data usually comes from data aggregators who collect it from multiple platforms.

Customer data platform data is more inclined toward tracking the interaction of individual customers which can easily be identified by customer identities such as the name of the customer and email address. On the contrary, data management platforms use anonymous data. Data from data management platforms can help with digital advertising while data stored in customer data platforms is more helpful for your marketing department.

The third difference between a customer data platform and a data management platform is data retention duration. Customer data platforms not only retain customer data for a longer period of time as compared to data management platforms but also enable customers to request access to their data. On the contrary, a data management platform retains data for a short period of time and also refreshes and replaces old data with newer anonymized data.

What are the Different Use Cases For CDPs?

You might be wondering what are some of the common applications and use cases for customer data platforms. Some of the common use cases for customer data platforms include:

• Omni-channel marketing
• Unified customer view
• Personalization
• Data management and integration
• Data governance and privacy
• Marketing automation

What did you know and did not know about customer data platforms before reading this article? Share it with us in the comments section below.

Andrej Fedek

Andrej Fedek is a digital marketer. He recently started his own blog about digital marketing called InterCool Studio. His passion is to help startups grow and thrive in a competitive environment.