The ultimate guide to Customer Data Platforms (CDPs)

Marketers today face an incredibly complicated and tricky state of affairs. 

On the one hand, customers are better informed than ever before, and they don’t hesitate to share their opinions with people all over the world. On the other, these customers demand an increasingly personalized experience and relationship with your brand.

These two realities mean that campaigns and strategies that worked well in the past can quickly become irrelevant, outdated, and obsolete with little more than a click, tap, or swipe. 

How can marketers stay ahead of the curve and become the most valuable people (MVP) for their companies? Here at Simon Data, we believe that the answer lies in using a customer data platform (CDP) to ensure that you’re leveraging all of your valuable customer data as efficiently and effectively as possible. 

Below, we take a closer look at what customer data platforms are, what they should be capable of doing, and why legacy tools are falling short. We also discuss how CDPs fill this gap, before walking through several potential use cases for CDPs within your organization. Finally, we compare CDPs against a number of other tools that they are often discussed alongside so that you’ll have a better sense of how CDPs differ from them and how your entire stack can potentially play together.

What is a customer data platform?

A customer data platform (CDP) is a marketing platform that helps you understand who your customers are and what motivates them to buy your product or interact with your brand. It does this in two key ways:

1. First, a CDP unifies customer data from disconnected data sources (like your company’s website or app, CRM, POS system, accounting system, and more) to create a single profile of each customer
2. These customer profiles can then be used to create more targeted segments and audiences and more personalized marketing campaigns (email, social, etc.).

In other words, a customer data platform (CDP) makes the right customer data available where you need it to activate your customers at the right moment. Think of it as your customer nervous system — it combines four key capabilities: data collection, profile unification, segmentation, and campaign orchestration.

What should a Customer Data Platform do?

Today’s marketing world is all about relationships between companies and consumers. The more meaningful the connection, the easier it is to grow and sustain a loyal base of enthusiastic people. However, this leaves marketers with a difficult dilemma: How can they build trusted relationships at the scale needed to remain either in a growth phase or at the scale they need to be to remain competitive?

The answer is in your data — from first-party and zero-party data you collect yourself all the way to third-party data you source from partners. Customer data is powerful, and brands need it to thrive in this constantly changing digital era. It is your biggest and most unique competitive advantage.

From the initial lead interaction to the storage and use of the data, all the way through a quality customer relationship, data makes a difference. And a CDP is the tool that helps you put this data to work.

CDP use cases

A CDP can help your business significantly improve your processes and move several important needles toward growth. This includes:

1. Increasing operational efficiency

The bottleneck between marketing and their technical partners in IT, data science, and engineering is very real and time-consuming. Anything that cuts down on that strain is appreciated by everyone.

A quality customer data platform democratizes this kind of critical customer intelligence so marketers can focus on marketing without the wait. It also allows transparency between departments and creates a central location for everyone to access the data they need to move forward. And with the advent of technologies like artificial intelligence (AI) and machine learning (ML) this can happen with greater speed and ease than ever before. 

2. Increasing revenue generation

The more available and accessible customer data becomes across the marketing program, the better you will know your customers. As a direct result, the speed at which new campaigns can be tested and deployed allows teams to do more and be more granularly personal, which generates more revenue.

The more insight into customer preferences and behavior you have, the better your decision-making will achieve business-level objectives. Customer data platforms streamline and support revenue generation throughout these processes in ways that other martech solutions simply can’t.

3. Reducing media spend

On average, media spend generally accounts for one-third of all marketing costs. A CDP can dramatically cut this number down.

For example, with the right data ingestion, analysis, and incorporation in place, suppression lists can update automatically instead of manually. Simultaneously, you can also increase ROAS with more fine-tuned retargeting audiences.

A customer data platform’s built-in testing capabilities feed your segmentation and overall customer intelligence. This directly optimizes campaigns and enables you to assess ROI across your media landscape for much less.

4. Streamlining technology costs

A CDP enables you to see your data all in one place. This in turn, allows you to focus on getting the most out of every capability in your current stack and eliminate excess spend on solutions with redundant functionality.

By being tech agnostic, you have the flexibility to assemble your plug-and-play dream team or to optimize your workflows around the strengths of suboptimal tech solutions with which you’re momentarily stuck.

5. Optimizing workflows

When your team has a home base from which they can operate the entire stack, the manual work of marketing becomes a natural extension of thinking. Before, this seemed like a pipe dream. Now, it can be a reality. That’s the power of centralized, organized data. And it’s only the beginning. 

Why don't other martech solutions fill this need?

In a nutshell, legacy tools only ever filled in a part of the great customer data puzzle. Most, if not all, legacy marketing technologies were purpose-built with a set amount of functions in mind. Not all of these have aged well and none of them provided a cohesive solution.

This led to many organizations and companies cobbling together a system of multiple moving parts. No single vendor has solved every facet of the customer experience and many company combinations simply can’t fill the gap.

Enter customer data platforms.

How customer data platforms fill the gap

Each step in a quality customer data platform’s workflow guides the user toward driving value with a full view of the customer, critical insights around an opportunity sizing, and profoundly embedded support for experimentation.

Here’s how CDPs accomplish this.

Technology can only achieve this by aggregating all customer data across any data source, then providing a smooth, intuitive interface. This enables marketers to leverage the data to target and personalize their campaigns and next steps.

A customer data platform’s abilities allow marketers to orchestrate customer experiences in and across channels while also providing rich insights on customer behavior and campaign performance.

Customer Data Platforms + other marketing tools

Do you find yourself confused by the sheer number of initials, acronyms, and abbreviations used in the martech world? Have you tried to figure out how all of the s

Do you find yourself confused by the sheer number of initials, acronyms, and abbreviations used in the martech world? Have you tried to figure out how all of the solutions interface with each other and your needs, only to find frustration and disappointment?

These struggles can be particularly acute when companies and organizations research customer data platforms (CDPs) and their relationship with other martech solutions. Typically, this is because of the sheer size and scope of the systems in question.

Below is a look at some of the most common martech tools that get discussed alongside CDPs, including what they offer, how they differ from CDPs, and how each system can potentially interface with a CDP.

Cloud Data Warehouse (CDW)

What they do: Cloud data platforms like Snowflake are cloud-based databases designed to aggregate, process, organize, and store data from multiple sources so that it can be analyzed and understood more readily than if the data was kept in multiple siloed systems. 

How they work with a CDP: Once a CDW has aggregated and organized your customer data, a CDP will have a much easier time using that information to generate customer profiles, segments, audiences, and campaigns. 

Data Management Platform (DMP)

What they do: DMPs, like The Trade Desk and Nielsen DMP, are platforms that collect anonymized third-party data, which is then specifically used to generate and manage paid digital advertising and marketing platforms.

How they work with a CDP: A CDP leverages the capacities of the DMP to bring highly-curated PII to your advertising campaigns.

Customer Relationship Management (CRM)

What they do: CRM tools like HubSpot and Salesforce collect and track customer information that your sales and services teams can use to manage customer relationships more effectively. In addition to basic customer information (name, contact information) these tools also track customer interactions, including the products they purchase and the website pages they visit, amongst other data points.

How they work with a CDP: CDPs can push audiences to CRM tools for streamlined downstream management and ingest data from CRM tools to support audience segmentation and personalization.

Email service provider (ESP)

What they do: An ESP is a software that empowers organizations to collect customer email addresses and basic information, which can then be used to create and manage email lists, audiences, and email marketing campaigns. 

How they work with a CDP: Businesses can generate email lists and campaigns within the CDP and then upload them to their ESP for execution, or they can forgo an ESP altogether and opt to let a CDP manage their email needs.

Multi-Channel Marketing Hub (MMH)

What they do: MMHs are a type of software designed to orchestrate personalized communications for your customers across multiple channels. These systems specialize in managing and deploying marketing campaigns to end channels like email, social media, or SMS.

How they work with a CDP: Typically, clients use one or the other, due to the considerable overlap between these systems.

Digital Personalization Engine (DPE)

What they do: A DPE tracks and analyzes customers’ previous interactions and predicted intent to identify the best user experience for that individual. It then alters the online experience through visual presentation, recommendations, or triggered messaging.

How they work with a CDP: CDPs sync audiences to DPE tools for downstream management and personalization.

Master Data Management Platform (MDM)

What they do: An MDM platform consists of various tools and processes that consolidate and manage an organization’s data so that it can be more effectively utilized by that organization — including for marketing purposes. In this regard, they are similar to CDWs.

How they work with a CDP: When used together, MDMs and CDPs can provide an amazing overview of the entire company’s data as a whole.

Data Lake

What they do: A data lake is a centralized repository designed to store all of an organization’s data — in its original form. This can include structured, unstructured, and semi-structured data from any source.

How they work with a CDP: CDPs can share all customer data to a client’s data lake, streamlining the process of sharing information.

Simplify the CDP conversation within your organization

One of the challenges of acquiring a customer data platform (CDP) is that it can be unclear who should own the process. The muddle typically happens between Marketing, IT, and Production. However, you can easily avoid this confusion if you start with the proper processes in place.

Are you considering the role that a CDP might be able to play within your organization? Download our CDP Buyer’s Guide, which includes helpful tips you can use to evaluate your options and effectively guide the conversation.