Customer Data Platforms: A Marketer‘s Guide to Applications and Benefits in 2023

Customer data platforms (CDPs) have rapidly become one of the hottest technologies in the martech ecosystem. By creating unified customer profiles, CDPs empower companies to deliver highly personalized experiences. This in-depth guide examines everything marketers need to know: from CDP capabilities and benefits to top solutions, use cases, and implementation best practices.

What is a Customer Data Platform?

A customer data platform (CDP) is software that centrally aggregates, manages, and analyzes large volumes of customer data from various sources. It creates unified profiles that offer a 360-degree view of each customer.

While CRMs and marketing clouds capture some customer data, CDPs are dedicated specifically to consolidation and segmentation. According to the CDP Institute, over 120 platforms now exist with revenue exceeding $2 billion.
CDP landscape
CDP landscape (source: CDP Institute 2022 report)

Key capabilities include:

  • Collecting customer data from all touchpoints (web, mobile, POS, CRM, etc.)
  • Unifying profiles by resolving identities across channels
  • Enriching data with third-party sources for greater insight
  • Segmenting audiences into fine-grained cohorts
  • Sharing enriched profiles with other systems via APIs and integrations
  • Applying machine learning algorithms for predictive analytics and modeling

According to Forrester, over 50% of companies have now adopted CDPs. And Gartner predicts 80% will switch to CDPs by 2022 given the clear benefits over legacy customer data approaches.

CDP Use Cases and Applications

CDPs enhance a wide array of customer-focused capabilities:

1. Building Unified Profiles

CDPs aggregate data enterprise-wide to construct unified views of each customer. This "single version of the truth" gets all teams on the same page.

2. Segmentation and Targeting

Granular CDP profiles allow advanced behavioral segmentation based on interests, behaviors, and attributes. Hyper-targeted campaigns can deliver personalization at scale.

3. Real-Time Personalization

CDPs feed data directly into personalization engines to tailor content, offers, and experiences for website visitors based on their profile and context.

4. Attribution Modeling

With cross-channel data integrated, CDPs enable highly accurate attribution. Companies gain clear visibility into the customer journey and marketing ROAS.

5. Predictive Analytics

Applied AI reveals hidden insights like purchase propensity, lifetime value, and churn risk scores on each customer to inform proactive plays.

6. Orchestrating Omnichannel Engagement

CDP insights instantly activate the next best action across any channel. Touchpoints stay coordinated and relevant based on the unified profile.

7. Data Hygiene and Governance

Consolidating data into a CDP also enables critical governance with security, access controls, and compliance protocols.

The use cases span marketing, sales, service, ecommerce, and beyond. And the capabilities unlock exponential value from customer data.

Industry Examples

  • Financial services: TD Bank built 360-degree customer profiles to improve cross-sell and retention.
  • Retail: Home Depot uses its CDP to identify high-value customers at risk of churn based on behaviors.
  • Entertainment: NBCUniversal leverages its CDP to share insights across its TV and digital properties.
  • Automotive: GM‘s CDP powers a personalized owner portal with maintenance offers and reminders.

5 Key Benefits of CDPs

Here are the primary benefits provided by customer data platforms:

1. Holistic Customer Intelligence

By consolidating data from all sources, CDPs overcome silos to assemble the complete intelligence picture required for modeling and segmentation.

2. Hyper-Personalization

Unified CDP profiles empower personalization at a segment-of-one level not possible with fragmented data. Brands can deliver highly relevant experiences.

3. Improved Customer Experience

Informing next best actions across channels, CDPs help align engagements into consistent omnichannel journeys. This ultimately enhances the customer experience.

4. Greater Marketing ROI

With unified data and cross-channel attribution, CDPs provide clearer visibility into the performance of campaigns, channels, and assets. This drives optimization.

5. Future-Proof Foundation

With open and flexible data models, CDPs provide an adaptable customer intelligence foundation. As needs evolve, so can the platform.

According to a Forrester TEI study, organizations see 464% ROI over 3 years with payback in less than 6 months after implementing a CDP due to data-driven customer retention and acquisition. For marketers, the benefits are undeniable.

The Road Ahead for CDPs

While already gaining widespread adoption, analysts see CDPs evolving in important ways:

  • Expanded analytics – CDPs will become even more robust analytics hubs using AI/ML to uncover behavioral insights.
  • B2B applications – CDP personalization benefits apply equally to business buyers. B2B use cases will expand.
  • New modalities – CDPs will ingest emerging data like IoT and integrate with disruptive channels like the metaverse.
  • Coexistence with CI/CD – Rather than competing, CDPs will intersect with customer identity/consent tools for unified compliant profiles.
  • Industry clouds – Vertical-specific CDP solutions will emerge for industries like healthcare, finance, etc. with tailored data models.

Already central to modern martech stacks, the scope and impact of CDPs will only grow. Evolving into customer intelligence command centers, they remain foundational to delivering relevant experiences.

CDP Challenges and Considerations

While transformative, centralized customer data platforms also pose challenges around complexity, governance, and more:

  • Data integration – Connecting, mapping, and transforming incoming data from myriad sources poses engineering challenges. Garbage in, garbage out.
  • Identity resolution – Maintaining accuracy as profiles consolidate different identifiers and data points for the same user requires constant monitoring.
  • Privacy and compliance – With consolidated personal data, regulating access controls, securing data, and adhering to privacy laws is mandatory but difficult.
  • Proving ROI – Hard return on investment metrics take time. Having long term vision around the customer value is critical.
  • Future-proofing – Ingesting new data sources and channels demands flexible data models and connectors. Open ecosystems are ideal.

Mitigating Challenges

  • Prioritize identity resolution with both technology and data stewardship.
  • Architect for scalability and flexibility from the start.
  • Validate data quality before activation.
  • Plan for strict data governance and access controls.
  • Align stakeholders around long-term customer intelligence vision.

CDPs vs. DMPs

It‘s important to distinguish customer data platforms from data management platforms (DMPs) in a few key ways:

CDPs DMPs
Consolidate first-party customer data Leverage second/third-party data
Connect persistent identifiable profiles across devices Manage anonymous segments and cookies
Focused on personalization, retention use cases Enables targeted advertising
Store profiles indefinitely with ongoing value Data has short shelf-life, refreshed frequently

However, CDPs and DMPs can complement each other. Marketers can leverage both platforms, tapping 1st party CDP data to enrich 3rd party audience segments for more targeted advertising via the DMP. But their core purposes differ, with CDPs focused on known customer profiles.

CDP Vendor Landscape

As CDP adoption accelerates, the vendor ecosystem has expanded. Here is a look at key platform providers:

CDP Overview
Adobe Real-Time CDP Integrated offering within Adobe Experience Cloud. Strong analytics.
Salesforce CDP Native CDP with close ties to Salesforce CRM and marketing cloud.
Tealium Independent "universal CDP". Flexible and accessible.
Segment CDP Highly-rated independent CDP, now part of Twilio.
BlueConic Independent CDP focused on first-party data strategy.
ActionIQ Enterprise-scale independent CDP. Expert in B2C/B2B.
AgilOne Longstanding CDP for enterprise brands. Strong identity resolution.
Lytics Independent CDP focused on personalization across channels.

The platform selected depends on your martech stack, business model, and internal resources. As the space matures, expect continued consolidation among CDP vendors along with vertical solutions tailored for specific industries.

Open Source vs. Commercial CDPs

Beyond commercial solutions, open source CDP options also exist including:

  • OpenCDP – Apache-licensed platform coded in Java by StreamSets.
  • Unifiedprofile – Linux Foundation project for CDPs on Kubernetes.

Pros of open source CDPs:

  • Avoid vendor lock-in with greater flexibility
  • Lower costs with no software licensing fees
  • Customize and extend platform to your needs

Cons of open source CDPs:

  • Require more IT resources and technical skills
  • Limited vendor support and documentation
  • Harder to implement at enterprise scale

Commercial CDPs provide turnkey solutions with vendor expertise that may justify the premium price at large organizations. But open source offers a flexible path for early CDP explorers.

How to Select the Right CDP

Choosing a future-proof CDP aligned to your needs and resources is critical yet challenging. Here are best practices that ensure CDP success:

  • Connect stakeholders – Engage IT, analytics, marketing and other teams in selection. Secure executive buy-in.
  • Audit martech stack – Factor in integration requirements with your CRM, analytics and downstream tools.
  • Set objectives – Define primary use cases, KPIs and metrics for success upfront.
  • Model data flows – Map existing data and desired connections to inform CDP design.
  • Assess capabilities – Score CDPs on identity, analytics, segmentation, activation functionality.
  • Validate scalability – Ensure the platform can handle your expected data volumes and audience size.
  • Compare deployment options – Factor in implementation and maintenance considerations.
  • Focus on longevity – Seek an adaptable CDP that can evolve along with your stack and use cases.

Holding demos and proof of concepts will verify the top contenders. While core capabilities overlap, perfect-fit CDPs hinge on your specific customer data environment.

Maximizing CDP Value

Once implemented, the work has just begun. Here are insider best practices to drive results from your CDP:

Garbage In, Garbage Out

Obsess over inbound data quality. Profile accuracy is impossible with duplicate, incomplete, or outdated data. Integrate error handling and data monitoring.

Incremental Activation

Don‘t boil the ocean. Start with targeted high-value use cases. For example, activate segments in your email tool first. Expand from there.

Fix Identity Gaps

Profile consolidation requires connecting identities across channels. Maintain an identity graph separate from transactional data.

Prioritize Privacy

With unified customer data comes great responsibility around controls, access, and compliance. Make this a top priority.

Foster Adoption

CDP value depends on stakeholders embracing the platform. Provide training and support to drive utilization.

Measure Impact

Define and monitor success metrics from the start. Report ROI and value delivered to secure ongoing investment.

With the right vision, plan, and disciplined approach, your CDP will deliver immense value as a customer intelligence engine.

Conclusion

Customer data platforms now sit at the heart of enterprise martech stacks. By breaking down data silos, CDPs enable unified profiles, hyper-personalization, improved customer journeys, and ultimately better marketing performance. With capabilities expanding, CDPs will continue providing the foundation for customer-centric digital businesses.

This guide provided a comprehensive overview of CDP applications, benefits, vendor solutions, use cases, and implementation best practices. The opportunity to engage consumers with relevance and delight at scale awaits. Marketers who leverage the power of unified customer intelligence will gain sustainable competitive advantage.

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