Tuesday, December 6, 2022

Taking Advantage of Customer Data Platforms

Companies today have no problem collecting and storing huge volumes of data.  The real challenge is turning that data into value.

One of the engines of that transition is the Customer Data Platform.  CDPs are packaged software designed to create unified, persistent customer databases that are accessible to other systems.  Why is that important?

The first reason is that organizations need that data.  Today’s customers expect a consistent, personalized experience from every company they give their business and they’re quick to try a competitor if they don’t get it.  A consistent, personalized experience is only possible if the company is collecting, unifying, and activating data about each customer.

The second reason is that most companies don’t already have unified, persistent customer data available.  The CDP Institute’s own research found just 38% of companies reported having a central customer database (CDP Institute, User Survey, 2022) ; a recent Gartner survey found only 20% had a fully orchestrated, end-to-end customer journey throughout their organization.  (Gartner, Disruptions Derail Progress in Martech Utilization, 2022).

It’s worth asking why this problem hasn’t already been solved.  Companies have plenty of systems that create customer data: email, CRM, ecommerce, websites, call centers, chatbots, and mobile apps are among the most common.  And most companies have data warehouses, data lakes, and data management platforms to collect, store, and activate that data.

But none of those systems were designed to create unified, persistent, sharable customer profiles. They were built to send emails, manage call centers, buy advertising, do financial analysis or other important tasks.  And because they were built for something else and optimized for that something else, they can’t easily be repurposed to manage customer profiles.  This is because customer profiles technical requirements which are different from the requirements of those other systems.  Those requirements are best met by a system that’s designed with customer profiles in mind from the start.

This brings us to the third reason: CDPs can actually solve the customer data problem.  It’s not that CDPs use technologies that are so different from other systems.  Rather, CDPs take standard technology and configure it to meet their particular purpose.

You don’t have to take my word for this: the CDP industry is now approaching ten years old, and there are literally thousands of successful CDP implementations around the globe that show CDP is a success.  In fact, perhaps my favorite piece of research on this topic is a survey that found marketers CDP is listed more often than any other technology as the system marketers absolutely couldn’t live without.  (Ascend2, Marketing Trends, 2022)

That makes sense.  CDP is the backbone that connects everything to everything else.  This means you can connect or disconnect any one system from the CDP and it will have relatively little impact on how the rest of the company operates.  But if you take away the CDP itself, then everything falls apart: the connecting network itself has gone down.

That’s a bit theoretical.  What do companies actually do with a CDP or, more to the point, what they can do with a CDP that they couldn’t do before they had one?  Here are the three classic CDP use cases:

  • The first is to connect online purchase history to offline purchase history for each customer. That’s tricky because in-store purchases are captured in the point-of-sale system while online purchases are captured in an ecommerce system.  Those are not usually connected to each other.  But they can both feed data into a CDP, which combines transactions from both systems to create complete customer profiles.  That’s powerful because the complete history lets your systems make more accurate predictions of what that customer might buy in the future, so all of your promotions can generate more revenue.
  • The second is to update retargeting lists in near-real-time. This prevents your retargeting system from offering products that a customer has already bought.  We’ve all had that happen, and it happens because after consumers drop a shopping cart and are added to a re-targeting list, their subsequent purchases aren’t reported right away.  It can easily take a day or two for that data to reach the retargeting system with instructions to remove them.  But a CDP can capture that purchase when it happens and pass it on to the retargeting system within seconds.  This saves your company the cost of sending ads to people who already made a purchase, and, more important, it avoids annoying those valuable customers.
  • The third is to share a customer’s recent web behavior with call center agents. This helps the agent to understand the customer’s situation, which often clarifies why they’re calling and how best the agent can help.  It requires displaying website behavior logs on the call center system screen, something that the CDP makes possible.

These use cases all have one thing in common: they share data between systems.  That sort of sharing is a feature of nearly all CDP use cases.  So when you begin to identify your own CDP use cases, think about programs you can’t execute today because you can’t share data between some set of systems, and what would become possible if you could.

If you do deploy a CDP, this will position you as an industry leader.  While little reliable information is available, it’s pretty clear that CDP users are still in a minority.  It does feel risky to be among the pioneers, but higher risk promises higher rewards.  Deploying a CDP gives your company an advantage over competitors who are stuck in the old ways of doing things.  The good news is the actual risk is small, since CDP is well proven.  The even better news is many vendors, agencies, and consultancies can share their experience to help make your deployment a success.   So now is the time to assess the current state of your customer data, determine what you could gain by adding a CDP, and move quickly to take advantage of the opportunities CDP can create.

About the Author

David M. Raab is Founder and CEO of the Customer Data Platform Institute.  After starting his career as a marketer, he served for many years as a technology consultant to Global 2000 firms in retail, media, communications, hospitality, technology, and other industries.   He has written hundreds of articles and presented at industry conferences around the world.   David named the Customer Data Platform category in 2013.  He is a graduate of Columbia University and the Harvard Business School.