What is a Customer Data Platform (and how does it work)?
In this article
If you’re running an online business, every day you collect huge volumes of data about your customers: demographic, behavioral, purchasing and much more. Unfortunately, this information is hardly ever joined up, which means your company is losing significant conversion opportunities. A Customer Data Platform (CDP) can change all this. This article tells you how.
The most advanced marketing strategies employ customer data to create high-performing personalized user experiences. Today, many companies use the scenarios made available by Big Data to compute any number of variables and establish customer-related metrics, but the most valuable source of information is your proprietary data on your company’s real customers.
Every company can access this type of information: through its website, apps, social media and paid advertising, data collection is constant and systematic.
According to the Salesforce State of Marketing report (2021), B2B marketers use on average 12 sources of customer data and B2C marketers use nine.
The key to making this approach a success is the structured, organized collection of all the available data in one place, for the purpose of creating precise user profiles. This is made possible by CDPs, Customer Data Platforms.
A Customer Data Platform (CDP) is a software tool that brings data from a variety of sources together into a single centralized customer database, a container for the information from all the touch points and interactions with your brand or your products.
The database can then be segmented according to different criteria to develop personalized marketing campaigns.
Why is a CDP useful?
A Customer Data Platform brings into one place all the information from your user touch points (search engines, website, social media, email, e-commerce, advertising, etc.), eliminates unimportant or duplicate information (from different channels that in some cases collect identical data) and creates a complete, unique profile of the consumer.
Once these user profiles have been created, the CDP can be accessed by other technologies, such as Machine Learning and AI, to enhance the profiles with external data and make your marketing campaigns even more effective.
CDPs are highly versatile in terms of the volume and types of data they collect and manage and their ability to share information with the other systems in the company.
For example, thanks to a Customer Data Platform, information held by the marketing department can be combined with the data collected by the sales department or the customer service department, to build up a much broader view of the user.
Find out about the potential of the Customer Data Platform created by Contactlab, the Italian company that has joined the Growens Group of which MailUp is a member!
Collecting customer data
The CDP helps you retrieve all the information from the various user touch points and store it in one place. In other words, it acts as a container holding full information on your online users and their behavior, whatever the platform or tool that collected the data.
Managing customer data
The CDP unifies all the available data, making them easier to manage. It allows you to create precise segmentations in order to personalize your marketing campaigns.
With a Customer Data Platform, you can optimize data management and create more complete, precise customer records. Through a broader but specific understanding of each customer, you can develop better marketing campaigns.
Analyzing customer data
Once all your data are in one place, analysis and interpretation – essential to build accurate pictures about your customers and their needs – are made easier.
The CDP uses A/B testing to target different groups/segments with a variety of messages and creativity. It monitors the findings and assesses the effectiveness of the campaign in relation to your business objectives. This enables you to identify the campaigns that perform best.
How do Customer Data Platforms work?
CDPs are powered by customer data. In most cases, data take the form of proprietary data, in other words information collected by the company and used only for internal purposes.
The advantage of proprietary data is greater precision and consistency than, for example, third-party data, which companies purchase from and/or share with other companies.
The CDP implements a Customer Data Integration (CDI) process to transform the proprietary data into useful insights. Integration of customer data is the element that makes the CDP operational.
Different types of data integration methods are available, but as a rule CDPs use the consolidation method: data are collected from several sources and stored in a central data warehouse.
The Customer Data Integration process then combines the customer data from different databases and organizes them into a single format that can be used for more incisive analysis.
CDPs: how do they compare with CRM or a DMP?
Consistent data unification and greater operating efficiency are the two characteristics that distinguish CDPs from other customer data collection systems, such as CRM (Customer Relationship Management) and DMP (Data Management Platform).
Differences vs a CRM
Although CDPs collect and enable management of customer data, they should not be confused with Customer Relationship Management systems. CRM tools help businesses organize and manage interactions with customers, but they do not collect behavioral data on customer interactions with your products or services.
Differences vs a DMP
Customer Data Platforms are also not substitutes for Data Management Platforms. DMPs (link: customer data platform vs data management platform) are used only for advertising purposes and do not collect general data for the creation of complete consumer profiles to enable you to personalize your marketing activities.
Customer Data Platforms: advantages for marketing
Besides providing you with a full picture of the customer, CDPs deliver four other important marketing advantages:
1. Greater data accuracy
A CDP improves data quality. The CDP extracts data from all the available sources (known as data silos because they are not connected with one another) and converts them into a standardized or normalized format. It then corrects any imprecisions, cleans the records and integrates missing information, so improving the data in your company’s possession.
This gives you more reliable information, which helps you make better informed marketing decisions for your business.
The CDP segments users according to any combination of demographic, geographic, transaction and behavioral data, creating countless hyper-profiled micro-clusters. As a result, messages and offers sent to each segment in the database are always consistent, and so more effective.
You can also create specific campaigns, for example, for new users, for users who view a specific product category, or for users with a budget of under 100 euro.
Segmentation options are potentially infinite!
Once your customer data have been processed by the CDP, they can be used to create personalized purchasing experiences and boost customer engagement.
The CDP provides you with larger volumes of high-quality information, which can be more easily accessed by the whole company.
This means you can make a more precise assessment of the customer experience with your environment, brand and marketing. The information can then be used by the marketing team, the sales department or customer care to develop strategies and action that promote user engagement and deliver better results.
With a broader view of the data held by the company, more precise customer profiles and consistent, engaging personalized marketing campaigns, the CDP ensures greater loyalty among your customers, who feel more closely aligned with your brand.
Conclusions: is it worth implementing a CDP?
By increasing the value of the data you collect on a daily basis through your channels and platforms, Customer Data Platforms are the key to understanding your customers and their needs.
They combine all the data already in your possession so that you can obtain accurate and full information about your users. This new understanding will help you improve your marketing, your sales and even your product development.