1. What is a CDP

A Customer Data Platform (CDP) is a platform that lets companies in the insurance, banking, retail, and healthcare industries collect and analyze customer data in real time. Think of it as an online hub where customer information can be stored securely and accessed by end-users across the enterprise. Using big data, predictive analytics, and real-time marketing, a CDP aims to improve operational efficiency and customer satisfaction. Connect with Virtusa in partnership with Adobe to know how we deliver world class experiences for our clients.

CDPs make it possible for companies to offer personalized products and services to consumers based on their identifiable behavior.

In the past, companies had to rely on customers’ demographics to create personalized products and services. However, this method is now outdated and costly as data sets are limited. Companies can now use a consumer’s digital footprint (their Google searches, Facebook likes, and Instagram posts) to create products that are tailored to their specific needs. And CDPs make this possible.

1.1 CDP unifies data from multiple sources

CDP collects and unifies first-party customer data from various sources to create a single, coherent, and comprehensive view of each customer. It takes into account sources such as:

1.1.1 Demographic Data

Sources such as the U.S. census, surveys, and social media to collect information about their users’ gender, age, location, and more. This helps them to understand the audience better so that they can provide the best experience for them.

1.1.2 Behavioral Data

CDP gathers “action and behavior” data from its website and apps, which lets them know how often people use their service and what they are doing on it. They also get insights on how users interact with content on their website or app so that they can optimize it.

1.1.3 Transactional Data

Transactional data determines how effective a customer’s experience has been. CDP collects transaction information such as purchase value, time spent on the purchase, and time of site visit, etc. Transactional data includes marketing analytics, website analytics, customer service calls, and more.

1.1.4 Third-party Data

This includes publicly available information from other sources such as government agencies, websites, social media platforms, customer feedback, online surveys, customer interviews, etc.

1.2 How is a CDP different from a CRM, a DMP and Web Analytics?

A large part of the confusion between the three, stems from the two overlapping components — gathering and analyzing data. However, all three have different purposes.

1.2.1 CDP vs. CRM

CDP is marketing-focused. It gathers and combines first-party customer data from multiple sources to build a coherent, single view of each customer. The goal of a CDP is to improve the customer experience through segmentation.

But a CRM (Customer Relationship Management) platform is more sales-focused. The only goal of a CRM is to strengthen the relationship with the customer to increase sales. Unlike CDP solutions, CRM solutions do not usually combine or analyze data from different sources. However, a CRM can use data gathered by a CDP.

For instance, CRMs like Salesforce, Zoho and Hubspot gather customer data, but they do not stitch the data streams together and are typically run by sales teams to manage and nurture customers. But customer data platforms like Adobe Experience Cloud in partnership with Virtusa are run by technology and marketing teams to consolidate all types of data to personalize the customer experience in all stages of the marketing funnel.

1.2.2 CDP vs. DMP

A DMP (data management platform) is advertising-focused. It helps advertisers and marketers collect, organize, and analyze digital advertising data. The goal of DMPs like Oracle and Adobe Audience Manager is to help companies get the best return on investment (ROI) from their online advertising budgets. A DMP takes a macro view of the customers, whereas a CDP takes a micro view of the customer based on a lot more data.

The best explanation of the difference between CDPs and DMPs comes from David Raab, founder of the CDP Institute: While DMPs work almost entirely with anonymous entities like cookies, devices, and IP addresses, CDPs work with both anonymous and known individuals, storing personally identifiable information such as names, postal addresses, email addresses, and phone numbers.

1.2.3 CDP vs. Web Analytics

Customer Data Platforms and Web Analytics both help companies manage, analyze and utilize customer data. However, the key differences between the two lie in purpose, means, and effectiveness. Web Analytics, such as Google Analytics or Adobe Analytics, only analyzes website traffic or sales performance, while a CDP collects and analyzes data from various sources to improve customer experience.

The data it collects is also limited in nature and scope. CDPs collect data from all sorts of sources like CRM systems, POS machines, emails, and surveys while web analytics only collects data from website traffic. CDPs also feature improved reporting capability. They provide more detailed reports than web analytics because they have more access to a variety of sources of customer data, which provides a better understanding about what customers want and need.

2. Purpose of using a CDP

Data is the fuel that powers a business, and the biggest data problem for many companies is the sheer volume of data being generated every day. Data in its raw form doesn’t amount to much if there is no context for it. Even with future technologies like metaverse or AR the data is at the core to drive the experience. CDP gives context to the data and provides companies with credible insights to enable them to deliver better customer experiences, lower their marketing costs, and increase their bottom lines.

There are five key purposes of a CDP:

2.1 Unify all data sources

Companies have to deal with different streams of data such as web analytics, social media stats, emails, customer feedback, etc. Typically, departments or marketers don’t share this information with each other, so the data stays in their own “silos.” A CDP’s main purpose is to function as a conduit, linking all the different data silos together into a much broader spectrum. From here, the data can be looked at and new insights can be gained to help businesses make better decisions.

2.2 Manage customer data

Real-time data collection and a centralized database are two critical CDP customer data management platform functions. All CDPs offer a centralized database for collecting and integrating personally identifiable customer data across the enterprise. They collect, organize, and archive information in the form of identifiable customer data, ensuring that the information is available when needed, giving businesses access to the most up-to-date information they need.

CDPs use a multi-faceted approach to harvest data, including mobile SDKs, APIs, Webhooks, and built-in connectors to other platforms. It consolidates customer data points from different channels, such as emails, contact information, first-party cookies, and purchase data, to produce a unified customer profile.

2.3 Comply with data privacy laws

Data privacy laws have dramatically altered the landscape for companies and consumers alike. Companies are now required to comply with the new GDPR to ensure that their users’ personal information is protected. CDPs help companies meet these requirements by managing first-party data and providing a comprehensive overview of the user’s data usage experience.

In Healthcare the power of CRO with CDP is harnessed at the core level. CDPs manage first-party data and consumer privacy and data rights by managing consent and controlling the data flows between different marketing systems. CDPs break down who has access to the data, how and when it is accessed, what happens to it, and more. They provide transparency in all key aspects of data privacy, such as privacy policies, data access and ownership, and accountability.

2.4 Provide behavioral insights

Customer data platforms collate data from different sources and glean insights to better understand customer behavior. Customer sentiment analysis and behavior analytics determine how satisfied or dissatisfied their customers are with a product or service and help marketers make informed decisions related to which customers or users should be targeted and how often.

2.5 Hyper personalization

Customer data platforms are gaining more and more traction in the digital marketing sector due to their hyper-personalization abilities. Recent studies have shown that CDP-driven hyper-personalization is effective at increasing customer engagement, brand loyalty, and ultimately, revenue. CDPs achieve this by helping marketers personalize their campaigns to the needs of the customer through:

2.5.1 Data enrichment

CDPs can enrich customer data with information from third-party sources, such as social media profiles and purchase histories. This way, marketers can learn more about their customers and tailor their campaigns to them. For example, if a customer is a frequent traveler, they will be shown travel deals that they may be interested in.

2.5.2 Data segmentation

They can divide customers into segments based on different criteria, such as age or gender. This way, marketers can create personalized campaigns for each segment of customers without having to create multiple versions of the same campaign for each demographic group.

2.5.3 Data visualization

Customer data platforms can help marketers visualize their data in a variety of ways. For example, they can put customer information on a map so that it is easier for the marketers to see where their customers come from.

2.5.4 Data sharing

CDPs allow marketers to share customer information with third parties, such as partners and vendors. This way, the marketing teams can get the information they need to grow their business.

3. Benefits of using CDP

A recent IndustryARC report projects the CDP industry to reach $4 billion in 2025. This staggering figure is a testament by itself to how CDPs have become an integral part of business operations. It’s hardly a surprise given the range of benefits a CDP offers to the company.

3.1 Enhanced data availability

A customer data platform unifies disparate databases by serving as an enterprise-wide repository for customer information. Individual customer profiles are constructed by normalizing and piecing together various data sources. The result is a centralized database for keeping track of customer information that can be accessed by multiple departments and updated in real time.

A correctly implemented CDP:

● Provides a single point of truth for customer data across the enterprise, which can be used as an audit trail.

● Provides a centralized view of customer data, eliminating siloed databases and enabling greater business insight.

● Facilitates access to customer information quickly, so organizations can make timely decisions.

● Ensures the accuracy and integrity of customer information.

3.2 Improved marketing

CDPs assign unique IDs to different data and provide complete and accurate customer data with increased speed and maximum accuracy. But by automating a number of previously manual processes, CPDs allow marketing staff to focus on other, more important aspects.

All of this empowers marketers to:

● Model campaigns based on cross-channel interactions between customers and brands.

● Get more open rates and click-throughs

● Generate more personalized content

● Make better decisions faster through data-based segmentation, automation, and integration with other systems.

● Drastically improve their marketing ROI

3.3 Increased collaboration

When data is siloed, it becomes harder to make sense of the volume of information that is being collected. A customer data platform provides a central repository for all customer-related data across the enterprise, while also enabling collaboration between groups that are not otherwise connected. A CDP makes sure that companies can work together more effectively and efficiently by making it easy to access customer data across multiple touchpoints. This effectively translates into:

● A certainty that every department has access to the same information and can make decisions based on it.

● Consolidation of disparate data silos and making it easier for teams to find relevant information about customers.

● A marked improvement in performance metrics

● An improved focus on core competencies

● Better marketing and pricing strategies

● Improved customer acquisition, engagement, and retention

3.4 Streamlined system integration

To create a true single “system of record” for first-party customer data, companies need to ensure that their data is updated regularly and is clean. With a CDP, this isn’t an assumption but a guarantee. It reduces the amount of duplicated data across multiple systems and makes it easier for companies to find the right information. Customer data platforms remove guesswork completely from the equation. A CDP facilitates:

● A seamless integration of multiple data sources into the company’s infrastructure.

● Mitigating the need for data coordination across teams.

● Reduction in data replication and cleanup efforts.

● Better customer support through insight into the complete customer lifecycle.

● Easy access to customer data across systems and channels.

● Reduction in costs due to duplicated data, infrastructure, and storage requirements.

3.5 Greater regulatory compliance

The California Consumer Privacy Act of 2018 is a law that governs the privacy of personal information in California. It also applies to businesses that handle EU data or serve EU customers. This law mandates companies to disclose what personal information they collect and how they use it, and to provide consumers with the means to review their data.

This law is one of the most significant developments in privacy policy since the inception of data protection laws. Together, the GDPR and the CCPA require companies to be open about how they collect and use data, to give customers control over their personal information, and to keep private information from being misused or stolen.

● CDP enables organizations to manage and store customer information in a secure and compliant manner.

● It allows companies to store, manage, and protect their customers’ personal information in accordance with the GDPR, while also providing features like real-time privacy checks and automated data validation.

● The CDP can be tailored to meet the needs of individual business units for an even more comprehensive view of data, allowing compliance departments to assess and monitor risks.

4. How to find the right CDP

Customer data platforms are more than just marketing automation tools or customer relationship management systems. They have evolved into a multifaceted system that encompasses data management, intelligent segmentation, and marketing analytics. Finding the proper CDP requires understanding a vendor’s history, technology, and how it fits within the company’s infrastructure.

However, there are five key considerations every business needs to make to find the right CDP.

4.1 Real-time data support

Data streams are always continuous. It’s not just enough for CDP to ingest all the incoming data, but also analyze it in real-time. A CDP is constantly monitoring all the incoming numbers in real-time. These numbers can be analyzed for patterns and trends, and the probability that an event will happen in a specific location at a specific time.

A CDP without real-time support cannot deal with unstructured data and can only do what it’s programmed to do. But a full-fledged CDP with all bells and whistles structures the data on-the-fly and makes mince-meat out of the job of analyzing the numbers.

4.2 Identity resolution

A customer data platform must have the ability to build customer profiles based on users’ behavior across devices. This includes linking the actions of anonymous users to known users after their identification — a process called “reverse stitching”. A CDP maintains a log of all transactions, both successful and unsuccessful. This includes tracking every user interaction with a transaction as well as every user interaction with other transactions, following it up with segmenting and targeting advertisements in real-time.

4.3 Personalization and activation

The ability to segment, personalize, and start campaigns is one of the most important parts of customer data platforms. Segmentation allows the customer data platform to understand the needs of different customers. Personalization enables this company to improve engagement across customer groups by catering to their individual interests. Campaign activation means that personalized content can be sent quickly through a number of marketing channels that have already been set up. These marketing channels can be used to reach marketing goals like lead generation, product sales, or customer service.

If a CDP doesn’t already have built-in features for segmentation, personalization, and campaign activation, there may be extra costs. Businesses will have to compromise on flexibility, cost, and automatic activation while incorporating other tools.

4.4 Ability to integrate into current martech stack

A customer data platform should fit snugly into the company’s martech stack. It’s vital that it has an open architecture that allows for multiple types of integrations, so a company can easily expand its range of third-party and internal services. This means having the right set of features for different use cases, like collecting, storing, and processing digital data, and built-in support for all important third-party integrations.

A good CDP has a lot of integrations that let third parties get information about the company’s customers in real time. If it’s lacking in even one of these critical integrations, it will not only cripple the entire martech stack, but also leave the company vulnerable to data leakage. An open architecture is an important feature, given how quickly other companies are developing technology that competes with a CDP’s functionalities.

4.5 Security and data privacy

As GDPR regulators tighten their restrictions, cybersecurity and regulatory compliance are becoming increasingly important. For a customer data platform, having robust data privacy protection is not just a perk, but a necessity. Any company that uses a customer data platform that is not GDPR-compliant or does not have a regulatory compliance officer on staff will become subject to large fines. A CDP must have strong security policies in place for handling sensitive information, as well as taking the necessary steps to ensure compliance with GDPR regulations.

4.6 Use case

The final consideration pertains to what you are going to use it for and what you are hoping to get out of it. The best CDP platforms typically provide software modules that can be integrated with other applications for specific use cases like marketing automation, CRM, or analytics. But to leverage all these powers, your CDP must:

  • Provide a complete understanding of the customer journey and orchestrate it across channels
  • Enhance the personalized experience for the customers through content, Customer and Marketing Insights
  • Developing multichannel advertising strategies with greater targeting resulting in increased revenue
  • Enabling Cross Channel targeting
  • And finally, combine online and offline data to deliver next best offer at the right time in a cookie less world too.

Conclusion

CDPs are well known in the industry now and are not new. However, as we know that understanding your customer is not that easy, setting up, implementing and running a CDP needs expertise and knowledge. At Virtusa we have implemented CDPs for some of the largest brands in the Industry and would love to help you as well.

Contact us today to know how we can help you achieve your goals in Customer Centricity and Personalized Experiences.

Now you know about CDPs, Follow or Subscribe to receive Part-2 of this Whitepaper on How to Implement one.

Sidheshwar Chauhan is a MarTech Executive with over a decade of experience in spearheading marketing transformations and driving significant growth through strategic innovations and partnerships. Proven expertise in integrating AI and advanced data analytics to enhance customer engagement and operational efficiency, leading high-impact digital solutions across multinational landscapes and critical initiatives for large brands.

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