Why the Customer Data Platform (CDP) is becoming more important than your CRM

At a time when we are jointly generating more information in a day than in a century, the challenge of how to identify and overcome the biggest obstacles on the path of any modern business is becoming a secret weapon: Customer Data Platform (CDP). How is it different to a CRM?

The fight against data silos with a Customer Data Platform (CDP)

What is a data silo? A data silo is an isolated group of data that remains under the control of a department and is isolated from the rest of the organization. Comparable to grain in an agricultural silo that is isolated from external influences. They can be in the form of raw data that has not yet been processed or analyzed, or just data stored by different business units in a large enterprise. Data silos are also created where data is stored in such a way that it cannot be read by software.

Why are data silos created?

Data silos are created for various reasons. A common factor, however, is the structure of the organization itself. As soon as a company is large enough, it divides into specialized teams in order to accelerate the work processes. This slows down the flow of information between teams. As soon as data is collected without strategy, as these can be made available to other departments, data silos inevitably emerge.

While data silos may appear harmless on the surface, there are many ways in which a company can become incapacitated

Modern marketing is based on data, we all agree on that
So it is not surprising that the Customer Data Platform (CDP) is gaining momentum faster than any other marketing technology, even though many marketers are not yet familiar with the technology.

The CDP promises to provide the key to comprehensive data-driven marketing, a very attractive marketing concept that combines all your customer data for marketing (and other) purposes. Without centrally orchestrating the data and managing the data, smarter projects simply won’t work.

There are some unique features of CDP that explain why innovative companies rely on CDP rather than just CRM (Customer Relationship Management) software.

What is a customer data platform?

The goal of CDP is to merge all customer data and data into unified customer profiles. So a marketer can easily work with it.

It is the software that acts as a hub or central point of contact for customer data. The Single Customer View or the 360 degree customer profile becomes reality.

Until now, there was no platform type that had the potential to consolidate all data and at the same time be accessible to the marketer.

A Customer Data Platform (CDP) is a system managed by the marketer that creates a permanent, unified customer database that is accessible to other systems.

David Raab, 2013

How does a Customer Data Platform differ from a CRM?

CRM systems are designed to work with customers based on historical and general customer data to create a permanent customer profile. They are not designed to receive large amounts of data from other sources.

A CDP is capable of linking all types and sources of customer data, whether internal or external, structured or unstructured, batch or streaming. This allows you to get a much broader view and better understand and respond to your customers in real time.

The Data Sources of CDPs

• Transaction and order data E-Commerce, administration and sales systems, data on purchases, order data, customer and product value, shopping baskets, vouchers, returns and service requests.
• Behavioural, web and mobile data Products and categories searched, clicks, interaction data, pages visited.
• Profile data Profile data starts with contact data and opt-in and is enriched with psychographic data points – details on lifestyle, context, preferences and personality.
• E-commerce and product data These are not customer data, but are unmistakably necessary in order to establish and execute a personalized cooperation with the customer. Think of inventories and prices as just two important data points. The management of products and their data has increased dramatically. Assortments are getting bigger and product lifecycles shorter. Many products are only available in one season and are then replaced by a new edition. Typically, this data enters the customer data universe via PIM or e-commerce platforms. Larger companies have standardized exchange formats with their suppliers to increase efficiency.
• CRM & offline data Typical CRM data are deals, telephone, mail, e-mail, address.

The above examples are just the tip of the iceberg.

The CDP is designed for every type and category of data

The ability to flexibly add and change new types of sources makes them more future-proof as a central repository.

CDPs are not just databases. However, they standardize and bundle functions. These features include pre-configured connectors to marketing databases and included tools to facilitate database integration and operation. You can imagine data processing capabilities to standardize, sew, and cleanse data.

Some CDPs have additional functionality such as BI, analytics, reporting or tracking.

Therefore, the systems that are linked to touchpoints are referred to as delivery platforms or engagement platforms. These are, for example, e-mail marketing or marketing automation, social media management or apps.

These systems interact with the CDP to send messages. However, they also collect engagement and campaign data in order to forward it to the CDP. They are not part of the CDP, but some CDPs have tight integration with the delivery platforms, enabling them to plan campaigns and even send messages directly from a CDP.

Advantages of a Customer Data Platform over a CRM

• 360° customer profiles Integration of touch-points, autonomous orchestration of customer and interaction data. The behavior at the touch-points all in one place.
• Segmentation, personalization Bringing together customers and related content.
• Data Democratization Data compliance, GDPR, delivery to other applications, integration into channels.
• Agile and sustainable infrastructure The only constant is change, is the famous quote. This is especially true of ever-changing consumer behavior. The CDP is designed as a central hub for connecting data sources and delivering them to other systems.
• Data democratization Traditional IT-driven databases have a built-in bottleneck (the IT resources). A CDP democratizes access to customer data and lets the data be used directly by the departments that generate the value. Marketing, customer service, business intelligence, all depend on access to data and customer contact points.