What is a Customer Data Platform (CDP)?

A customer data platform, or CDP, is technology that allows businesses to pull in customer data from any channel, system, or data stream to build a unified customer profile. These tools usually include a customer database and automation, as well as management resources for multichannel campaigns, real-time customer interactions, and connected data. A CDP combines and unifies customer data in real-time for companies, allowing them to know their customers and create personalized customer experiences.

CDPs are helpful as a central database for user-level data. They tie together databases that traditionally don’t share data, like CRM, marketing platforms, service software, and e-commerce engines. This gives you easy access to the insights you need to connect with customers.

In the 9th State of Marketing report, 72% of marketers reported using a CDP along with other tools to fine-tune their outreach and measure success. In this article, we’ll explore customer data platforms' past, present, and future. Then, we'll discuss how this technology can power customer relationship management (CRM) and other components of your tech stack to help you make magical real-time moments from your customer data.

Customer Data Platform Guide: Table of Contents

• How does a customer data platform (CDP) work?
• History of CDP
• Benefits of customer data platforms
• Problems CDPs can solve
• CDP vs CRM: What’s the difference?
• How to choose the best customer data platform
• Customer success with CDPs
• What is the next generation of CDPs?
• Next steps with a customer data platform

To see how a customer data platform works, there are four primary tasks to understand: collecting data, harmonizing data, activating data, and pulling insights from data. Let’s take a deeper look at each one.

1. Collect Your Data

Your CDP is a centralized hub for all the customer data your company has. It’s where anyone from your business can find customer data organized in a single place.

To achieve this, your CDP needs to identify each individual customer by collecting and stitching together data from all of your company’s different CRM platforms, marketing systems, and data streams. Combining and unifying all this disparate data and identifying each customer based on their engagement history is called “identity resolution.”

2. Harmonize Your Data

After your CDP combines all your company’s data and creates customer identities, the next step is to resolve those identities across sources and devices. This means linking identity information from your known customers (such as email addresses and phone numbers) with anonymous data they may have shared before they became customers (such as anonymous cookies and mobile device IDs).

The purpose of cross-device identity resolution is to help you understand the whole picture of your customers’ journeys. For example, you can look at a customer and see that their interaction began with an email campaign and continued on to your website before they shared their information and downloaded content or made a purchase.

3. Activate Your Data

Once your CDP creates and resolves fully unified customer profiles, it activates that data, making it available for your teams to personalize customer experiences in real time.

This personalization is made possible by connecting the customer data in your CDP to all the different technology platforms you use to engage customers. This may include email send engines, automated workflows, real-time analytics, demand-side platforms, and content management systems.

4. Pull Insights from Data

With the unified customer profiles your CDP creates, it’s easy to see the entire catalog of data each customer shares and to track their whole customer journey. You can also use this data to get insights about customers and segment them into groups, as well as create lookalike audiences and personas to help reach new audiences.

As your CDP collects and organizes all your customer data in one place, it’s a great source for information proving your efforts' reach, revenue, and marketing ROI.

With so many different types of marketing technology out there — each one usually with its own three-letter acronym — you may wonder where CDPs come from.

Even though CDPs are among today’s most popular marketing tools, they’re not an entirely new idea. Instead, they’re the latest step in the evolution of how marketers manage customer data and customer relationships.

In the last decade or so, these updates to the CRM model also led to the creation of CDPs. As single sources of truth for marketing data, CDPs allow marketers to glean greater insights about their customers, allowing better segmentation across different brands. Before recent developments in AI, automation, and machine learning, this level of segmentation was impossible—but now it’s a best practice for everyone.

Previous customer data platforms on the market focus only on marketing and/or commerce and can take hours to sync. It’s impossible to give your customers the experiences they're looking for when basing your engagements on a delayed fraction of what your company knows about them. Customers expect every experience to be connected and updated in real time. When they aren’t, they’re disappointed.

With the capabilities of a customer data platform, marketers can see how a single customer interacts with the company’s different brands and identify opportunities for more tailored experiences and cross-selling.

Beyond audience segmentation, there are three big reasons why your company might want a CDP: suppression, personalization, and insights.

Account Suppression

One of the most interesting things businesses can do with data is identify customers not to target. This is called suppression, and it’s part of delivering truly personalized customer journeys.

When a customer’s unified profile in your CDP includes their marketing and purchase data, you can suppress ads to customers who’ve already purchased. They don't have to see ads that aren’t relevant to them, and you get to optimize your budget by directing ads to new audiences.

Marketing Personalization

We’ve all seen it happen: Sometimes, a customer visits your website, looks at a few products, and then leaves. A CDP can add that visit to the customer’s unified profile, allowing you to follow up with personalized offers via their favorite channels, whether that’s email or a push notification.

Customers who see content tailored to their interests are five times more likely to engage with a brand, so personalization through a CDP can bring significant rewards.

Customer Insights

A CDP brings all your company’s customer data and analytics together and makes it available to all of your teams, breaking down silos and creating opportunities for shared insights. With a view of every customer’s interactions linked to e-commerce data, website visits, and more, everyone across marketing, sales, service, and all your other teams can understand more about each customer and deliver more personalized, relevant engagement.

CDPs can help companies address the root causes of many of their biggest day-to-day marketing problems. In particular, there are three main challenges that CDPs can help solve.

Disorganized data

When your data is disconnected, it’s more difficult to understand your customers and create meaningful connections with them. As the number of data sources companies use continues to increase, it’s more important than ever to have a CDP as a single source of truth to bring it all together. Integrating your disparate data sources through a CDP makes it simple to surface customer insights anytime.

Customer identification

Only one in three marketers say they’re satisfied with their ability to link customer identities across all their different data sources. As a centralized hub for your customer data, CDPs can easily solve customer identification issues, bringing together data from multiple sources to create unified profiles for each customer.

Segmentation

Organizing your data and unifying customer identity profiles are the first steps toward better segmentation and targeting. From there, a good CDP will automatically surface shared traits among customers that make it simple to segment your audiences and deliver personalized engagement to one and all.

CDPs are an evolution of customer relationship management (CRM) solutions, dedicated to the real-time, highly personalized needs of today’s digital-first teams, while CRMs are a log of known customer data.

Purpose and Focus

• A (CDP) primarily manages customer data across the entire customer lifecycle. It collects, cleans, and consolidates data from various touchpoints, including ad clicks, website traffic, offline interactions, and more. The goal is to create a unified view of customer behavior and traits.
• On the other hand, a (CRM) system is designed to support sales and customer interactions. It tracks specific interactions between your brand and individual customers, such as communication history, notes from sales representatives, and previous interactions.

Data Collection and Unification

• CDPs collect data from various sources, ensuring a comprehensive view of customer interactions. They consolidate this data to create a single source of truth and identity-resolved customer profiles.
• CRMs focus on customer-facing interactions with your team. They log specific details about individual accounts and their interactions with your brand.

Scope of Information

• CDPs provide a big-picture view of how all customers interact with your brand, considering behavior across different platforms.
• CRMs note interactions between a specific account and your brand, often within the sales cycle.

There are hundreds of different CDP solutions on the market, but the differences between most really boils down to two key focus areas: insights and engagement.

An insights CDP software solution integrates and manages customer data from your company’s different systems and ultimately provides analytics and activation to deliver a single view of each customer.

An engagement CDP software solution uses customer data to power real-time personalization and engagement on digital platforms such as websites and mobile apps.

To choose a CDP, your company’s stakeholders should consider whether an insights CDP or an engagement CDP would be best for your needs and research the few CDP options that include both.

Considering these questions to narrow down the best software selection may also be helpful.

1. Is this CDP easy to implement? Some CDPs are for highly technical users, while others are more accessible. It’s important to find one that your teams can easily operate.
2. Does this CDP easily integrate with our data sources? CDPs need to bring in a lot of data from many technology systems, which requires a lot of integrations and APIs. Make sure the CDP’s data model fits with your data systems.
3. How does this CDP handle identity? Your CDP should be able to resolve customer identities across a wide variety of platforms and devices.
4. Is this CDP good for customer privacy? Make sure your CDP follows both the GDPR and CCPA and can easily adapt to future privacy regulations.
5. Does this CDP easily connect to our engagement platforms? Just as a CDP needs to integrate with many data sources, it also needs to connect with every platform you use to reach customers: email, websites, social media, and more.

Because CDPs make it easy to manage customer data, they can increase marketing success in countless ways.

For example, a Midwestern comfort food and convenience store chain wanted to deliver more personalized digital experiences to its customers. The company knew its customers wanted more relevant engagement and that it was important to showcase how friendly and relatable its brand and staff were.

After launching a loyalty program and reaching 2.5 million active customers, the business started using a CDP to manage customer data more easily. Before a CDP was added to the mix, engaging lapsed customers and suppressing nonrelevant email communications was difficult. However, these previously difficult tasks became easy once all the data was brought together with a CDP.

With customer data in its CDP, the business was able to personalize the hero images in each marketing email with a customer’s most recently purchased pizza — a simple adjustment that led to a 16% increase in conversion rates on pizza alone.

Moving forward, customer data platforms must enable all your teams with data to power business processes in real-time.

While many companies have made the first steps towards centralizing their data, they are still unable to actually use it to power AI and drive business outcomes.

That’s because centralizing data is not enough - it’s probably still trapped and disconnected from the business applications that are used to connect with customers.

Undoubtedly this is important for marketers, but it’s applicable to any front-line team across the business that could benefit from having more complete data and AI insights - sales reps, service agents, merchandisers. That’s why we need to redefine Customer Data Platforms. What we need in today’s world are Company Data Platforms that enable marketing, sales, service, and commerce teams to work together to deliver hyper-personalized, connected experiences.

Enter Data Cloud. Data Cloud unifies all of your company’s data onto Salesforce’s Einstein 1 Platform so that it can then be used in applications that marketers, salespeople, service reps, and more, use every day.

Data Cloud not only provides the traditional benefits of a CDP, it also offers a comprehensive data solution for other data-driven teams like sales, service, and commerce, allowing them to automate workflows, personalize customer interactions, and work smarter with AI.

Data Cloud solves for business use cases across the entire customer lifecycle by making enterprise data easily accessible and actionable, including data from existing data and AI investments (e.g., Snowflake, CRM).

For example:

• Raise conversion rates with advanced segmentation and real-time personalization of every customer interaction.
• Improve customer lifetime value and productivity across teams with shared insights and AI-powered next-best-action recommendations.
• Increase share-of-wallet using connected journeys and alerts to drive up-sell and cross-sell opportunities for additional products and services for customers with unmet needs.

Today’s businesses need data management solutions that make complicated amounts of data easy to use and understand. That’s why customer data platforms are constantly innovating and here to stay.

Now and into the future, it’s essential for digital-first companies to have an intuitive real-time customer data platform with a powerful single source of truth to help guide every customer interaction. With the ability to truly know your customers and personalize real-time customer experiences everywhere, a CDP is an essential part of the modern business’s toolkit.

By unlocking the true power of customer data (and making it easy to access and manage), you can keep customer experience at the center of all you do across your entire organization — in marketing and beyond.

See how customer data helps grow your audience — and your business.