What Is A Customer Data Platform (CDP)?

The customer data platform (CDP) was formally defined by David Raab of the CDP Institute in 2016 as “packaged software that creates a persistent, unified customer database that is accessible to other systems.”

CDPs originally had four simple characteristics: ingest data from multiple sources, manage identities, segment audiences, and provision data to other systems. The initial value of a customer data platform was to provide marketers with a unified, omnichannel view of first-party customer data. Provisioning the data made it easier to activate for real-time customer engagement.

The original CDP characteristics are still important to marketers, but the market is changing rapidly. As the pressure to personalize intensifies and the technology environment gets more sophisticated and more complicated, CDPs are taking on a whole new set of capabilities. As a result, the lines between the traditional CDP and more comprehensive, multichannel marketing suites have begun to blur.

What is driving the need for CDPs?

Today, the marketer’s world is extremely complex, and customer expectations are high. Companies that can enable customer trust with unique personalized communications in real time that transcend traditional marketing and span channels and devices earn customer loyalty.

But marketers are dealing with a very complex MarTech vendor space. The latest Martech Landscape CDP marketplace is following suit with over 200 different CDP vendors in the market today. Wrangling all this dispersed data and acting on it quickly is becoming much harder in this environment.

In a SAS-sponsored survey from Harvard Business Review Analytic Services, Optimizing the Use of Marketing Technology to Build Customer Trust, 91% of respondents said that customer trust is very important to their organization’s success. The top benefits realized from enabling customer trust included enhanced brand reputation, increased customer engagement, improved customer loyalty and increased customer advantage.

However, when asked which factors pose the greatest threat to enabling customer trust for their organization, the top factors revolved around customer communications and access to data. The specific factors listed were delays in responding to changing customer needs, inconsistent messaging across channels, messaging and content not aligned to customer needs, inadequate customer service and silos of customer data.

Marketers clearly need a technology environment that will help them overcome these threats if they want to reap these very real benefits. It’s no wonder that CDPs are garnering so much attention.

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What you need to know about customer data platforms

While CDPs continue to experience meteoric popularity (rising growth rates of 33.2% by 2032 are projected by Custom Market Insights), this has also led to a considerable amount of market confusion. Vendors offering CDP solutions come from areas as varied as tag management, digital monitoring products, campaign management, web analytics and data integration.

Other groups, although smaller, bill themselves as “pure-play” CDPs. They promote standalone customer database capabilities more like a supercharged master data management solution. Many of these offerings are dissimilar in capability, making comparative evaluations difficult.

And while the core value proposition of CDPs continues to resonate, Joe Stanhope of Forrester notes that there are lingering issues, such as “immature functionality, confusing product marketing from too many vendors and disappointing solution results.”  

The problems that have drawn marketers to the CDP are very real, and the upside for solving those problems is significant. But there is a growing belief among marketing technology analysts that these capabilities do not meet enough of a marketer’s objectives for the CDP to continue to be a standalone technology solution. Instead, many believe that CDPs will simply become standard parts of large enterprise marketing solution suites, such as multichannel marketing hubs or real-time interaction engines.

The Gartner 2025 Magic Quadrant for Customer Data Platforms predicts that by 2028, the data management markets will converge into a single market of a data ecosystem, enabled by data fabric and GenAI. And MarTech vendor landscape expert Chris Marriott asks, “… In five years, will standalone CDPs still exist, or will their functionality simply become an embedded feature of ESPs, CX platforms, and other MarTech systems?”

Companies must carefully consider their CDP options. Marketers need to understand what the CDP solution under evaluation really offers and determine how many of their specific needs will be met for today and beyond.

3 areas where customer data platforms may fall short

Established data infrastructure

Importing all customer data into a CDP for marketing activity can have significant implementation and data synchronization costs for organizations with established data infrastructure and architecture.

We call this the “lift and shift” problem. To work around this issue, companies may want to explore solutions that provide basic CDP capabilities (identity management, segmentation and data provision) without requiring a physical data move into a single database. While these solutions do exist, exploring them may require investigation beyond pure-play CDPs.

Analytically driven data activation

While CDPs allow for audience segmentation, the core capabilities typically support rule-based approaches. When algorithmic applications of segmentation enter a brand’s required use cases, real-time decisioning, triggering and next-best-offer execution frequently fall apart.

Although some CDP vendors are developing analytical capabilities to supplement their core CDP functions, the sophistication of these varies widely. If requirements extend past core CDP capabilities, it may be better to look at purpose-built tools like enterprise marketing suites. These suites offer basic CDP functions but are designed for more broad-based journey orchestration and analytics activity.

Integration and MarTech duplication

Many large marketing clouds have grown not through native product design but instead through acquisition. Therefore, they use a “layer approach” where multiple clouds for various purposes are required, integration between clouds or acquired products is scanty, and data must be duplicated into the CDP – and sometimes also across clouds.

These applications can struggle with execution, particularly where capabilities such as real-time updates of segments, profiles or communications are required. MarTech costs are higher due to data duplication and feature overlap – both within the CDP/marketing cloud and across your MarTech stack – which can be a significant issue. Platforms with embedded CDPs can alleviate this issue.

What capabilities does a future-proof customer data platform have?

Composability

By pulling only the data you want to activate when you want to activate it, you can cut data duplication and synchronization costs, control privacy and boost data quality.

CDPs with a composable data architecture eliminate duplication and integration issues and maximize investment in existing data infrastructure by enabling marketers to activate their data directly from cloud data stores without having to move it all into a separate CDP database. 

Real-time digital event detection

Because consumers are using multiple digital devices and channels – many of which require an immediate response – you need to capture events as they happen. Acting on these events in real time (decisioning, triggering, next-best-offer execution, etc.) is also critical.

Coupling the need for immediate action with the increasing focus on data privacy will require customizable events to collect all the required data in real time. This will also identify important personally identifiable information (PII) that should not be captured. The solution should provide strong digital guardianship with APIs for adding, merging or removing offline customer information and the ability to encrypt sensitive data in the cloud.  

AI-powered journey orchestration

The real return on investment for marketers will come from activating unified customer data via AI-powered, right-time journey orchestration across all channels. Comprehensive analytics, next-best-offer capabilities, real-time decisioning and seamless integration with other critical marketing functions (planning, testing and attribution analysis) will enhance insights and shorten the time from insight to action.

Extended customer experience activity

Customer experience management is not confined to the marketing department. Full-scale journey management must include all customer-facing and customer-affecting activity, including fraud detection, pricing, credit and collections. All these functions require unified customer profiles and benefit from sophisticated analytics, real-time decisioning and access to digital events as they happen. Extending the CDP capabilities beyond marketing with the easy integration of real-time decision engines is critical for the customer experience, now and in the future.