Customer data platform: What it is and why it’s important

What is a customer data platform? A customer data platform (CDP) is formally defined by the CDP Institute as “packaged software that creates a persistent, unified customer database that is accessible to other systems.” CDPs typically have four common functions:

1. Ingesting audience data from multiple sources.
2. Managing customer identities.
3. Supporting real-time customer segmentation.
4. Provisioning customer data to other systems.

The ultimate value of a customer data platform is to provide both a unified omnichannel view of first-party customer data for marketers and the ability to activate that data for real-time customer engagement. But the CDP has its limits, and many companies will need to enhance and extend customer data activation beyond the CDP to include intelligent personalization and automated delivery – both of which are critical components for the customer experience (CX) of the future.  

Customer data platform: What you need to know

The recent rise in popularity for CDPs has led to a considerable amount of market confusion. Vendors offering CDP solutions come from areas as varied as tag management and digital monitoring products, campaign management, web analytics and data integration. Others, albeit a smaller group, bill themselves as “pure-play” CDPs and tout standalone customer database capabilities more akin to a supercharged master data management solution. Many of these offerings are dissimilar in capability, making comparative evaluations difficult.

While the problems that have drawn marketers to the CDP are very real, and the upside for solving those problems significant, the marketplace for these products is nascent and will continue to evolve. It’s imperative for companies to carefully consider their CDP options. Marketers need to understand what they’re looking for and determine their specific needs, both for today and beyond.

As previously mentioned, the basic CDP has four primary capabilities:

1. Data ingestion. CDPs pull in first-party customer data from multiple sources (e.g., transactional systems, web behavior, call center, demographics or POS).
   
   
2. Identity management. CDPs resolve the identities of customers across multiple channels, most using deterministic matching and profile stitching with identifiers provided by the inbound data. The CDP creates and maintains a persistent customer identifier.
   
   
3. Segmentation. CDPs allow marketers to build and maintain universal, omnichannel audience segmentation with the unified data in the CDP.
   
   
4. Data provision/activation. CDPs facilitate the activation of the insights and unified customer profile generated in the CDP by providing connectors and APIs to other marketing technologies.
   
   

Customer data platform: 4 challenges to consider

Established data infrastructures.
For organizations with established data infrastructure and architecture, the requirement to import data into a CDP can have significant implementation and data synchronization costs. 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.

Real-time event detection and analytically driven data activation.
While CDPs allow for audience segmentation, the core capabilities do not extend to capturing events, digital and otherwise, as they happen. Nor do they provide the ability to act on these events in real time (decisioning, triggering, next best offer execution, etc.). The lag in getting event information into a CDP can be anywhere from hours to days, and while some CDP vendors are developing adjunct analytics capabilities to supplement the core CDP functions, the sophistication of these varies widely, as does the integration functionality. If requirements extend past core CDP capabilities, it may be better to look at purpose-built tools that offer basic CDP functions but are designed for more broad-based journey orchestration and analytics activity.

Comprehensive cross-device identities and data management.
Keeping track of customer behavior across all devices and digital channels when customer activity is both known and anonymous is outside the scope of many CDP solutions. The strength of both data management and identity management capabilities can also vary significantly from one CDP to another because many rely on customer identifiers that are provided with the incoming data and cannot match on multiple identities across a single profile. If existing customer data requires data hygiene, advanced matching and merge rules, or other data management activity, look closely to ensure the CDP has these capabilities, or plan to provide the activity outside the CDP. Otherwise, the CDP will not perform as intended.

Beyond marketing.
A core characteristic of the CDP is provisioning unified customer data to other marketing applications. But a common complaint is that the integrations to other systems are more complex and time-consuming than advertised. This problem is magnified when customer experience programs extend beyond marketing and into other areas that affect customers, such as sales, service, fraud and risk. All these areas need to apply analytically driven contextual personalization to their customer activities, and the CDP is the logical place to get the needed customer data. In this situation, the need for real-time event detection, analytically driven decisions and cross-device identity matching will also carry over into areas outside marketing.

Going beyond the CDP with seamless integration

Figure 2 (above) illustrates the seamless integration that will take you beyond your customer data platform. Let’s look at each piece.

Real-time digital event detection: Beyond simple data ingestion
The growing propensity for consumers to use multiple digital devices and channels, and the immediate response required within many of those channels, requires the ability to capture events, digital and otherwise, as they happen. Acting on these events in real time (decisioning, triggering, next best offer execution, etc.) is also critical. Coupling the need for immediacy with the increasing focus on data privacy will require customizable events to collect all the required data in real time while identifying important personally identifiable information (PII), which should not be captured. It will be critical to easily connect this data with on-premises or private cloud transactional data.

AI-powered journey orchestration: Beyond segmentation
The real ROI 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 – such as planning, testing and attribution analysis – will enhance insights and shorten the time from insight to action.

Extended customer experience activity: Beyond marketing
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 of 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 is critical for customer experience, now and into the future.

Data management: Beyond rudimentary identity management
The variety and volume of data sources contributing to customer profiles require a robust data management strategy that covers data preparation, hygiene, matching across many identifiers and privacy capabilities. These activities, not included in many current CDP solutions, may have to be done in the cloud.

If your marketing and customer experience needs carry you beyond CDP, reach out to SAS to see how we can help.