Who are your customers? How do they want to be treated? These simple questions have vexed companies since the term “customer” came into existence. Now, with privacy and personalization taking starring roles in business, the customer data revolution is picking up steam.
As the digital era took flight, companies turned to customer relationship management (CRM) solutions. For years, these systems performed admirably by helping to:
- Track transactions
- Analyze pipeline
- Manage customer health
But it’s not enough to simply know your customers and their journey stage. Consumers want the freedom to engage with a brand on their terms and preferred channels – and they want relevant engagements, not to be spammed with offers that hold no interest for them.
To meet these evolving expectations, market leaders are turning to customer data platforms (CDPs).
The customer data revolution: Format, source, and identity
Three attributes are key to understanding the growing complexity of customer data management and the customer data revolution:
These attributes also help demonstrate how CDPs differ from CRMs.
Format: Traditionally, customer data is structured, meaning it has a pre-defined model, fits into a database field, and is easy to search for. Name, shipping address, and email address are the most common examples.
Most customer data, however, is unstructured. This means it has no pre-defined model and cannot be processed or searched using conventional methods.
- Email responses
- Social media comments
- Experience data (e.g. survey responses)
Source: Customer data can also be categorized by how it’s acquired:
- First-party data is information collected directly from the customer
- Second-party data represents customer information acquired from another brand within the enterprise or another company
- Third-party data covers information acquired from data aggregators
Identity: Anonymous data doesn’t include any personally identifiable information (PII), meaning companies can’t rely on it with high confidence to engage with customers directly.
Known data can be associated to a real person because it contains PII, hence the need for data protection. It’s deterministic and volunteered by the customer, meaning it’s highly reliable. Companies use known data to personalize interactions across channels and touch points. These interactions can feel a little too familiar to consumers, which has played a role in launching the customer data revolution.
The evolution of CRM systems
Businesses adopted CRM systems to support sales teams. Over the years, solutions grew from on-premise to cloud and from manual to automated processes. They’ve also expanded to serve marketing, commerce, and service use cases.
Built with first-party, structured, and known data attributes, a CRM profile includes the operational details businesses need to understand customers and prospects during a sales process.
Through integrations with other systems, the profile may include a consumer’s purchase and engagement history, and “permission to contact” status, among other data points. CRM is still crucial to organizations – businesses spent more than $48 billion on CRM software in 2018 alone.
Yet times are changing. Structured and known data provide only a small slice of the view needed to improve a customer experience. The recent explosion of unstructured, anonymous, and third-party data has outpaced the CRM’s ability to consolidate customer information effectively at scale.
The evolution of the CDP
A CDP is a prebuilt system that centralizes customer data from all sources within an enterprise, then makes the data available to other customer engagement systems, like marketing cloud solutions, e-commerce platforms, and customer service applications.
The CDP market category emerged in 2013. Early CDP solutions connected data sources across an organization to create unified customer profiles, primarily to fuel marketing technologies. This emphasis limited widespread adoption because enterprises wanted more holistic customer engagement systems.
As the solutions matured, the CDP market increased. Last year, CDPs held a prominent position in Gartner’s Hype Cycle for Digital Marketing and Advertising. The analyst firm found marketers didn’t understand the core capabilities, and that CDPs were often confused with other systems, such as CRMs.
So, what are the key differences between a CDP and CRM?
A CDP is built to ingest huge volumes of data, collecting first-party, second-party, third-party, structured, unstructured, known, and anonymous attributes. Everything from operational data like in-store purchases to experience data like online survey results can be connected to a CDP profile.
As a result, the solution can build a customer profile CRMs can’t match. CDPs offer brands the opportunity to understand customer context – like emotions, feelings, and intentions – in addition to their names, addresses, and email information.
Customers engage with a brand across a variety of channels and regions: web, mobile app, phone, etc. Identity resolution ensures these channels – and the data streams they produce – are matched with the correct individual.
CRMs don’t specialize in identity resolution, while CDPs do.
If a customer interacts with multiple brands and regions in the enterprise’s portfolio, CRM systems alone cannot provide the visibility into when, how, and why these interactions occur, nor can they drive targeted and personalized engagements across channels.
CDPs collect data from every channel and brand, mapping and matching it to create unified customer profiles, so a CDP can become the single source of truth for customer engagement across an enterprise.
CDP solutions include features and functions that deliver actionable customer insights at scale.
Unlike CRMs, CDPs cleanse all the data in their stores, fueling analytics applications and machine learning technologies with high-quality, high-confidence customer data. Then the applications provide more robust intelligence and insights, helping brands add context to every customer engagement.
A new wave of CDP innovation born via the customer data revolution
Today, the CDP market is maturing rapidly. Two key innovations include:
1) A data privacy focus
CDP consent and preference data management capabilities can help brands put customers in control of their own data, engage on the customer’s preferred channels, and address data privacy regulations.
2) Expanding the scope beyond marketing
New CDPs can seamlessly connect with commerce, sales, and service systems, in addition to marketing. This means every engagement can be created with accurate, up-to-date customer data.
Defining a future-facing customer experience strategy
It’s tempting to think of CRMs and CDPs as competing software programs, but you’d be comparing apples to oranges. In practice, both play a role in the wider customer experience strategy of an organization.
As CDP adoption grows, brands can use them to power CRM systems with accurate customer data, enabling brands to go far beyond simply knowing their customers to build long-lasting, trusted, and valuable relationships.