September 10, 2021
The 4 types of customer data platforms (CDPs)
CDPs help you bring together all of your customer data in one place, improving marketing insights, helping retain customers, and building profitable growth. However, not CDPs are made the same. To help you make an informed decision about which CDP vendor is right for you, here’s a breakdown of the 4 main types of CDPs.
What is a CDP?
A customer data platform is a solution that combines all of your customer data, organizes it around individual customers, and then makes that data available to everyone in your company who needs it. From a CDP, you can gain customer insights, create segmented audience lists for targeting, and activate personalized campaigns across all channels. This reduces data discrepancies significantly, helps marketers and others get the data and insights they need in real-time, and ultimately improves performance across the board.
However, not all CDPs are made equal. There are, in fact, four primary functions of CDPs, and different CDP vendors tend to have different focuses. If you’re not clear on the strengths and weaknesses of each type of CDP, you might end up choosing one that’s incompatible with your needs and goals.
So, let's take a look at these four functions and what they offer to your company.
The 4 types of customer data platforms (CDPs)
Data ingestion and integration
Data ingestion, in this case, means bringing together the customer data from all of your retail data systems and channels. Many companies attempt to do this customer data integration process manually, relying on an extensive IT and analytics team or an external vendor. These manual processes are not only expensive and time-consuming, but they also may come with inconsistent and inaccurate data, preventing you from using that data effectively.
CDPs automate the process by capturing data from all of your sources, including data that might not be well-structured or organized. This ensures that the data is formatted correctly for the new platform and reduces errors that are often introduced during manual transference due to human error. You can then run checks to deduplicate records and also to check for data inconsistencies that might indicate a typo in the past or outdated information.
A CDP that is focused on this will tend to easily integrate with most common data sources and will ingest data in batches or streams. However, in some cases, the CDP may not be good at running checks to unify and deduplicate records and allow for easy analysis. Instead, the focus is on getting the data into the system quickly and easily.
CDP vendors whose main strength is integrating and connecting your tech stack include SAP, Salesforce, and Adobe.
Unification and identify resolution
One of the key factors of a CDP is that it ties everything to the individual customer. Unification, also known as identity resolution, brings everything into the customer's record, erasing duplications and allowing marketers and others to see, at a glance, a customer's full history across channels and touchpoints.
This is called the "360-degree single customer view," and automated matching will look at the data and combine records based on exact information (e.g. email) or, even, inexact information, using combinations of data points such as last name and phone number. The latter is often superior as not every record is going to contain every bit of data.
Typically, these CDPs use machine learning to spot and combine duplicate records with a high rate of accuracy. They may even enrich your dataset with information from third-party sources such as Experian’s Mosaic. The goal is that once the data is in the system, customers will have unique, comprehensive records, and a good unification CDP allows this with minimal manual checking. A good unification system will also flag inconsistent data for checking, such as if a customer has more than one shipping address in the system.
CDP vendors whose main strength is identity resolution include Tealium, Segment, and mParticle.
Intelligence and analytics
The biggest advantage of a CDP is that single customer view. It shows you how each customer behaves, which channels work best for them, and what other data might affect them. It allows you to quickly and easily check what a customer has purchased in the past, draw insights about their preferences, make predictions for the future, and adjust your engagement strategy accordingly.
This data can then be aggregated to create high-value customer segments, update customer personas, assess the impact of different marketing campaigns, and guide your personalization approach. However, this requires intelligence and analysis.
CDPs with good customer intelligence tools can help you easily segment your audience, make personalized recommendations for actions to individual customers, and uncover opportunities for acquisition, growth, and retention. The CDP does not provide all of your analytics needs on its own. Like all tools, it is only as good as the people using it, and you still need to have a team that understands how to take the insights gained from the CDP and transform them into actionable, impactful engagement strategies. This then allows you to personalize your campaigns and also provide better, more informed customer experiences in your retail business.
CDP vendors like Lexer are particularly strong in their retail data analytics and customer intelligence capabilities, providing comprehensive data enrichment and strategic guidance to help you gain valuable insight into your customers.
The last layer is activation. Not all CDPs are strong in their activation capabilities. The ideal, though, is that the activation-based CDP can connect to all of your engagement channels, so you can then build and automate customer journeys and marketing campaigns from within the CDP itself.
Many older marketing tools are heavily focused on email, but a good CDP can handle omnichannel marketing, working across email, website, social, and more, connecting to all of your existing tools. To make the greatest impact, your CDP should also be able to measure omnichannel metrics such as customer lifetime value so you can iterate, improve and optimize your campaigns as needed.
Lexer’s Customer Data & Experience Platform is strong in its activation capabilities, allowing you to collect, segment, analyze, and activate your data from an all-in-one hub. With native tools to support marketing, service, and retail, your entire team can use the CDP to power personalized customer experiences.
CDPs are more than just marketing tools
While the CDP is of greatest use to marketing, these tools and functions can be useful across the business. In fact, CDPs can have an impact on overall business transformation, revenue, cost savings, and most importantly, the customer experience. For example, they can also be used to prioritize service to existing customers, ensuring that your highest-value customers are continuously provided with exceptional experiences to keep them coming back. The analytics used are valuable all the way up to the C-suite, allowing you to track changes in buyer behavior and quantify the impact of all of your business activities.
If you are looking for a CDP, choosing from the multiple options out there can be challenging. You need to consider which of these functions are the most important to you, which may depend on your industry, business type, and the tools you are already using or have recently purchased. But a good CDP can help you reduce errors, improve marketing performance, and offer incredible customer experiences that grow lifetime value and boost retention rates. And once you’ve decided on the right CDP vendor, you need to build an effective CDP business case that resonates with stakeholders.
Still struggling to decide? Click here to read "Checklist: How to choose a customer data platform (CDP)" to help you narrow things down and make the right choice for your business.