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What is a Customer Data Platform (CDP)?

You may (or may not) have heard our recent announcement that we are now BlueConic Partners. We’re really excited to support Customer Data Platforms (CDPs) like BlueConic, as we believe this is a logical next step for many companies wanting to both unify and activate their first-party data.

We also realize that not everyone has heard of CDPs and what they can do. So, I wanted to take the time to explain in detail what Customer Data Platforms do and how they can be used to drive tremendous business value.

A Definition

According to the CDP Institute, "A Customer Data Platform is packaged software that creates a persistent, unified customer database that is accessible to other systems."

Let’s break this definition out by the three critical elements:

  1. Packaged software”: A CDP is a prebuilt system that is configured to meet the needs of each client. While CDPs do require some technical assistance to set up and operate, they are meant to be owned by marketing, not IT.
  2. “A persistent, unified customer database”: A CDP connects to your first-party data sources, like your website/apps, email marketing system, CRM system, and more to create a persistent, unified customer database. All of your anonymous and known users will be assigned a unique identifier, and as you collect more data, that identifier will be added to each user’s profile.
  3. “Accessible to other systems”: A CDP connects to your other systems including ad networks, analytics tools, tag management systems (TMS), content management system (CMS), customer relationship management (CRM), marketing automation, and so on, to activate your first-party data. Many CDPs have native integrations built with popular tools so that connecting the CDP only takes a few minutes with a few clicks of a button.

What Can You Do With A Customer Data Platform?

The two main purposes of a CDP are to unify your first-party (and even third-party) user data and to activate that data via your marketing and advertising networks, channels, tools, etc. We’ll also discuss a third purpose that’s come about recently with new data privacy laws like GDPR coming into effect.

The diagram below outlines the typical data flow for a CDP, which sits in the middle of the diagram as the unified customer database.

customer data platform

Once you have your first-party user data in the CDP, you can then use that data through different methods like segmentation to activate it across your marketing and advertising channels.

Once your users interact with those channels, that data is then sent back into the CDP to further build out each user’s profile. And so the cycle continues on to build out more accurate, robust user profiles that will lead to more optimized marketing and advertising.

A few notes on what CDPs DO NOT replace:
  • Web/app analytics tools like Google Analytics or Adobe Analytics: These analytics tools actually complement and enhance a CDPs first-party data. Analytics tools like GA are much more robust when it comes to tracking websites and apps and offer very powerful reporting and analysis tools that a CDP does not have (and does not want to have).
  • Data management platform (DMP): DMPs can help enhance your CDP, but there are things that a DMP does (mainly activating third-party data across ad networks) that a CDP cannot do. And there are things that a CDP can do that a DMP cannot do (unifying your first-party data). Confused yet? I would suggest reviewing our friend Cory Munchbach’s blog post on CDPs vs DMPs to get a better idea of the differences between the two and how they can complement each other.

Now, let’s talk in more detail about the two main purposes of a CDP, data unification and data activation. In addition, I’ll discuss a more recent purpose that has come along with the advent of user privacy laws like GDPR (the General Data Protection Regulation in the European Union).

Purpose #1: First-Party Data Unification

If you’re a marketer, how many different systems and tools does your company use? Do these tools all share data with each? Or are they siloed, each collecting data that is only accessible within that specific tool or platform?

If you’re like most marketers, you use a number of different tools for marketing and advertising, none of which are connected to each other to pass data or insights.

Think about it. Your website engagement data is collected in an analytics tool like Google Analytics or Adobe Analytics. Your email engagement data is located in your email marketing tool. Your customer data, like ecommerce purchases and offline behavior, is in your CRM system or ecommerce platform. And then if you’re running advertising, that data lives in the ad networks like Google or Facebook.

Each of these systems have their own unique identifiers for your users, their own unique metrics for your users’ behavior, and the data sits siloed in each platform. We’ve done a number of integrations with GA and CRM systems like Eloqua and Salesforce, and found that this is very powerful for passing unique identifiers from one tool to the other to unify your user data. This is a great start and we highly recommend it.

But the actual purpose of a Customer Data Platform is to connect ALL of your tools and platforms so that you have one persistent, unique identifier (created by the CDP) across all of these tools and platforms. So, this takes the GA - CRM system integration a step (much) further by being the source of truth for first-party data across all of your first-party data systems.

Purpose #2: Data Management & GDPR Compliance

CDPs help to manage both your first-party data and consumer privacy and data rights. CDPs control the flow of data from your different marketing and advertising systems and therefore can tie into or act as your consent management tool.

For instance, if you’re operating in a company that requires active consent, you can use a CDP to manage that consent and then consequently the user’s first-party data flow.

If the user does not grant consent, the CDP ensures that no first-party user data is sent to any of the tools configured with the CDP.

If the user does give consent, the CDP will then allow the first-party data to be captured in the CDP and then sent over to the connected tools and platforms.

In the age of GDPR and ever-changing data privacy laws, it’s extremely important to ensure your organization is actively managing consent and data flow. CDPs can manage this for you.

Purpose #3: Data Activation

The third purpose of a CDP builds on the first two. Once you have the right and/or permission to collect your first-party user data and it is unified and structured into user profiles, you can then take action on it.

CDPs highlight a number of features, like creating audience segments, that you can use to activate your user data across the rest of your marketing platforms and channels.

Think about pulling a list of your top ecommerce customers and creating a new email campaign to reward them with a one-time 25% off coupon. Or creating audiences based on content preferences and sending that to an ad network for advertisers to target for a more personalized ad experience.

There are a lot of possibilities and I’ll cover some of the larger use cases in the next section.

Example Use Cases

Now that we’ve talked about the three main purposes a Customer Data Platform serves, I’d like to walk you through a few prime use cases. One of the reasons CDPs have become so popular is due to their flexibility. Companies of all sizes and within all industries can leverage a CDP to improve their marketing and drive a more one-on-one relationship with their users.

1. Improving Customer Loyalty/Retention

One major use case is improving customer loyalty and/or retention. Thinking specifically about ecommerce/retail companies, they have a treasure trove of purchase data about their users.

The holy grail for ecommerce companies is determining Customer Lifetime Value (CLV). Not only can you centralize your data sets to build a more robust and accurate CLV, but you can then build campaigns and customer experiences tailored to those CLVs.

A few examples:

  • To improve loyalty: For your most valuable customers (top 10% highest CLVs), you could create a VIP loyalty program with exclusive offers, discounts, and more. Since your CDP would be connected with your email management software (EMS), you can send this top customer audience over to your EMS to handle the communication. Then, their on-site behavior can be measured and sent back to your CDP to evaluate if it has improved each customer’s CLV.

 

For these examples, you would want to actually structure an experiment with a control group and a test group. You’ll then be able to evaluate the success by measuring the effect on each group’s CLV. The ultimate objective would be to increase CLV for each target audience.

2. Reaching New but Similar Audiences

Another option is to create “lookalike audiences” that behave very similar to your current valuable user segments. Many ad networks like Facebook have an option to upload first-party audiences based on certain behaviors and characteristics, and then the ad network will find users that are similar for you.

Let’s look at Facebook as an example. You could create an audience of your customers that purchase your highest margin products via your website or app (therefore they are most profitable to your business) and then send that audience to Facebook. Then while in Facebook, you can target ads at people that Facebook deems as “similar” to your most profitable customers. This allows you to reach new audiences, but audiences that hopefully will have a much higher CLV than less targeted audiences based on demographic-only data like location, age, and gender.

3. Personalizing the User Experience

This is one of my favorite use cases because it’s not industry/vertical-specific. There are a number of reasons why companies should be delivering personalized experiences. We won’t get into them here, but suffice to say that the end result of a more personalized experience is generally a better user engagement, a higher conversion rate, and more value to your business’s bottom line.

Ecommerce/Retail Example

In the case of ecommerce/retail companies, being able to present personalized product recommendations based on previous purchases, current products in the current shopping cart, or products recently viewed can help you to upsell or cross-sell additional products the customer might not have thought about. This not only could improve the average order value (AOV) but the overall revenue for your business as well.

For example, I might go to Dick’s Sporting Goods website and purchase a new pair of Nike running shoes. If Dick’s Sporting Goods is using a CDP, they can offer me additional products that would go with my shoes, like Nike socks. This would be a perfect example of a cross-sell opportunity. I came for shoes, but also purchased socks, because why not? You need socks with your shoes and maybe I’m running low.

Publishing Example

In the case of a publisher, like the New York Times, being able to create a more personalized experience drives user engagement. Resulting in more user engagement which can lead to more advertisement impressions and clicks, which of course can lead to more advertising revenue for the New York Times.

If the New York Times is collecting all my web and app behavior, they can put together a user profile on me which outlines what categories of content I like (mainly articles and videos) and what sections I read the most or am most engaged with (Sports and Finance).

Upon my arrival, the New York Times could tailor my home page through the CDP to present me with the content I’m most interested in. I no longer have to dive through the menus to find the content and sections I’m looking for. The New York Times handles that for me.

4. Offering Advertisers Better Audience Targeting Options

The last use case I’ll talk about is mainly for publishers that sell advertising on their properties. We’re hearing more and more from publishers that advertisers are looking for very specific audiences they would like to target. And many times, the publishers don’t have the first-party data to make those audiences available.

By utilizing a CDP and connecting it with your other first-party data, you can create high-value, granular audiences for your advertisers to reach.

Let’s walk through a few examples:

1) For an auto property like Car and Driver

The publisher might work with a lot of local auto dealerships that want to target individuals that are actively looking to purchase a car.

For Car and Driver, their CDP would be capturing the user’s location, the content the users are looking at, how often they’re looking at that content, and what specifically the users are searching for on the site or app.

Car and Driver could create an audience of people that are located within ~50 miles of the car dealership and have looked at three or more car reviews within the past two weeks (however Car and Driver defines the audience for “local users that are actively looking to purchase a car”).

Those local car dealerships are able to reach people that are expressing active interest in content related to purchasing a car - which hopefully means they are much more interested in advertising from local car dealerships.

2) For a B2B content site like Chief Marketer

Collecting information on users, like their job function, industry, company name, company size, and so on would allow for some really valuable targeting audiences.

For instance, if a B2B software company is looking to sell their newest product to decision makers at large companies within the marketing industry, Chief Marketer could put together an audience based on job function (Manager, Senior Manager, Executive, etc.), industry (Marketing), and company size (>500 employees).

As long as Chief Marketer has that first-party user data in it’s CDP, they can activate it by sharing it with advertisers to reach those specific, targeted audiences. Pretty cool, huh?

What's Next?

To summarize, I’ve walked you through what a Customer Data Platform does, it’s main purposes, and some example use cases. Hopefully, you’ve found this information insightful and it has gotten you thinking about what a CDP could do for your company.

If you are interested in learning more about CDPs and their use cases, I suggest you check out BlueConic’s Resource Center. It has a ton of great information that goes beyond what I’ve discussed here today.

If you have additional questions or would like to talk through how a CDP like BlueConic can help your organization, please reach out to us and we’ll set up some time to talk.

Your competitors are most likely already using a CDP. Why aren’t you?

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