What is a CDP? A Complete Guide for Customer Data Platforms

Let's say you're a shopaholic at an online fashion store called "Fearless Femme" – the ultimate store for strong, independent women who aren't afraid to take risks and break the rules.

It's a popular store whose trendy clothes are always in demand and somehow always seems to get its customers' attention. How? It's not like you went out with the sales rep and told them all your life goals, tastes, and styles. How does it know which clothes will pick your interest? 

Fearless Femme uses a CDP to track your every move to create marketing campaigns tailored specifically to you. Seems stalker-ish, right? Don't worry; it's not as creepy as it sounds. It's all about providing you with a more personalized shopping experience. That's how it gets to know which outfits will work for you.

Here's how it works: the CDP collects data from various sources, such as shopping behavior, browsing activity, and social media interactions. This data is then organized into a customer profile that gives Fearless Femme a complete view of your preferences and interests. With this information, they can create targeted marketing campaigns to resonate with you.

That way, if you're a fan of vintage-inspired clothing, Fearless Femme will send you an email showcasing their latest collection of retro-style dresses. Or, if you shop for accessories, they might show you a pop-up ad with a discount on jewelry. Next thing you know, you're adding it to your cart and checking out.

The beauty of a CDP is that it allows Fearless Femme to provide a more engaging and relevant shopping experience for you. Instead of bombarding you with generic marketing messages, they can customize their approach based on your unique preferences. And hey, if that means you're more likely to make a purchase, then everyone wins! It's like having a personal stylist but without the hefty price tag.

Let's look at how consumer brands use CDPs to create a shopping experience that's all about you: 

What is a Customer Data Platform?

In today's business landscape, customer data is precious. Companies that collect, organize, and utilize customer data can gain a competitive advantage. However, with so much data available from various sources, managing and analyzing it can be a daunting task. That's where a CDP comes in.

A Customer Data Platform (CDP) is a software tool that helps businesses collect, unify, and manage customer data from multiple sources. The goal of a CDP is to create a unified customer profile that can be used to drive marketing and business decisions. A CDP can pull data from various sources, including website analytics, CRM systems, social media, and third-party data providers. Once the data is collected, the CDP analyzes it to create a complete view of each customer, including their preferences, behavior, and history. 

And what's "customer data"? This is any information that pertains to a specific customer or group of customers. It includes demographic data (age, gender, location, etc.), behavioral data (website activity, purchase history, etc.), and psychographic data (interests, preferences, etc.).

Such data is essential for businesses to understand their audience and make informed decisions about their products and services.

The core features of a CDP include:

Data integration: A CDP pulls data from multiple sources, including website analytics, CRM systems, social media, and third-party data providers. This data is then unified into a single customer profile.

Identity resolution: The CDP matches customer data across different channels and platforms to create a complete view of each customer.

Segmentation: It can group customers based on shared characteristics, such as behavior or preferences.

Personalization: A CDP can use customer data to personalize marketing messages and content.

Reporting and analytics: It provides insights into customer behavior and campaign performance.

CDP vs. DMP vs. CRM: What's the difference and which do you need?

In the world of customer data, options are many, and the decisions can be overwhelming. CDP, DMP, and CRM are the three musketeers of customer data management. Each tool has its own unique focus and use case. Here is a comparison of the three powerful tools and how they work for different business goals:

1. Customer Data Platforms (CDPs)

A CDP is designed to manage customer data and create a unified customer profile. It takes data from various sources and creates a complete view of each customer, which can be used across different channels and platforms. A company uses a CDP to combine data from its website, social media, and customer service interactions to create a single customer profile that can be used to tailor marketing campaigns.

2. Data Management Platforms (DMPs)

A DMP is a technology platform that allows businesses to collect and manage large amounts of anonymous user data from various sources, such as cookies, mobile device IDs, and IP addresses. DMPs analyze this data to create audience segments that can be targeted with relevant ads or content.

They are primarily used for digital advertising and can help businesses improve their marketing ROI by delivering personalized content to the right people at the right time.

For example, a retail company can use a DMP to collect data on the browsing behavior of its website visitors. It analyzes this data to create an audience segment of people who have viewed specific products but have not purchased them. The company then targets this audience with ads for those products, which leads to more conversions and sales.

3. Customer Relationship Management (CRM)

A CRM is a tool that helps businesses manage their interactions with customers and prospects. These tools typically include features such as contact management, sales tracking, and customer service tools to improve customer satisfaction and retention.

CRMs allow businesses to track customer interactions across different channels, such as email, phone, and social media, and provide a holistic view of the customer journey. For example, a B2B company can use CRM to keep track of its sales leads and customer interactions. The tool helps them manage their sales pipeline, send personalized follow-up emails, and track the effectiveness of their sales efforts. This results in a more efficient sales process and improved customer satisfaction.

So what's better for you?

If you're just focused on digital advertising, a DMP will do.

A CRM will suit you more if you primarily want to manage customer relationships and interactions.

If you want a complete view of your customers and use that data for marketing and advertising, then a CDP is the way to go. 

Unlock the power of customer data: 5 reasons to use a CDP

Now that we've covered what a CDP is and how it differs from other data management tools let's explore some of the benefits of using a CDP.

1. Get a 360-degree customer view.

One of the benefits of using a Customer Data Platform (CDP) is the ability to create a unified customer profile. A CDP consolidates data from various sources, such as website visits, social media interactions, and purchase history, into a single profile for each customer. This complete view of the customer enables businesses to gain insights into customer behavior and preferences, such as their preferred communication channels and product interests.

For example, a financial institution can use a CDP to thoroughly understand its customers' investment portfolios, credit scores, and spending habits. By analyzing this data, the institution can tailor its marketing messages to each customer, offer personalized investment advice, and create customized financial products that meet their customers' specific needs. On the other hand, e-commerce platforms use CDPs to gain a holistic view of their customer's shopping behavior, such as their preferred product categories, average order value, and purchase frequency. By analyzing this data, the platform can optimize its product offerings, personalize product recommendations, and create targeted marketing campaigns that appeal to each customer.

2. Personalize marketing messages and improve customer experience.

Saying 'Dear Valued Customer' just doesn't cut it anymore. Leveraging customer data, such as browsing history, purchase behavior, and demographic information, to create tailored marketing messages and content that are more relevant and engaging to your customers. That's how online retailers use CDPs to track customers' browsing history and recommend products relevant to their interests. This personalized product recommendation can improve the customer's shopping experience and increase the likelihood of purchasing. Or how hospitality companies rely on such tools to personalize email marketing messages, offering promotions and services that align with a customer's booking history and preferences.

Personalized content enables businesses to improve the customer experience and increase customer satisfaction. It can lead to repeat business, positive reviews, and word-of-mouth referrals, ultimately increasing revenue and brand reputation. According to Statista, 63% of marketers have found that personalization leads to increased customer interactions. So why not make your customers feel special? They might return the favor by converting into loyal buyers - every business owner's dream. 

3. Boost your marketing game with more effective campaigns

It's marketing that resonates with customers and drives higher engagement and conversions. Analyzing customer data from various sources and unifying it into a single customer profile gives you insights into customer behavior and preferences. This information can be used to create more effective marketing messages and campaigns.

That's what fashion retailer Fearless Femme is in the introduction here. Analyze a customer's browsing and purchase history to understand their fashion preferences. Such data can create personalized marketing messages and offers more likely to resonate with customers. It can also send abandoned cart emails with product recommendations based on a customer's purchase history or create targeted promotions for those who frequently buy from a specific product category. Restaurants, in turn, can use a CDP to understand a customer's dining preferences and create targeted promotions or offers based on their past orders.

Even fin-tech companies can use a CDP to improve their marketing campaigns by gaining insights into customer needs and preferences. First, they look at data from various touchpoints, such as website interactions, call center logs, and transaction history. Then the company can create more personalized marketing messages and offers. For instance, they can create targeted campaigns for customers who have recently applied for a loan or promote new investment opportunities to customers interested in similar products.

4. Turn insights into action with customer journey mapping

With a CDP, you can analyze data from various touchpoints and better understand customer behavior, preferences, and pain points. This information can be used to optimize each touchpoint of the customer journey and improve the overall customer experience. 

Let's say you run a hotel, "The Seaside Inn," and want to optimize your customer journey with a CDP. Here's how they could do it:

Awareness Stage: Use the CDP to track website visitor behavior and identify where they're coming from (e.g., social media, search engines, referral sites) and what they're interested in (e.g., room types, amenities). By understanding the customer journey at this stage, they can personalize content and offers on their website to capture potential guests' attention and entice them to book a stay.

Consideration Stage: Once a visitor has shown interest in The Seaside Inn and is considering booking a stay, the CDP could track their activity and tailor email campaigns to their preferences. For example, if a visitor has looked at beachfront rooms, the CDP could trigger an email campaign promoting the benefits of booking a beachfront room and any current deals or promotions.

Booking Stage: After a visitor has decided to book a stay, you could use the CDP to track their booking process and ensure it's as seamless as possible. If a visitor abandons their booking midway, the marketing team can use the CDP to send an email reminder with a particular discount or an offer to assist with any questions they may have. 

Post-Stay Stage: After a guest has checked out, you can use the CDP to track their satisfaction and feedback. Integrate the data from the post-stay survey into the CDP to better understand their guests' experience and make improvements at The Seaside Inn where necessary. This data could also be used to personalize future communication with the guest and offer incentives to return for another stay.

That way, the CDP helps you increase customer satisfaction and loyalty to The Seaside Inn by providing your guests with a more personalized and seamless experience.

5. Keep your business data privacy compliant.

The last thing you want hitting your business is a GDPR fine. No one is safe. Even Big Tech gets fined, from Amazon paying €746 million ($888 million) after a successful complaint by a French privacy rights group, Meta being issued with a €390 million fine for violating GDPR rules with Facebook and Instagram, and even Google being forced to fork out  €90 million fine for not allowing YouTube users in France to refuse cookies easily.

Data privacy regulations are becoming increasingly strict, and businesses must collect and manage customer data compliantly. A CDP can help you achieve this by providing a centralized and secure platform for collecting, storing, and managing customer data. You can implement strict data access controls and permissions, allowing customers to manage their data and maintain detailed records of all data processing activities. It also minimizes the risk of data breaches and ensures you can respond quickly and effectively to data privacy incidents.

Healthcare providers need to comply with HIPAA regulations on storing and managing patient data, tracking consent and access permissions, and auditing data access;  e-commerce retailers should track and managing customer consent, anonymize personal data when necessary, and provide customers with the ability to access, edit, or delete their data in line with GDPR; financial institutions that are under strict CCPA regulations on securing sensitive financial data and giving users the ability to opt-out of data sharing - CDPs come in handy across the board.

What data makes up a CDP?

A CDP is designed to pull data from multiple sources and create a unified customer profile. The types of data that make up a CDP can vary depending on the business and the data sources involved but typically include:

First-party data: Data collected directly from customers through interactions with the business, such as website visits, purchases, and customer service interactions.

Second-party data: Data from partners or other businesses with whom the business has a relationship, such as joint promotions or co-marketing campaigns.

Third-party data: Data purchased from external sources, such as demographic information or behavioral data.

Offline data: Data from in-store purchases, call center interactions, and direct mail campaigns.

Combining all of this data into a single customer profile allows businesses to create a complete view of each customer and gain insights into their behavior, preferences, and history.

What is an example of a good customer data platform?

When looking for a CDP, there are several key factors to consider:

Data management capabilities: A good CDP should be able to ingest and integrate data from multiple sources, store it securely, and make it easily accessible for analysis.

Analytical capabilities: The CDP should provide robust analytical tools that allow you to segment and analyze your customer data and identify trends and patterns that can inform your marketing and customer engagement strategies.

Integration capabilities: The CDP should be able to integrate with other systems and platforms you use to manage your customer data and marketing campaigns, such as your CRM, email marketing tools, and social media platforms.

Customization and scalability: The CDP should be flexible and customizable to meet your business needs and scalable to accommodate your data growth over time.

Security and compliance: The CDP should have robust security features and comply with relevant data privacy regulations to protect customer data.

Ease of use: The CDP should be easy to use and navigate, with a user-friendly interface that enables you to access and analyze your customer data quickly and efficiently.

With this in mind, here's a look at Layerise and how it checks those boxes. It's a  customer registration and experience platform that helps consumer brands capture and analyze customer data, segment customers, and increase customer lifetime value. 

Here's what it brings on board:

A comprehensive suite of tools: Layerise offers tools to help businesses identify, analyze, and engage with their customers.

Captures any customer data: The platform's ability to capture any type of customer data, including demographic information and purchase behavior, allows businesses to deeply understand their customers and target them with personalized marketing campaigns.

Segment customers based on purchase channel: Layerise can segment customers based on their purchase channel and help businesses funnel customers from third-party marketplaces like Amazon to their channels, ultimately increasing sales and customer loyalty.

Increases customer lifetime value: It offers a range of features to help businesses increase customer lifetime value, including tools to build product up-sell strategies and create smart interactive stories that educate and engage customers.

Provides real-time customer support: The chat and reminders features provide real-time customer support and help businesses stay connected with their customers.

Emphasis on sustainability: Layerise's sustainability focus and support for multiple languages and global templates make it a versatile and eco-friendly platform to help businesses expand their reach and reduce their carbon footprint.

API integration: Layerise's powerful GraphQL API allows businesses to build their front end, whether it's for IoT, native mobile, or web applications, and integrate with other services.

Permission control: Its feature-based granular permission control allows businesses to configure their team and workspaces correctly, ensuring access is limited only to those who need it.

Insights and reporting: Layerise provides insights on customer demographics, product feedback, and NPS scores. It allows businesses to understand their customers better and make data-driven decisions.

Overall, Layerise's robust feature set and emphasis on customer data and engagement make it a strong choice for businesses looking to build strong customer relationships and grow their sales.

FAQ

Here are answers to common questions about CDPs, from the types of data they collect to how they can be implemented:

What does a customer data platform do?

A customer data platform is used to unify customer data from multiple sources into a single customer profile. This unified view can improve marketing effectiveness, optimize the customer journey, and create personalized customer experiences.

What is the difference between a CDP and a CRM?

CRMs are focused on managing customer relationships and interactions, while CDPs are designed to unify customer data from multiple sources into a single customer profile.

What is the difference between a CDP and a DMP?

DMPs are designed for managing anonymous data and primarily for digital advertising. At the same time, CDPs focus on creating a complete view of each customer by unifying data from multiple sources.

What types of data can be collected and stored in a CDP? 

A CDP can collect and store various types of customer data, including demographic information, purchase history, website behavior, and engagement with marketing campaigns. It can also collect data from both online and offline sources, including in-store purchases and customer service interactions.

Is a CDP only useful for large businesses?

No, CDPs can be helpful for businesses of all sizes. While larger businesses may have more complex data management needs, smaller businesses can benefit from the ability to organize and analyze customer data to improve customer experience and drive growth.

How can a CDP be implemented in a business?

Implementing a CDP typically involves several steps, including selecting a vendor, integrating the platform with existing systems, and defining data management processes. It may also involve training employees on using the platform and ensuring data privacy and security measures are in place. The specific implementation process will depend on the needs and resources of each business.