Since the internet has taken over our lives, the digital world has accelerated at a fast pace, transforming the way we do business. The COVID-19 pandemic acted as a catalyst to revolutionize the digital transformation and eCommerce trends across industries, and added an increased emphasis on strengthening organizations’ eCommerce strategies, something I discussed in my last Forbes Technology Council article.
With the ever-increasing competition to gain customers’ attention, Personalization is no longer a ‘nice to have’ tactic in today’s marketing & sales communication. From better sales, and higher retention, to stronger customer loyalty, personalization delivers better outcomes & conversions for businesses.
Personalization is one of many use cases which can be enabled when organizations understand their customers and predict their current states of mind, their needs, and the timeframe of their needs. To achieve this, it is essential to be able to utilize the owned and borrowed customer data (1st party, 2nd party, and third party) and to apply modern data analytics techniques to be able to deliver highly personalized and relevant marketing messages at the right time.
What is a Customer Data Platform (CDP)?
Every organization defines CDPs in a different manner mainly including or excluding certain features. Within our teams, we define CDP as a centralized, cloud-based solution that helps organizations understand their customers and enable personalized, consistent & real-time experiences across marketing, sales, and service channels.
A customer data platform (CDP) is one of the most essential tools being adopted across B2C as well as B2B industries in the last several years. It is essentially a specialized data management system having all the technical & functional capabilities needed to:
1) Centralize data related to customer profiles and the activities performed by them or for them, and
2) Make that data usable in the form of activations, integrated reporting, and predictive actionable insights.
With the browses and tech giants moving away from third-party cookies, CDPs become even more relevant to be able to cover the use cases which are generally enabled using third-party cookies.
Understanding the customer’s needs and predicting their next moves can help companies grow faster and more efficiently.
Those looking to stay ahead of the game know how to tap into the benefits of personalization using tools like CDPs.
Functionality
CDPs operate using four major functions:
- Collect and standardize data from first, second, and third-party data sources.
- Create a persistent, single view of the customer by identifying and unifying the information
- Analyze and enrich the data using business rules and predictive intelligence, and finally
- Democratize and activate the unified, enriched data to achieve marketing and business goals.
Say, for example, you are in the market to make a purchase, in this case, we’ll say a refrigerator. You then search for and compare the best refrigerators on the internet. You may notice that with every website you interact with the ads become more specific to your search, the websites are catered to your preferences, and there may even be a nudging email in your inbox soliciting you into making the purchase. If you wondered how that was happening, the answer is that the companies you interacted with leveraged their CDP.
During this journey, as a customer, you may clearly differentiate between companies providing a pleasant experience versus bothering you with unnecessary and irrelevant recommendations. That difference appears with the usage or absence of the right tools & platforms being utilized by the organizations for marketing and sales purposes. The difference also comes with the way the tools are implemented and different components are configured to enable several use cases.
Use Cases enabled by CDPs
Industry leaders go across channels to find, retrieve and store data, but what good is it if it can’t be utilized effectively to pave the path to success? Customer Data Platforms form the backbone of a robust data and marketing infrastructure which works seamlessly with other systems such as Web Content Management systems, Tag Managers, Marketing Clouds, Analytics software, and reporting tools.
Following are the most common use cases where CDPs help businesses grow faster:
- Optimize Prospecting: Identify premier prospects via lookalike models and target them via emails, direct marketing, social media, and more.
- Multi-Channel Attribution Marketing: Identify channels to which conversions should be attributed, to assess channel performance and optimize future marketing budgets.
- Lead Prioritization & Lead Scoring: Derive and automate a variety of scores based on customer profiles and activities to help the sales team prioritize better quality leads to improve conversion and acquisition rates.
- Customer Profile Access for Sales & Customer Services Teams: Enable teams to provide better customer service and sales experience by making enriched customer information available to them in real-time.
- Predictive & Propensity Modelling: Facilitate the prediction using advanced analytics models of the likelihood of visitors, leads, and customers performing certain behaviors, and use the data to personalize messaging, offers, and much more.
- Customer ROI: Helps you accurately calculate customer ROI based on total customer revenue and total cost of acquisition, utilizing the enriched data in the exhaustive centralized CDP.
- Enable Integrated Reporting: CDPs provide unified and enriched data to your reporting tools, giving you access to real-time reports on customers and marketing.
- Automated Alerts to Internal Teams: Send alerts to teams based on customer activity and responses to sales and marketing efforts, in real-time.
Benefits of Customer Data Platforms
Who doesn’t want a well-rounded 360-degree view of customers?
CDP helps you create that view of customers and acts as the single source of truth for all the customer-related data, which can be made available to any other system in the organization providing various functions such as reporting, marketing messaging, content personalization on the website, predictive analytics, operational systems, CRM systems, etc.
A variety of third-party platforms can also be leveraged to further enhance the usability of CDPs. For example, geolocation data available from third parties can help enable geofences, geo-location-based messaging, and a similar real-time personalized experience for your customers.
With data-backed predictive intelligence, you can act as per the customer’s next actions and products. While you’re creating a solid customer experience, CDPs also help ensure your organization is adhering to data privacy regulations using inbuilt consent and preferences management. In addition, several CDPs also comes with the ability to track data usage policies for data received from second and third-party providers, ensuring any limitation on the data usage is honored programmatically.
What CDP is Not?
It can be easy to confuse CDPs with other types of data management systems that have been in use for decades. There may be a few overlapping features, however, it is the functional focus, and the scope of the data processed that differentiates CDPs from other systems. Let’s take a look:
- Data Management Platforms (DMP): are designed to manage paid advertising based on anonymous customer data.
- Master Data Management Systems (MDM): deal with all types of data, creating a golden record, but enrichment and activation are generally not part of MDMs. All the sources of customer data generally aren’t configured with MDMs.
- Customer Relationship Management Platforms (CRM): are generally focused on sales & service interactions with customers tracking lead to opportunity to conversion. They generally do not have customer data from all the sources and do not have enrichment or activation features.
- Data lake: is a general system to store any type of enterprise data to support various functions such as analytics, long-term storage, reporting, etc.
- Marketing Platform (Marketing Clouds): are focused on marketing communication via digital & offline channels. They do not have data from all data sources and do not have much enrichment and analytics capabilities.
Now that we’ve understood the basics of CDPs, it’s time to make a move[GL18] . The right technology can help you maximize the utilization of your customer data and automate a lot of intelligent marketing & sales processes so that business leaders can focus on the decision-making, and CDPs do just that for you and your teams. In my next article, I will dive into whether you should build or buy CDPs for yourself, and why asking that question is important in the early stages of your digital transformation journey. Stay tuned!
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ABOUT THE AUTHOR
Swapnil Srivastava, VP & Global Head of Data and Analytics at Evalueserve
VP & Global Head of Data and Analytics, Swapnil Srivastava, Evalueserve