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Customer Data Platforms - the technology of 2021?

Barb Mosher Zinck Profile picture for user barb.mosher December 16, 2020
Customer Data Platforms (CDPs) are being hailed as the next big thing - but why? And do you need one? What are the costs involved? A new survey from Segment (now owned by Twilio) brings insights into what companies are doing with CDPs, and the questions customers should be asking.


Everyone is talking about customer data platforms (CDPs). Why? A CDP brings together data from all your marketing and sales software to provide a 360-degree view of your customers. Plus, they provide insights into the best ways to engage and support your customers as they move through the customer lifecycle. So are they the new "must-have" technology for 2021?

A new survey from Segment (which was recently acquired by Twilio) suggests that the CDP is a must-have in your marketing/sales tech stack. The survey of over 4,000 customer data decision-makers suggests that the CDP is a "must-have infrastructure for any serious digital-first business."

Customer data drives revenue growth

There is good reason for having a CDP. Digital transformation is happening much faster than expected - thanks in part to the pandemic and the necessity to be digital. But it's more than being on digital channels; companies need to find ways to reach their customers and stand out against all the competition - direct and non-direct. And that means it's critical to understand your customers as intimately as possible. 

Getting pieces of customer data from multiple applications and trying to string it all together into a cohesive view that you can analyze and make decisions with is nothing short of complicated. It's that complete view of the customer that will drive a company's success, says the study, with 58% of those surveyed saying they expect customer data to drive revenue growth.

In this study, 47% will increase their CDP budgets by over 25% in the next five years, and 73% believe a CDP is critical to customer experience efficiency. It's also important for customer privacy and insights and reporting (the top three reasons to use a CDP).

How are CDPs being used?

There's an understanding that a CDP is an essential part of the tech stack, but how are companies using it? This one was on the questions asked in the study:

  • 73% for data collection
  • 61% for access and accountability
  • 58% for data unification and comprehensive customer profiling
  • 57% for data standardization
  • 48% for CDP and privacy compliance

These are just data collection use cases. Equally important is personalization. A CDP can create a customer profile in real-time that enables a marketer or a salesperson to provide a targeted, genuinely personalized experience in many ways - email, website, messaging, chat, and so on. 

There's another use case that is growing in popularity: using a CDP for AI and machine learning. Predictive analytics is not unique to CDP solutions, but when you think about all the different types of data, the CDP ingests - profile data, real-time interaction data (behavioral, demographics, transactional), campaign data, product data, customer support data, mobile, and  IoT data - you start to understand how good the CDP can be at predicting customer behavior. 

You can also define better segmentation using machine learning, improving the quality and substance of the messages and engagement you have with customers.

If you could prevent customers from leaving by getting intelligence on their activities, would you not? If you could create super-personalized experiences without being too creepy, experiences that make a customer feel like only you understand their needs, you would do it, right? Some CDPs support schema-less data ingestion, so you can pull in data from anywhere and then unify it to create a detailed customer profile. 

How to know if your CDP is providing value

Implementing a CDP will not necessarily come cheap. According to the Segment study, 62% will spend more than $100,000 on their CDP, with most (30%) spending between $100k and $500k. There are plenty of CDPs solutions available, some standalone, others as part of a digital experience platform and not all CDPs offer the same features; how much you spend will depend on the CDP itself. 

In terms of providing value, 56.8% of respondents said they expect to see 5-10 times ROI from their CDP. They plan to measure that in terms of improved customer satisfaction scores, sales and revenue growth, customer acquisition, and cost savings. 

My take

There are situations where a CDP isn't required, but that's typically for smaller businesses that only work with one or two channels. However, even if you think you need a CDP, it's important not to get caught up in the vendor pitches before you spend some time understanding what you may already have internally to manage your customer data. 

If you implement a CDP, I think the most important thing to remember is that you want to use its intelligence to offer the right customer experiences. The right offers, the right messages, the right engagement - it's still hard to do well. 

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