6 minute read

CDPs: Why They’re Important (Especially Right Now) & How to Choose

In the last year and even more so in recent months, the buzz and conversations around Customer Data Platforms (CDP) have taken a noticeable shift. Forrester released a CDPs for Marketers report back in October 2018 noting that most of the hype was coming from vendors and not buyers. However, all of that hype was clearly getting noticed by marketers, because just six months later, CommerceNext released a benchmarking report that said differently: According to brands, the top innovation investment priority for all ecommerce marketers, regardless of business model, is in customer data platforms. Both vendors and buyers are validating that there is a pressing need for a new wave of technology to solve the longstanding market challenge of understanding customer behavior across channels and devices and using it to deliver more compelling customer engagement.

The need for a solution has become even more critical and apparent as brands attempt to adapt to drastic behavioral changes due to COVID-19 and hopefully stay afloat in a post-pandemic world. But when it comes to settling on a CDP, the process can be long-winded and semi-confusing—which isn’t exactly convenient for marketers who should be acting on this as soon as possible.

You’ll find many ultimate guides, dummies guides, and quick-start guides to understanding CDPs, but it shouldn’t be that complicated and it really isn’t. I’m hoping to put some of the confusion to rest and help cut down on research time. Here’s what you need to know about CDPs and how to select the best one to fit your business needs:

What is a CDP and why do I need one?

72% of today’s consumers say they only engage with messages tailored to their interests, and 80% of frequent shoppers only buy from brands who personalize their experience. They also want individualized recommendations—47% of consumers check Amazon for product recs and suggestions if their retailer doesn’t make any—and expect brands to anticipate their needs and pivot quickly in response to global events.

But with so many ways for consumers to engage, meeting these expectations is incredibly complex for marketing teams. They’re managing more channels, data, platforms, marketing campaigns, and deadlines than ever with the same headcount and budget as before. So it’s no surprise that if you research what marketers have been most frustrated with over the last decade, it’s been the inability to collect and connect all of their disparate data sources together so they can create a single customer profile to even begin powering personalized marketing campaigns. Enter CDPs.

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." Forrester says, “A CDP centralizes customer data from multiple sources and makes it available to systems of insight and engagement.” While there are many different definitions out there, they all are consistent around that same idea.

Where things start to break down amongst analysts, vendors, and thought leaders are the different categories and definitions of types of CDP vendors. Because, unfortunately for marketers, there is not one platform (yet) that is a fully comprehensive customer data platform.

The 3 Types of Customer Data Platforms

Hilary Edelstein, senior analyst at Winterberry Group, believes that true CDPs must be able to properly execute on four core capabilities:

  • Ingestion and integration of customer data from multiple sources.
  • Customer profile management, including identity resolution to create universal and persistent customer profiles of visitors across different states.
  • “Real-time” customer segmentation.
  • Exposure of customer data to other systems via “out-of-the-box” connectors.

While I tend to agree with this definition, there are many types and categories referenced out there, so I’ve distilled CDP types down to three main and common categories.

  1. Data Streaming: This CDP type provides a waypoint for marketing data, similar to a data warehouse or data mart, by ingesting and centralizing data. They make compiled customer data available to other technologies for analysis and execution.
  2. Orchestration: This CDP type builds customer profiles and segments that marketers can use to target messages. They provide a segmentation interface to provide audiences to engagement platforms, as well as direct targeting via web and messaging personalization and product recommendations.
  3. Automation: This CDP type focuses on the development and execution of customer marketing campaigns. They provide a campaign design interface and natively execute campaigns such as email and mobile messaging.

Each category has a number of different features and functionality that CDPs in that category could or should have. Some CDPs are even able to check the box across category types.

Where SmarterHQ fits into the CDP landscape

You may have landed on this article because you were interested in learning more about how SmarterHQ fits into the CDP world. Let’s break it down:

  • Data Streaming: We are not a data warehouse but we do collect data across all of the data streaming sub-categories to then be used for segmentation, predictive models, and identity resolution.
  • Orchestration: Due to our broad data collection, sophisticated segmentation capabilities, predictive models, identity resolution, cross-channel unification, campaign tools, and integrations with over 30 data streaming and automation providers, we fit neatly into the Orchestration category.
  • Automation: We do slightly overlap with the automation category in that we enable real-time messaging through your automation providers (as most automation providers fall short on real-time messaging) and power website transforms. We integrate with all marketing clouds and as well as niche email and app providers to power real-time personalized messaging through those delivery providers.

Selecting the right CDP for your needs

Unfortunately, it’s not as easy as simply heading to the CDP Institute, a vendor-neutral directory of CDPs, and selecting one of the 100+ vendors listed. In my conversations with marketers, there is still a lot of confusion around Customer Data Platforms and how to choose one. On top of that, enterprise technology and marketing clouds are joining the fray and claiming to also be a fully comprehensive Customer Data Platform. Which is funny really—because if enterprise vendors were already a CDP, then marketers wouldn’t need to find one outside of their existing tech stack.

Due to all of this confusion, a Merkle survey found that 75% of marketers think they already have a CDP. Since everyone is calling themselves one, then it’s easy to see why the majority of marketers surveyed would think they’ve already got one. Merkle cited the unbelievable figure as proof of confusion around what a CDP even is.

My advice to marketers is to recognize that there isn’t one vendor out there checking all the boxes of a CDP. Instead, marketers need to evaluate what goals they are looking to accomplish with the CDP vendor types that are available. Are you looking for a data streaming vendor to provide a single integration point to provide hookups to as many other systems as possible? Or are you looking for an orchestration vendor that will make sense of all the data points so you can organize and segment your customers to drive business outcomes through marketing channels? Or you could be starting from scratch, or needing to make the switch to a new automation vendor to power delivery through the channels you are wanting to use to communicate to your customers?

Whatever direction you’re headed, we can help recommend providers in the categories that we don’t play as strongly in or can help guide you to understanding all the components of a CDP. Get in touch with the SmarterHQ team here or contact your Client Success Director—and we’ll help you investigate.