The Definitive Guide to Customer Data Platforms

What is a Customer Data Platform?

Customer Data Platforms (CDPs) collect and unify all of a brand’s first party customer data (structured and semi-structured) and make that data directly usable by any external system. This allows brands to develop a rich, timely, and contextual understanding of customers at the individual level, and use that knowledge to create powerful omni-channel personalization and targeting.

How do Customer Data Platforms work?

CDPs do the following:

  • Ingest all first party customer data: The volume, variety, and velocity of customer data is at an all time high and increasing by the day. CDPs rapidly ingest Terabytes of data in its raw, untransformed states, from any source, in order to make that data usable for marketers while it is still fresh and relevant. (see "What is Customer Data")

  • Build rich, unified customer views: Most customer data is inconsistent, incomplete, and lacks the unifying keys needed join it with complete confidence. CDPs employ sophisticated machine learning-powered identity resolution that can unify uncertain data and build the richest and most complete customer profiles possible.

  • Give direct access to users: CDPs are data users’ new secret weapons. Unlike IT-controlled data lakes or warehouses, CDPs let users explore, segment, download, and activate customer data directly, without help from other teams.

  • Deliver data to any external system: CDPs are intelligent platforms that sit between data sources and systems of action. They make data accessible and usable by all of the external systems that data users want to leverage, never trapping data in a "walled garden".

If a CDP doesn’t enable you to use ALL your customer data, from every source you have, it’s not a true CDP. Using this false solution will give you an incomplete view, throw off your results, and fail to fuel precise, meaningful marketing that drives sustainable, long-term customer loyalty.

Customer Data Platform

Customer Data Platform Diagram

back to top

What is customer data?

Customer data describes known customers who have identified themselves to your brand. They have opted in to your marketing emails, signed up for a web profile or loyalty program, shared contact information at a point-of-sale, or authorized (actively or passively) the use of cookies or device IDs to track them on your first party digital channels:

Customer data includes all of the following and more:

  • Personally Identifiable Information (PII): email, home address, first name, last name, former last names, phone number, birthdate;

  • Transactions: all online and offline purchases , returns, events attended, surveys taken, and brand credit card usage — historical and recent;

  • Preferences: opt settings, preferred channels, interaction frequency;

  • Loyalty: loyalty number, status, date of sign up, and interactions

  • Clickstream: where, how, and when a customer interacts with your site and mobile apps, including relevant cookies and device IDs;

  • Geographic: where customers live, shop, and travel;

  • 3rd Party Data: demographic, occupational, lifestyle, and buying intent

  • Custom Attributes: propensity to buy, lifetime value, customer and engagement scoring, etc.

Anonymous Customer Data

Before a customer has supplied any PII to your brand, they are considered an anonymous customer. This data is not the primary realm of CDPs because of strict privacy laws that limit combining anonymous data with PII. However, CDPs do injest cookies and device IDs, as mentioned above, and build anonymous profiles that can later be appended to customer profiles once the individual shares PII with the brand.

GDPR Compliance

General Data Protection Regulation (GDPR) is making the use of consumer data more complicated. Fortunately, a Customer Data Platform can help. By enabling brands to make the most of their known customer data it’s possible to bypass riskier practices, such as targeting anonymous users with ads on 3rd party sites, without sacrificing revenue. Meaningful, personalized retention marketing strategies, the wheelhouse of CDPs, pay off much more in the long run, dollar for dollar, than acquisition marketing. (see below: Focusing on Existing Customers: Getting off the Acquisition Hamster Wheel)

back to top

Why are CDPs essential now?

Customer Data Platform is a relatively new category, first appearing on the MarTech Supergraphic just a few years ago (although CDP-expert David Raab originally coined the term a decade ago). CDPs solve for an integral problem that marketers and other data users have struggled with for a long time. So why are they suddenly becoming the most talked about new technology?

Customers are Demanding Personalization

Setting up and paying for a CDP had to be justifiable before the category could gain today’s level of popularity. Today, the ROI delivered by a CDP more than justifies the investment required. A primary reason for this is that the consumer landscape looks very different than it did a decade ago, with customers expecting a much higher level of personalization than they ever did before.

This is due to the fact that the same consumers who shop with internet-first brands also fly on planes, shop in brick and mortar stores, and order takeout from restaurants. And brands like Amazon, Netflix, Uber, Airbnb, etc., consistently offer their customers seamless, personalized experiences. This includes relevant emails offers, custom product recommendations, and identity tracking that makes it easy to find and purchase items and experiences you that are meaningful to you personally.

Consumers are taking note. They don’t necessarily know why some brands personalize and others don’t, but they do know what they prefer. An Accenture study showed that 41% of consumers switched brands in 2017 due to poor personalization and lack of trust. Boston Consulting Group predicts an $800 billion transfer of market share to the 15% of brands that get personalization right, over the next 5 years.

So what does personalization have to do with CDPs? You can’t personalized marketing and experiences without customer data. ALL of your of customer data. Connected, accessible, usable customer data. This is the job of the CDP - to help brands use all of their customer data for better customer experiences and personalization.

Customer Data and Channel Explosion

CDPs are centralized platforms that connect to many disparate systems and manage a high volume of customer data. Before we had big data about customers and hundreds of channels and systems, there was less of a need for this type of solution.

But in the last decade there’s been an explosion of technologies, including eCommerce, clickstream tracking, brandname credit cards, social platforms, and at least one mobile app for every brand (Nike has 7!). These new data sources and channels, when combined with legacy loyalty databases, point-of-sale systems, direct mail, and brick and mortar experiences, make for a complex ecosystem that requires a CDP. At the same time, consumers have also been more willing to share their likes, wants, and needs via a wide variety of social media channels such as Facebook, Instagram, Pinterest and more.

Technology Advances: Because Now It’s Possible

Only recently did cloud storage and distributed computing become available and affordable enough for Customer Data Platforms to start to leverage it. Without it, brands are stuck with legacy approaches, such as Master Data Management (MDM).

MDMs are IT-built, managed, and controlled systems that require human intervention to manually manage data. At Big Data-scale, this approach is slow and inefficient. MDMs also require that rigid schemas be re-configured every time data sources change or are added. With new best-of-breed solutions coming online every year, this approach is limiting and inflexible.

Enter the Customer Data Platform. CDPs were built to handle the volume, variety, and versatility of customer data across all the sources and systems modern brands need to manage and leverage.

Focusing on Existing Customers: Getting off the Acquisition Hamster Wheel

There’s another reason why CDPs are gaining popularity, and it’s more fundamental than personalization. It’s that marketers are trying to re-balance their strategies, with less focus on customer acquisition, and more on customer satisfaction, loyalty, and retention. This makes sound business sense, resulting in longer-term, more predictable revenues.

Harvard Business Review reported way back in 2014 that "increasing customer retention rates by 5% increases profits by 25% to 95%." And yet, only 16% of brands are currently focused more on customer retention, despite knowing its a flawed strategy.

What gives? Well, it’s not completely the fault of the brands. It’s that there was no solution that effectively helped marketers take advantage of their customer data. Marketers we talk to have hundreds of ideas about how to better interact with their customers. They were just stuck without a platform built for them, for their data, and for their ideas. Overnight CDPs went from obscure, new tech to the category everyone is talking about.

It’s as if marketers had been waiting from CDPs all along...

back to top

What is a CDP for (use cases)?

Customer Data Platforms serve up complete customer profiles so that a cross-channel personalized customer experience can be created ‒ whether it's the right personalization in-store, online, and within marketing campaigns, or the best possible customer care and support experiences.

Specific use cases are virtually limitless. The following are the most common ways marketers and analysts put their CDPs to use::

Personalized Email

As soon as a brand has a customer’s email address, it’s time to starting honing their email communications. This requires customer profiles that tell marketers not only how that customer responds to emails (opens, clicks, and conversions), but also how that customer has been interacting with the brands across other touchpoints as well.

CDPs can feed data into an email marketing tool about recent and past purchases, lifetime value, preferences, and much more. Marketers can use this data to create precise segments (e.g. female shopper, LTV > $1000, purchased in-store last month, lapsed mobile app usage) for highly targeted communications. They can also use data to create personalized messaging and to fuel precise product recommendations.

Targeted Social Advertising

Advertising isn’t just for acquisition. It’s also for retention and upsell. By sending rich customer data to social channels, Google, and advertising platforms using a CDP, brands can target their existing customers with the products they know they will love, at the exact moments when they are most likely to buy.

That’s not to say that CDPs don’t help with acquisition as well. They absolutely do. By fueling lookalike modeling in Facebook or Google, brands can target new customers that are similar to their best existing customers, resulting in higher conversion rates and optimized ad spend.

Better Site and App Personalization

There are many existing tools that use in-session clickstream data and some customer profile data to personalize app and site experiences for individuals. While this is better than nothing, CDPs enable much richer site and app personalization.

CDPs do this by sending rich data about individual customers to the personalization tool, which can then leverage information from in-store purchases, loyalty status, email interactions and more to better personalize and enrich the site or app experience.

Analytics

CDPs can send data to any external system, so they can also power marketing analytics in addition to marketing and advertising use cases. The rich, unified data that a CDP supplies can help brands build better product strategies, optimize omni-channel campaigns, and enhance customer journeys.

And because the Customer Data Platform handles all data prep and cleaning, data sciences and analysts get back up to 60% of the time they used to spend on these activities.

Personalized 1:1 Interactions

It’s not just about digital personalization any longer. Innovators are using in-store applications and customer support tools to bring the personal touch to their 1:1 interactions. A great CDP will provide real-time access to customer data through an API, so staff can query their CDP customer database and return a rich unified customer profile. This profile can then be used to inform the staff person so they can personalize the interaction.

Mergers and Acquisitions

When one brand merges with or acquires another, there is a lot of valuable customer data to manage. There is also a need to not alienate new or old customers. This requires by offering both groups meaningful and relevant communications about the merger. CDPs can quickly bring together all the customer data from both brands and help them not only determine which individuals are customers of just one brand or of both brands, but also supply the unified data needed to create tailored communications to each group.

Customer 360 Initiatives

Many brands have an initiative to bring customer data into a central and accessible location where diverse teams and roles can use it to fuel all types of programs. CDPs supply the data foundation and role-based access, helping brand democratize their data across the organization.

Click here to learn more about use cases for Customer Data Platform.

back to top

DMP, CRM, & EDW: What a CDP is not

Customer Data Platforms are often confused with other types of data management solutions. Here’s a table that highlights the key differences between the tools that are most commonly compared to CDPs:

Customer Data Platform (CDP) Data Management Platform (DMP) Customer Relationship Management (CRM) Enterprise Data Warehouse
What is it? A platform that collects and unifies all of a brand’s customer data and make that data directly usable by any external system An anonymous profile builder and segmentation engine for coarsely targeted online advertising A system that stores customer contact and interaction data which is primarily entered manually by customer-facing staff A vast repository for all types of data across the enterprise
What is it for? Enabling personalized marketing and customer experiences with unified customer data Enabling targeted advertising and site personalization using anonymous customer segments Helping sales team and customer support can track and log customer journeys Storing data in one database where it can be used for business intelligence
Who uses it? Marketers and analysts Advertising teams Sales or customer service teams IT teams
What data types? 1st and 3rd party customer data about known individuals from all systems across an organization; includes PII Anonymous or anonymized 1st and 3rd party consumer data; excludes PII 1st party data about known customers that’s been manually entered by sales teams or ingested through custom-built integrations All data types including legacy systems and newer sources that have been connected by IT

back to top

Where do CDPs fit into your tech stack?

As mentioned above, Customer Data Platforms connect to external systems. So the simplest answer is that a CDP sits downstream of your data sources, and upstream from all the systems where you want to send your data.

These systems include:

  • Email marketing tools

  • Marketing automation tools

  • Advertising platforms

  • Call center and customer support tools

  • Clienteling and in-store applications

  • Analytics tools

  • App or site personalization tools

  • CRM

  • Data lakes or warehouses

Because CDPs are system-agnostic, integrations are not limited to marketing technologies. Destinations for data include any analytics or data storage environments. CDPs can also easily integrate new destinations, such as chatbots, IoT, or virtual reality hardware, helping brands to future-proof their technology ecosystems.

Also of note, in many cases data sources are also data destinations. Email marketing tools, for example, take in customer data about transactions for more personalized communications, and also feed data back into the CDP to let other downstream systems leverage email interaction data.

Finally, people and teams can be destinations as well. CDPs are not walled gardens, and allow data to be directly downloaded for use and exploration by individuals. Click here to learn more about how CDPs work with other technologies.

back to top

Which industries need a CDP?

It’s an exciting time to be a marketer. Across every industry there are huge opportunities to improve marketing performance, win market share, and increase profits by giving customers the types of personalized, targeted experiences they want.

Any industry that focused on improving customer experiences can benefit from using a CDP, and as innovators harness their customer data for creative new programs, we will all learn the bounds of what’s made possible using a Customer Data Platform.

That being said, the following industries are being disrupted or are poised to be disrupted by data-savvy newcomers, so they are the verticals most urgently in need of a CDP, right now.

Airlines

Now is a great time to be an airline. By adopting of a new set of digital trends, there is enormous potential to attract and retain high value customers in a market where low margins, commodification, and waning loyalty mean an ongoing struggle for profits. The key to doing so is through seamlessly crafted personalized marketing and customer experiences.

According to Forbes and Sabre:

Airline travelers are the same tech savvy customers who are used to Alibaba or Amazon prompting them with personalized offers and fulfillment. They have grown accustomed to seamless journeys at their fingertips from Uber and Lyft, and people do not change their expectations when they fly.

And Boston Consulting Group writes:

With the wealth of consumer data at their disposal, airlines have an enormous opportunity to increase revenue by building strong customer loyalty rooted in a personalized experience… But there is a risk here as well: if airlines fail to act, deep-pocketed tech giants—which have already established strong footholds in travel—or well-funded startups may do so instead.

Luckily, CDPs fill an enormous gap for airlines, which have more complex data sets and systems than many other industries. CDPs offer airlines the ability to rapidly ingest and use data from all of their systems at the pace and volume they need.

Aviation use cases include contextual alerting, omni-channel notifications about flight changes or delays, and personalized pricing deals. And while marketers at airlines can’t prevent missed connections, lost luggage, or in-flight turbulence, they can use the data they already have about customers to artfully acknowledge customers’ unique experiences before, during, and after a flight. This builds loyalty, increases engagement, and drives revenue.

Read the white paper: How Customer Data Mastery Will Determine Who Dominates the Air Travel Industry

Casual Dining

The restaurant industry is booming. In 2016 (for the first time in history) Americans spent more money on bars and restaurants ($55B) than they did on groceries ($52B). This opportunity has restaurateurs working hard to earn their share of an expanding market. In addition, the rise of online ordering, mobile app usage, and restaurant loyalty programs has enabled a new set of data-driven strategies that are paying off with increased share price and revenue for the brands that execute them well.

Boston Consulting Group writes:

Nearly 60% of restaurant users have downloaded one or more restaurant apps, and around 15% have downloaded at least three. In the two months before BCG conducted the survey, nearly 20% of all restaurant users had made purchases using a brand’s website, and nearly 15% had ordered using a brand’s mobile app. Four in ten restaurant users purchase food for delivery at least once a month.

Almost two-thirds of restaurant users are members of at least one restaurant loyalty program, up from 55% in 2014. Leading brands use the data gleaned from their loyalty programs to develop personalized offerings and experiences.

Restaurant brands must increasingly go head-to-head with digital natives as the competitive set expands… The restaurant brands that are pursuing digital as an offensive strategy are seeing bottom-line benefits and opening up leads over the competition.

CDPs help non-digital natives not just to catch up with newer brands, but to leverage their rich assets (vast networks of storefronts, brand recognition, and huge amounts of customer data from many sources) to dominate in a highly competitive landscape.

Read the blog post: Personalizing the Restaurant Experience

Hospitality

The hospitality industry has already gone through seismic changes at the hands of meta search engines and online travel agencies, which provide valuable discoverability but at a high cost. OTAs get between brands and their customers, complicating the buying journey, shrinking margins, and blocking brands’ ability to collect and use data about individuals. Now there are also non-traditional competitors such as AirBnb.

Hospitality brands are evening the score with book-direct programs and rich benefits for loyalty members. As some Kalibri Labs analysis found:

"…direct brand.com bookings are significantly more profitable than OTA bookings, to the tune of a roughly 9 percent before factoring in ancillary spend which can take this to almost 18 percent. These findings are based on analysis of a database of daily stay and cost history from 25,000 hotels in the U.S. from 2011-present.

On top of this, the acquisition costs for customers using direct channels decrease over time while those for OTA customers remain steady or may grow as commissions rise. Hotels essentially pay the same commissions every time a guest comes through an OTA; there is no reduction in cost when volume increases or guests come back. In contrast, as loyalty rosters grow, the overall marketing costs are reduced and the entire system becomes more efficient. The added advantage of direct engagement leads to improved relationships with guests."

Direct bookings have two benefits: 1. they allow hotels to interact directly with customers and 2. they give hotels access to the customer data they need to create seamless, personalized marketing and experiences.

Customer Data Platforms are the final step in the process. CDPs sit between data sources and customer touch points, allowing brands to take complete advantage of the data they collect. This includes direct bookings, site clickstream, app interactions, loyalty membership data, ancillary purchases, on-site purchases through the hotel’s restaurants, bars, the spa, or room service, and customer care. The data paints a rich picture of each guest, which can be used for personalized marketing and guest experiences, building long-term loyalty and driving sustainable growth.

Read the white paper: How Hospitality Brands Can Eliminate Data Silos and Activate All of their Customer Data

Retail

If you were to believe the prevalent narrative in parts of the media, you’d think the retail sector is doomed, and that the marketers at those brands are lost and confused. But in working with savvy marketers at some of the world’s most loved consumer brands, we know that this storyline couldn’t be farther from the truth. In fact, now is one of the most exciting times to be a marketer in retail.

McKinsey writes:

We’ve come a long way from "People who bought this, also bought that."

Consider the experience of a representative customer we’ll call Jane. An affluent, married mom and homeowner, Jane shops at a national clothing retailer online, in the store, and occasionally via the app. When visiting the retailer’s website in search of yoga pants, she finds style choices based on previous purchases, the purchases of customers with profiles similar to hers, and the styles of yoga pants most frequently purchased on weekends. She adds one of the offered yoga pants to her shopping cart and checks out.

With the exception of a follow-up email, most interactions with the customer stop there. But here’s what this example looks like when we activate Jane’s data: Three days after her online purchase, the retailer sends Jane a health-themed email. Intrigued, she clicks the link and watches a video about raising healthy kids. One week later, she receives an iPhone message nudging her to use the store’s mobile app to unlock a 15 percent one-day discount on workout equipment. Though she has never bought such items at this retailer, Jane takes advantage of the offer and purchases a new sports bag. What began as a simple task of buying yoga pants ended up being a much more engaged experience.

Such data-activated marketing based on a person’s real-time needs, interests, and behaviors represents an important part of the new horizon of growth. It can boost total sales by 15 to 20 percent, and digital sales even more while significantly improving the ROI on marketing spend across marketing channels: from websites and mobile apps to—in the not-too-distant future—VR headsets and connected cars.

This excerpt is taken from an article that introduces Customer Data Platforms, laying out the ways in which a CDP can make the above marketing examples possible. For retail, above all other sectors, the stakes are immensely high with competitors like Amazon and other Internet-first brands stealing greater market share every quarter.

Read the white paper: The Epic Return of Retail and the Journey Ahead

back to top

How do I know if I need a CDP?

A CDP is worth the investment if your organization:

  1. Has a high volume of customer data from several disconnected sources

  2. Lacks a unified view of customers at the individual level

  3. Looking to democratize access to customer data for marketers and analysts

  4. Aims to accelerate personalization and/or customer experience initiatives

  5. Wants to improve customer satisfaction and loyalty

  6. Has customer-facing touchpoints that are not easily integrated

back to top

What is a true CDP?

Here is a quick litmus test to help you understand if the technology you are considering, vetting, or using is a true Customer Data Platform:

  • Does it enable you to bring in ALL your first party customer: online, offline, in-app, on-site?

  • Do you have rich, cross-source profiles about your customers that contain actionable PII?

  • Can marketers and other data users directly explore, segment, and download data?

  • Can users directly send data out to ANY external system?

If the answer to any of these questions is ‘no’, the technology is not a true CDP.

back to top

How can I learn more?

Amperity offers the world’s only Intelligent Customer Data Platform. Through the use of advanced machine learning and a probabilistic data infrastructure, Amperity ingests all of a brand’s raw customer data from any source, creates unified customer profiles, and connects to any external system. Amperity users receive 24/7 access to directly explore, segment, download, and send data. To learn more about Amperity, write to us at contact@amperity.com or visit the product page: amperity.com/product.

back to top

Ready to get started?

Privacy Policy

By submitting this form, you agree to our terms and privacy policy. You can manage your communications preferences at any time by clicking “Unsubscribe” at the bottom of any of our emails.