What Is CDP or How to Unite and Conquer the Data Landscape

Have you ever been yelled at to clean your room as a teenager? You’re used to the mess at this point; it doesn’t bother you. But after 2 hours of grunts and pain, you sit in a blissful apartment rather than a hobo den and feel the enlightenment. Well, that feeling is what you’d get from a customer data platform.

The mess in this uninspiring allegory is data. The bigger your company becomes, the harder it gets to track everything. Where’s this customer’s email? Who are our best leads? What is this MQL’s interest? Naturally, the need for a sorting tool for all of this arises.

However, customer data platforms have reached far beyond simple data storage. Today, let’s find out what CDP is, how it works, and how it fits in the world of other platforms with similar tasks.

What Is a Customer Data Platform?

The name is self-explanatory to what CDP means.

A customer data platform is a software tool used to aggregate data on customers into a single database.

The concept of CDPs began to take shape as a natural market response to the growing problem of data optimization. You see, even if you’re a medium-sized advertiser, you can easily have up to 40 data sources. The number scales progressively with your growth.

The term “customer data platform” was first coined in 2013 by David Raab, a marketing technology analyst then and the CEO of CDP institute now. The first iterations of the technology appeared in the same year.

Weirdly enough, we, ad tech players, weren’t the first to understand the CDP meaning for the industry. The retail guys had understood the potential of integrating online and offline customer data way earlier.

What Does a CDP Do?

A customer data platform collects, surprise-surprise, data on customers, that much we’ve figured out. But it’s a rather dull way to look at it. The list of what CDP software does would include:

#1. Turning Chaotic Customer Data into a Structured Library

In marketing, there is a plethora of different data sources, such as emails, social media, loyalty systems, etc. Some of it is relevant, some of it is outdated mono-device crap (looking at you, third-party cookies).

What is CDP’s part in all of this? It is to combine structured and unstructured data sets under one roof. As a result, a marketer has nice single profiles for each customer that can be used for proper targeting.

#2. Unifying Data for All Company’s Tech Stack

We’ll come to it later, but a CDP is not the “rival” to data management platforms, customer relationship management, and enterprise resource planning. Instead, it can unify data from both advertising and marketing sources into an easy-to-use platform for every team in your company.

#3. Activating Data

All of that information doesn’t just lay around in a nice form; it’s activated! In essence, CDP software makes the customer’s journey a really smooth experience, turning them from “interested” to “loyal” by examining their needs and preferences.

#4. Analysing Data

Lastly, a customer data platform provides the marketer with a set of reporting tools to measure how well the campaign goes, customer engagement, and other key metrics (depending on the product).

All of this ensures a sneaky approach to the customer’s heart. Imagine toaster-lovers.com, a website selling (you guessed it) toasters, and John who wants to buy one. He searches for what a good toaster should do, what is the average price for the toaster and decides where to buy one for cheaper.

What is CDP doing during these actions? At each of these stages, John interacts with toaster-lovers.com. The company’s CDP helps to gather cross-device data on John, his average page view time, desired budget and other preferences. With this, the company can put the right ad placement at the right time and win John’s toaster buying budget.

What Data Does CDP collect?

Okay, but what exact data is under the jurisdiction of CDP meaning? Well, primarily, customer data platforms unify first-party data, which is information collected by the company firsthand. But it really depends on the user’s intent. CDPs may easily store first, second or third party data.

Since we’re at it, let’s quickly discuss the difference.

First-party data is collected by you from your own sources and interactions with the customer. This information has strict privacy protocols and is more expensive due to exclusivity. Examples of first-party data would include:

• Website analytics (page views, total impressions, time spent on site);
• Transaction data (purchases from an e-commerce platform, their frequency and average order value);
• App usage data (behavior data, in-app purchases, app session duration);
• Email engagement (open rates, click-through rates, conversion rates).

Second-party data is something that you share with a partner company. The transparency of how this data was obtained is the key factor that determines its price. Examples of second-party data would include:

• Retail partnership (retailer shares data on customers who purchased the brand’s products);
• Event sponsorship (sponsor-company receives access to event attendee data);
• Co-branded partnership (two companies have a data-sharing agreement running a mutual campaign).

Third-party data is the data that you don’t collect directly. It’s more accessible and cheap, while having privacy issues. Third-party data (like cookies) can’t give you a cross-device user profile and should’ve really become a thing of the past, but it seems that Google has gaslighted the industry once again and will never get rid of it.

So, it’s important to know the examples of third-party data like:

• Data brokers information (purchasable age, gender, income level info from “sources”);
• Behavioral advertising data (cross-site audience segmented data based on behavior);
• App data (all sorts of customer data sold by app owners);
• Market research reports (detailed industry insights from companies like Nielsen/Forrester).

What Are the Benefits of a Customer Data Platform?

“Okay, but why should I pay for the customer data platform?” The finance department won’t ask what is CDP or what types of data it collects. They’ll ask for the benefits of a customer data platform, and in that case:

Consolidation of Disparate Data Sources

The main selling point of a customer data platform is to transform a jumbled assortment of customer data into a cohesive, structured library. Every department of your company should know what a drag it is to manage data from emails, social media, and loyalty programs—some of it vital, some of it outdated.

The CDP steps in to integrate these data streams under one roof, creating unified customer profiles, and making the workflow of your teammates more smooth and effective, thus boosting the potential profits.

Improved Customer Experience and Personalization

Once again, owning first-party data is awesome, but it’s no use if you can’t use it to its full potential. What is CDP’s role in it? The platform can enhance the customer experience through personalized interactions. By integrating data from online and offline touchpoints a CDP builds comprehensive profiles for each customer.

These profiles allow businesses to understand individual preferences, behaviors and needs on a far deeper level. Better personalization = better engagement = better sales, meaning that CDP will be very useful for the product.

Enhanced Data Activation and Analytics

“But what is CDP’s purpose besides data collection?” Well, the platform doesn’t just absorb data — it activates it. This means that the insights gained from the data can be immediately applied to improve customer journeys by providing the users with analytics and reporting tools.

So yeah, the solution doesn’t require separate tools for the above purposes, saving up costs (in theory, at least, later on that).

How Does a CDP work?

As we’ve established, a customer data platform can integrate into everything both in marketing and advertising as long as you need it and are ready to pay for it. Before moving on to platform comparisons, let’s cement your knowledge of how a CDP operates:

• Collects data from different sources;
• Unifies it into an easy-to-work-with format;
• Gives the user the activation & analytics tools to use this data.

The pic below should explain how it looks in scale:

CDP vs DMP vs CRM

By now, you already know that comparing these is like comparing main meals, beverages, and desserts. Each has its own flavor, and only by combining these can you have the full gastronomic experience.

Unlike the food analogy, however, the differences in purpose don’t lie on the surface (nice rhyme, ain’t it?). That’s why let’s dissect CDPs, DMPs, and CRMs bit by bit to see the ingredients inside and what to do with them.

CDP vs DMP

A data management platform is a technology used for gathering and managing data. It could store first-, second-, and third-party data to build anonymized user profiles and share them with other parts of the ad tech.

“Woah, isn’t it the same as our beloved CDP software?” – Not quite, avid reader. There is a lot of room for “customer data platform vs data management platform” debate, but not in the sense a lot of ad tech media would like you to believe:

1. Purpose

Both platforms could handle data from any source; despite that in most cases, data management platforms store third-party data, while customer data platforms store first-party data. That’s how it’s intended to be.

This difference defines their purposes. Data management platforms store anonymized third-party data to create audience segments. The customer data platforms store the company’s first-party data to create single user profiles.

That means that a DMP is used for cheap and accessible programmatic ad targeting, while a CDP’s goal is to gather info on a specific user to make effective and precise personalized options.

Of course, nothing prevents you from using first-party data for this broad targeting, but let’s face it, none of us are Google or Facebook to have that much data and finance.

2. Expiration date

The difference in data produces the difference in demand. Yes, customer data platforms can store data longer than data management platforms, which doesn’t make any of these platforms better or worse.

You see, there’s no point in storing third-party data for prolonged periods of time. People change their interests and desires day by day, so placing a toaster ad for John, who intended to buy one a year ago, is plain absurd. This is not only inaccurate but highly annoying.

The situation is different for single user profiles. The more data the CDP collects, the better the user profile, which results in more opportunities for the marketing team.

3. Pricing

All of the points above conclude with the main point of CDP vs DMP – pricing.

A nice yearly DMP subscription will cost you from 1 to 6k USD. With the CDP, the pricing ranges from 20 to 60k+ USD. Why is the range so wide? It’s because the more data sources you keep, the more expensive these platforms (especially CDP) become. We’ll talk more about that later.

CDP vs CRM

Yet another terribly long acronym, customer relationship management, is a platform for organizing customer interactions. This one undoubtedly deserves its own article, but for now, let’s concentrate on CDP vs CRM:

1. Purpose

Unsurprisingly, the data collected by both platforms is different.

You already know the drill about customer data platforms and what type of information they are able to collect. The data collected by CDPs can serve every department of the company.

The situation is different with CRMs, it’s main purpose is to serve sales and customer service teams. The CRM manages customer interactions and relationships. The data collected by a CRM includes:

• Contact information (customer names, email addresses, phone numbers, physical addresses, and social media profiles);
• Interaction history (records of emails, phone calls, meetings, and chat interactions with customers);
• Sales data (sales pipeline information, deal stages, lead sources, purchase history, product preferences, and revenue data);
• Customer support data (support tickets, issue resolutions, product returns, and service requests);
• Behavioral data (customer behavior data like website visits, email opens, and clicks, often integrated from other tools to provide context for interactions);
• Demographic data (customer demographics such as age, gender, occupation, company size, and industry);
• Notes and Custom Fields (additional insights or specific information recorded by sales or service teams unique to individual accounts).

In most cases, if you’re already using a CDP vs CRM, it would be UNwise NOT to integrate these platforms.

2. Storage

This one’s kinda obvious, but it still needs to be pointed out.

Customer data platforms store and process data in real time. Since it integrates with multiple sources, it’s important to always have the latest data accessible. Unlike CRMs, CDPs also store unstructured data such as website interactions or third-party data.

Customer relationship management doesn’t have that large need to have real-time data at hand. Unlike CDPs, CRMs are often updated in batches based on interactions logged by employees or scheduled imports from other systems. Yes, the data is usually entered by sales, marketing or support teams.

3. Pricing

Once again, the difference in CDP vs CRM features heavily affects the final paycheck. The annual pricing for a CRM could range from $ 1,5k to $18k USD. That’s as little as $12 (minimum) per month.

The CDP software is 10 times more expensive, even at the start. The difference only gets bigger with the amount of new data sources.

How to Choose a CDP

Okay, now you know almost everything about customer data platforms and their advantages. So how do you choose one? Say you’ve already looked up a particular product but aren’t sure if it’s worth it. Here are three things and features to watch out for:

Support for Your Code

If you’re working with Python, Ruby, Javascript, and other well-known programming software, there’s no need to worry about proper integration. What you should keep in mind is the newer frameworks.

To put it simply, if you’re using software that is not supported natively by a CDP, it will be a major pain to make things work. You’ll run into problems that require time and money to solve. So yeah, consult the CDP product sales team before making an investment.

Support for Your Data

In theory, every data source in marketing can be integrated into a customer data platform. In practice, it doesn’t always work that way.

What we mean is that from dozens of data sources, you want your CDP to support each one out of the box. You should be fine if you only stick to major, well-known CRMs, DMPs, etc. But if your software choice is a bit more obscure, consult the CDP’s sales team.

Pricing

We know you have already seen this coming. It’s not about the features, it’s about understanding your potential growth. Because in 12 months, you won’t be paying $20k – you could be paying up to $100k. Don’t be soft about it, because the CDP software paychecks have a tendency to bite pretty hard and pretty unexpectedly.

When this article was in the utero of our content planning, this section could’ve had a looong passage on how the deprecation of third-party cookies will skyrocket the demand for first-party data and elevate the CDP’s significance in marketing. This would, in theory, mean “pay for a CDP now, it will only get more expensive.”

However, since the most famous ad tech gaslighter, Google, has decided to back down on cookie removal, we don’t predict any major changes in the future. Sure, the teasing that lasted for 3 years has had its effect. The demand for CDPs has risen, although not as greatly as expected.

To sum up, if you’re drowning in data and money – go for it. A customer data platform will be your Mr. Proper in a messy room. If you’re interested in how to use all of that stored data, we have a solution for you.

Epom White-Label DSP will make the data work for unlimited programmatic advertising potential. Combine a CDP with our DSP and skyrocket your sales!