For the PostFunnel Nuts and Bolts series, we’ve discussed in-app advertising, SMS marketing, social media, and much more. So how do marketers go about managing data from all of these channels simultaneously? Especially if customers are interacting with your brand from multiple contact points?
This is one area where marketers are victims of their own success. As digital marketing becomes the global standard, businesses have become inundated with higher volumes of customer data. Organizing this information into useful formats is a genuine challenge with few promising solutions. In 2019 however, one seems to stand above the rest: Customer Data Platforms.
As part of PostFunnel’s Nuts and Bolts series, we’ll delve into the world of modern Martech to shed some light on tools and best practices being used by you – our fellow marketers – in your day-to-day strategies. Every month, our experts will sink their teeth into another aspect of this fascinating field, hopefully inspiring you to elevate your business through smart marketing.
What is a customer data platform?
A customer data platform (CDP) is a marketing software solution that is used to build and manage a persistent customer database. Its primary function is to aggregate data from multiple channels to render a unified customer profile.
The Customer Data Platform Institute classifies CDPs using three core elements:
- Pre-Packaged: Each CDP is a prebuilt solution that is customized to meet client needs. While technical expertise is still required for setup and maintenance, CDPs tend to be more streamlined and easier to install than other data warehouse projects.
- Persistent, Unified Database: CDP databases provide a 360 degree view of customers by compiling data from multiple sources, linking information under a unique identifier, and tracking changes over time.
- System Accessibility: CDP profiles can be accessed by other systems on the same network, usually when managing customer interactions or conducting analysis.
CDPs bear some similarities to generalized marketing automation solutions — such as CRMs or DMPs — but there are a few key distinctions to consider. Most notably, CDPs are designed to be far more compatible with a range of business systems to ensure profiles are transmitted and updated effectively. They also retain more comprehensive volumes of data compared to most automated platforms, enabling them to unify fractured data points in a holistic way.
How does a customer data platform work?
Each CDP has its own unique features, but all have the ability to store, clean, and enrich user data while creating an insightful customer profile. They achieve this by drawing on records from multiple internal or external sources. Each new data element is linked under a profile’s unique identifier for later retrieval. These sources might include:
- Purchase history
- Existing customer relationship management platforms
- Marketing automation data
- Social media profiles
- Website trackers
While a CDP can be accessed by multiple systems, its primary function is to assist marketing teams. To that end, CDPs often provide additional features that can deterministically model customer behavior. These might include performance measurement tools that monitor customer interactions, or predictive analytics that recommend optimal paths for the buyer’s journey. Combined, these features make CDPs immensely useful business intelligence and campaign management tools.
Why use a CDP?
For years, digital enterprises have experimented with various methods of unifying customer information. The first data warehouses were a promising approach, but lacked the marketing and profile creation features that allowed teams to leverage collected data. Meanwhile, data lakes offered the ability to store records and scale insights, but often failed to organize the data in meaningful ways — creating “data swamps” in many cases.
CDPs are the next evolution in marketing data platforms, and they have done much to fully realize the potential of past models. By placing an effort on marketing initiatives, they offer a grounded experience that is more efficient than general purpose data tools. And thanks to CDP accessibility functions, it’s relatively easy to integrate solutions with any existing data resources you control.
By capitalizing on these needs, CDPs have gone a long way towards meeting marketer needs. The current market valuation of the CDP industry is approximately $1 billion.
Some other benefits of CDPs include:
- They prevent data silos from forming by unifying customer data sources across the organization.
- They streamline collection of first-party data from customers using tracking tools.
- They help unite cross-channel marketing efforts and campaigns.
What is data discovery?
Data discovery is the process that allows a CDP to translate individual data points into a usable format. The phrase is a business intelligence term, referring to the methods companies use to locate patterns and generate actionable insights. In a manual system, this might be done by creating pivot tables, heat maps, and charts that visualize data. In 2019, these tasks are increasingly managed by algorithms and machine learning systems that visualize data and measure trends with a high degree of accuracy.
Within a context of CDPs, data discovery algorithms can highlight key interactions from customer communications, extract them from the broader dataset, and update profiles with relevant information. Once this is complete, the data can be subjected to behavioral analysis to measure the customer’s engagement and predict future steps in the buyer’s journey.
Some marketers confuse data discovery with data mining. While the two practices share some features, data discovery combines extraction with additional analysis to find the most valuable insights.
What are the regulatory constraints on linking PII to behavioral and demographic data in a CDP? US versus EU (GDPR)
The technological capability of linking personally-identifying information to behavioral and demographic data is relatively new. As such, few regulations exist that compel companies to restrict the use of personal information — including CDPs. Until recently, the onus fell on individual companies to preserve user privacy as a customer service priority. Google, for example, has taken some steps to anonymize behavioral data. Facebook, on the other hand, has been far more flexible with how personal, behavioral, and demographic data overlap.
Naturally, this state won’t last for much longer. Europe’s General Data Protection Regulation (GDPR) and California’s Consumer Privacy Act (CCPA) are the first significant examples of lawmakers stepping in to formalize data practices. These impact businesses using CDPs in a few ways:
The GDPR applies to all companies within or conducting business with the European Union, especially those maintaining large consumer databases. For marketers using CDPs, this generally means that customers must grant explicit and informed consent before data is collected and used. What’s more, companies must request that consent again if they change how data is used.
Companies must also be able to procure all information they manage related to European individuals upon request. They must also correct inaccurate information, and delete any and all data at the customer’s discretion. The European Union takes these regulations quite seriously, even fining Google for €50 million when the tech giant cut corners.
The recently passed CCPA is actually a lenient alternative to a much stricter bill, since it focuses on commercial trade instead of generalized data collection. It allows customers to know what kinds and categories of data are being collected, grants the ability to opt out of data selling, and provides “the right to be forgotten” – deleting information on request. Consumers can still request information related to themselves, but businesses only have to provide activity up to twelve months prior to the request.
In short, these regulations do not prevent businesses from collecting and managing user data. Instead, they make marketers more accountable to users regarding the ways information is collected and used. Interestingly, CDPs actually make these processes more effective — it’s incredibly easy to obtain customer profiles and data sources upon request when compared to manual techniques.
For marketers, CDPs are here to stay. They provide an effective, reliable method of collecting, storing, and managing large volumes of user data, and help marketers leverage data at scale. As industries continue to embrace digital technologies, the importance of CDPs is only going to increase in 2019 and beyond.