What is a CDP?
Learn everything about what an CPD is and how your e-commerce business can grow with one
Think of the last time you bought something online. It probably wasn’t as linear of a process as you might think it was.
Let’s just use the example of a pair of headphones.
Your buying process likely looked similar to this:
- You googled “Best headphones 2022”
- You visited multiple sites reviewing different types of headphones
- You looked up the headphones that you like on different retail sites
- You watched videos to learn more about the pros/cons of your favorite headphones
When you have finally decided on a pair that fits you, you probably found the best place to buy them from. You most likely visited a few more sites to compare prices, colors, shipping, service, and more.
Chances are you interacted with the company you end up buying from on a multitude of occasions. It could be from Facebook ads, live chats, emails, or website visits.
Each interaction probably felt more personal to you than the previous one did. The Facebook ads you saw felt like they were made for you, the website experience felt crafted specifically for you, using recommendations that fit your style, price level, and more. That email you received, even though it was automatically generated was still hitting the exact needs and worries you had.
But how is that even possible? You might have even been browsing on different units, sometimes on your phone, other times on your computer.
It’s likely that the company was using a Customer Data Platform (CDP) to create this exact experience and personalized marketing for you.
What is a CDP?
This fairly new technology is not only rising amongst users of it, but plenty of enterprise e-commerce companies are also creating their own. It is therefore important to have a good understanding of what a CDP is in order to make an accurate evaluation of customer data platform tools.
A Customer Data Platform is a system that empowers you to be able to:
- Collect data from every touchpoint of your customers
- Store data in one single place
- Unify customer profiles
- Segment customers
- Activate customer data in different tools that can drive personalization and revenue.
The main purpose of a CDP is to consolidate customer data from a variety of data sources. It is a platform that enables an intelligent approach to create audiences based on those data insights and makes it usable across every possible channel.
Basically, a CDP allows you to know, understand, and interact with every single customer on a 1:1 level using data.
A CDP is a system that can store, collect, consolidate, analyze customer data. All that data that you collect about your customers are going through processing in the CDP. It can come from all your channels and touchpoints, from your website, emails, advertising campaigns, CRM, POS, social media, and more.
CDP vs DMP vs CRM
For the initiated marketer this could sound a lot like a Customer Data Management Platform (DMP). However, the differences between the two systems are quite staggering. They both handle Customer Data, but that’s about where the comparison ends.
DMPs are only used for advertising, and cannot help you with the personalization of your own marketing. They also don’t collect any behavioral data on how customers interact with your product or service (that’s where CDPs come in).
A CRM is another thing completely. It is a tool used to help manage and organize customer relations and customer-facing interactions. They do however not provide any data or analysis into how customers interact with your brand, product, or service. This is where a CDP comes into play.
What does a CDP do?
The CDP customer data platform gives you the foundation to ensure that your customer data analysis and insights are consistent across all your tools, platforms, or channels.
It is possible to do this as a CDP can track identifiers from your different channels and unify them in the CDP. The platform also identifies and automatically removes duplicates, so you have a clear overview of your customers.
These identifiers in a CDP like Custimy.io are based on transactional data, demographics, personal information, and more.
Some other CDPs base identifiers on Cookie-ID or device-ID, but with 3rd party cookies being phased out in the near future, this is not a sustainable and long-term solution anymore.
Why use a Customer Data Platform
You need to use a customer data platform because the customer journey has radically changed compared to just a few years ago. No customer follows a linear journey any longer. Just think of the headphones example in the beginning of this text. Your customers may interact with your brand in a whole variety of places across online and offline channels.
In just a single day your customers might interact with your business through advertisement on Instagram, they might download your app, maybe even receive an email from you, all on their phones. And then later that same evening they decide to purchase a product on their laptop.
Under normal circumstances, all this information is split into different tools, that do not work together. This means it becomes incredibly difficult to identify who your customers are, what motivates their behavior, and what drives them to become customers in the first place. This is where CDP marketing comes into play.
A CDP can solve these challenges of siloed data and allows you to:
Understand the Customer Journey
A Customer Data Platform can unify all this data across every customer touchpoint. This makes it easy for you to understand the customer journey and how each step impacted their behavior and your revenue.
Have one single source of truth
Having one single point of data collection, consolidation, and analysis means that you can segment your customers with better insights. You can base it on the full picture of their journey and thus personalize every single interaction with the customer, at scale.
Create multichannel segmentation
A CDP can create target audiences on e.g. Facebook, and by using a CDP instead of your disconnected tools, you can make sure that you have streamlined your segmentation and interaction with them across all channels.
The future of marketing is data-driven, as that is the only way you can keep tabs on your customers’ journey as it keeps getting more complicated. You need real-time data, that is accurate, interconnected, and empowered by machine learning.
What is CDP in marketing?
A CDP is not specifically made for marketing teams only. While it is obvious that the benefits that you can reap from using customer data analysis are extremely valuable to your marketing team, a good CDP can benefit your team across multiple departments. When selecting your CDP, make sure that it can empower your marketing, product, finance, and customer service teams. However, working with marketing CDP, it is important to understand the benefits your team can gain from it.
The most common are the 3 listed below:
- Create better segmentation through integrations that make it easier to create or manage your audiences
- Single customer view – to enable 1:1 insights into all your customers, at scale
- Find your most valuable customers, based on behavioral analytics and machine learning.
But as we said, a top customer data platform is not made for marketing only. Instead, it should be seen as the foundation for your customer data. The customer data platform architecture should enable your other tools and the team that uses them to become more insightful.
Here are a few examples of how:
Understand the customer journey. Centralize all your isolated data from email, payment, CRM, and more into a single platform, making analysis easier.
Have consistent data in every tool. Get your whole business on the same page with correct data that feeds into all your tools, integrations, and systems.
Adopt new technologies faster. Empower your teams with the flexibility to use new technologies and vendors without having to wait for tiresome and costly integration projects.
Single customer view data platform
A Customer Data Platform in its essence is focused on being able to understand your customers, and by default your business better.
To do that, a CDP should be able to create a Single Customer View based on all your touchpoints with that single customer.
This means, unifying all the information you have on one customer, across platforms, channels, devices, and all other touchpoints. With all that information, that CDP can create a profile on each and every customer you have.
A profile you can use to create personalized experiences, from delivering tailormade messaging on the website, emails, apps, push notifications, or wherever you interact with your customers.
This way you can create unique, personalized experiences for all your customers, at scale.
Customer Data Platforms have unique advantages in creating customer audiences and segmenting them based on your customer data. With the best quality of data in first-party data, CDPs can make it easier to activate your audiences.
A good CDP will be able to ensure you communicate with the right people, on the right channel, with the right message, at the right time. Every single time, at scale.
Without a CDP, marketing teams often work with outdated segments, overspend on advertising, and send non-personal, irrelevant messages.
If you truly want to connect with your customers, you need to personalize your messaging. It starts with having a CDP being able to synthesize raw data into traits, behaviors, and actions of every single customer.
What data is used in a CDP?
A CDP needs customer data to be of any value. This customer data typically comes in the form of first-party data. First-party data is collected by one company, and only used for that company’s marketing.
It is unique, very often of higher quality, and many see it as a competitive advantage when you have an understanding of how to leverage the first-party data.
Unlike first-party data, third-party data is data bought or shared by other companies.
It is often used to find new customers on other platforms like Facebook or Instagram.
However, there are often concerns about third-party data. It changes hands often, which means it can be hard to determine how up-to-date it is when it was collected, and if it was collected with consent from the users.
First-party data on the other hand is of higher quality. It is owned by you, so you will know when, where, how, and why it was collected. These are key elements to understanding the quality and accuracy of the data you are working with.
CDPs like Custimy collect first-party data and make it valuable through consolidation, analysis, and activation. This means you can use the data and combine it with other sources of information and identifiers to create the full picture of your customers, and their behaviour. With the activation layer, you can use this data to feed it into the right integrations for your marketing and create sharper targeting in your marketing efforts.
Customer data analytics
Customer data analytics involves having a full understanding of your customers’ journeys. This helps drive decision-making in your marketing, finance, product, and customer service teams.
A CDP consists of 4 main elements, also called the customer data platform magic quadrant.
A Customer Data Platform collects data from all your data sources such as CMS systems, websites, Facebook, and Google Analytics. Using an API, a CDP can retrieve data from more than 180 different systems easily and simply, and allow the user to quickly integrate it into the systems used in the company.
Data from all these different systems work independently and are written in different ‘data languages’ with a CDP. Therefore, the customer data you collect from Facebook will most likely not consolidate with your data from your website or from Google.
One of the core abilities of a CDP is to combine data from all of these sources into one place. This allows you to build scaled personalization efforts, and avoid isolated data sources.
A CDP translates all your data sources into the same language so that data from different systems can play together and provide insights to your business and customers, allowing you to gain a more precise, holistic view of your business.
The engine and the real value of your CDP is in the data analysis itself. A CDP uses advanced AI and Machine Learning algorithms to process and analyze a large amount of data to identify the right customer segments for your business.
In addition to defining a precise customer segment, the analysis from your CDP gives you access to information about your customer segments’ expected profitability, size, and the probability of them placing an order on specific products.
The final component is to put all these insights into work. There is no one right way of doing it, and you can use the activation of your data for multiple purposes.
One example is boosting your customer acquisition – We have all heard that it costs 5 times more to attract a new customer than to retain an existing one. But you can’t only focus on existing customers, you need to expand the current customer base.
A CDP can help you expand your database with lookalike audiences built on meaningful metrics. Instead of targeting based on age, location, or other demographical data points, you can use behavioral targeting based on actions that are most likely to lead to a purchase.
We call it reverse enrichment, where you can enrich Facebook audiences with your own insights, and bring in more valuable customers for your business. The so-called most valuable customer.
Future-proof with first party-data
Working with data can be a liability. 2021 has probably been the toughest year for data-savvy people. Apple’s changes to the rules with iOS14.5 and iOS15 mean that some types of data are on the way out.
The use of third-party data is by many seen as a liability for the future, and with Google looking to out phase cookies by 2023, the challenge becomes even more difficult to deal with.
Working with first-party data ensures that your knowledge of your customers is owned by you and that you are in control of what happens to it. This counts for the future as well.
Ownership of your own data means you are working with data in a future-proof way.
A CDP such as the one from Custimy is based on first-party data. That means data is shared with your company directly by the user. This ensures that the data methods are future-proof, especially as iOS14.5, GDPR, and Google further tighten the grip around 3rd party data usage.
How to choose a CDP
Perhaps you are not sure it is the right time to invest in intelligent infrastructure for your customer data. Here are a few scenarios in which a CDP would benefit your business immensely as of right now.
- You are searching for a better understanding of your customers
- You want to consolidate your customer data all in one place
- You are thinking about switching analytics or marketing tools.
- You want to provide the best, personalized customer experience across all of your channels.
- You want to mitigate the damage from iOS14.5 and take ownership of your own data.
All of these things lead to one of the most important aspects of running a successful business. Driving better results – and if we have learned anything from working with data over the last years – it is that the mentioned things will drive results for your business.
Once you have come to the conclusion that Customer Data Platform software could help elevate your business, the next step automatically becomes researching which one is best for your business.
This part can be tricky. So we have put together a few resources to help you understand more about how to choose the best customer data platform for your business
Good general guidance is to look for a customer data platform vendor that contains the following:
- Omnichannel data collection
- Audience segmentation
- Single Customer View
- Future proof with use of first-party data
- Access to raw data
- High-quality data integrations
- Cross-functional utility
How others use CDPs
We have mostly discussed the theoretical benefits of what a CDP can do for e-commerce up until this point. But let’s dive into what is actually possible when used well.
Here is how Moodings has used a CDP to increase performance on their marketing.
Moodings is an online lifestyle and design store which curates and sells interior design, and art from upcoming designers, artists, and established brands.
They are built around personalization of their home, and needed to be able to create the same personalized experience in their advertising.
However, as the company kept growing bigger and became more advanced and ambitious, the platform that Moodings were using beforehand, was not able to properly collect, analyze, and segment on a level that Moodings needed it to.
The platform was not built around CDP capabilities in its essence, and it meant that the data processed in this platform started raising doubts.
They feared that the look-a-like audiences would not be as accurate as Moodings needed them to be. On top of that, the segmentation was not able to account for those customers who brought the most value to the business.
To solve the issue they looked to a CDP to help create a more precise segmentation of their customers.
The segmentation in Custimy is based on a multitude of advanced variables and features that allows for much more precise insights into the customers within the segments.
The 3 different segments there was used from Custimy was:
- Most Valuable Customers
- Promising Customers
- High Spend Customers
Most Valuable Customers is a segment built up around some key factors that we have pre-build to find the best and most profitable customers you have.
Promising Customers is a segment that is built up around some of the same key factors as your Most Valuable – these customers are looking promising for ending up in the same segment as your best customers.
High Spend Customers is a segment with customers that don’t place that many orders, but they are having big cart sizes with a high profit from the start.
Using first-party data on existing customers, Custimy is able to create a segmentation based on more variables and thus create better insights.
Moodings were able to use the insights to build more accurate and relevant look-a-like audiences on exactly the type of customers they were looking to activate.
When looking at the results of the CDP marketing, CMO at Moodings, Daniel Selde, said:
“The results speak for themselves, and it means that we are going to use the data from Custimy as a key element in the way we think and work with segmentation in the future. Custimy has given us the belief in the power of data that we work with.”
Read the full story and learn how the Moodings team leveraged Custimy as their segmentation engine, helping them increase Return on Ad Spend (ROAS) to 60 compared to Facebook’s and Klaviyo’s algorithms while bringing in customers more likely to buy again.
CDPs are key in understanding customer journeys today.
A CDP can have a magnitude of different purposes depending on the size of your company and area of business.
Whether you are new to CDP, looking to change to one that fits your business needs better, or just on the lookout for a tool to improve your business, we are here to help you.
Custimy is one of the only customer data platform companies built specifically for e-commerce businesses.
It is built by marketers, for marketers with the goal of making it possible for everyone to use it. Custimy made CDPs no longer be an enterprise customer data platform anymore.
This means, that we have made it much more accessible for everyone to get a hand at what was previously considered enterprise-only software. And we are not only talking price here.