The best marketing, sales, and product teams need data and information about their customers to perform to their level. To collect and analyze this data there are two types of technologies that are preferred by the professionals. Often interchangeably mentioned, customer relationship management (CRMs) and customer data platforms (CDPs), even though they serve very different purposes.
Despite their similar-sounding names, the CDP and CRM technologies have distinct different outputs on the bottom line. Salesforce ranks CRMs as the most commonly used technology used by high-performing companies to manage their data, while CDPs follow as the second most popular technology for marketing teams working with data.
Both systems rank highly because they are not mutually exclusive. Despite serving their different roles, they are often used interchangeably to provide a consistent, personalized customer experience that the customers are screaming for these days.
When asked, many companies will say that they have a CDP in place already, but Gartner’s 2018 Marketing Technology survey showed that 51% of respondents actually mistook their CRM system for being a CDP. This is leading to many confused people not knowing the difference between the two systems.
But what is the difference actually? What is a CDP, and what does it do?
What is a CRM, and what does that do? And most importantly, why are so many marketers confused about what a CDP really is?
The quickest way to explain it would be by saying that the difference between CDPs and CRMs comes down to CDPs being used to manage customer data, and CRMs being used to manage customer relationships. But there is so much more to it, so let’s take a dive into the world of marketing technology tools, and look at what the purpose of the tools are, and how you can use them to bring your company ahead of the competition.
Who are CDPs and CRMs for?
Both systems are basically collecting customer data, the main difference is in which kind of data they collect. CRMs usually collect, organize, and manage customer-facing interactions with your sales, service, or success team. CDPs on the other hand collect, consolidate, and analyze customer behavior with your products and services.
Customer relationship management systems are for customer-facing roles, typically people working with sales or customer success. CRM is the go-to tool for people having the finger on the pulse with customers on a daily basis.
Salespeople love it, because CRMs log interacting data with customers, allowing them to speed up, analyze and execute their efforts. CRMs also track website forms, support tickets, and more.
The purpose of the CRM is to support customer-facing professionals secure new business and customer retention by making it more accessible to manage individual customer relationships.
One way of using CRM as intended is by having a customer success team member go through how many support tickets a customer has submitted, and how these tickets got solved. Having this knowledge allows for tailored communication with each customer, and keeps them happy and engaged with the product.
Customer Data Platforms are for non-customer facing roles, typically people working in marketing, product, or management. It is not just for sales.
The CDP can help understand, analyze and manage all customer data, with the goal of making data-driven business decisions. The purpose of a CDP is to unify fragmented customer data and turn it into actionable insights.
To do this, a CDP collects data from every touchpoint with a customer, including website, transactions and user behavior, and stores it all in one place.
This data functions as the basis for customer segmentation, in order to identify your Most Valuable Customers, and their behaviors, preferences, and trends.
An overview of your different segments can look like this, from Custimy.io’s Customer Data Platform. Marketers can use this information to understand which customers should be your target group, and how to reach your audience in the most effective way possible.
Who can use a CDP
Product teams can get a better understanding of which products your best customers prefer, and optimize their purchasing decisions based on this.
Your management team can see which value the different segments bring to the company and adapt the strategy accordingly, to provide their teams with the best conditions to perform.
To create such segmentation, the CDP first produces a Single Customer View based on the data collected.
With consent from the users, a CDP can access data from every touchpoint of the customer, to create a view in which you can predict and understand the behavior of a customer on a 1:1 level. At Custimy.io it looks something like this.
Being able to source information from so many different sources, the CDP and the users of the CDP can understand what products a customer prefers, and what to recommend to increase sales.
Marketing can, like with segmentation, gather information on what their customers prefer, in regards to channel preferences, tone of voice, time for communication, and much more.
Leadership can use the Single Customer View to understand the predicted Customer Lifetime Value and see the costs associated with acquiring each and every customer.
Having this deep understanding of every single customer means that your team is able to not only sell, and manage relationships with your current customers. You are able to do so much more. You can identify, and even predict which products your most valuable customers are interested in. You can identify which customers are most likely to churn, and catch them before this happens. This way you do not have to go through the costly process of reacquiring lost customers again.
How does a CDP vs CRM work?
The way CDPs and CRMs gather and manage data varies greatly. The two systems serve very different purposes, as we explained above. Both systems solving such different needs for a business also reflect in the way they collect and use data.
The only real similarity they share is the use of first-party data, which you can read more about here
Customer Relationship Management tools are typically used as a centralized source of interactions between sellers and customers. Having a central record for these interactions, allows everybody to reference it. However, it is mostly used when a customer-facing employee is getting briefed on the customer they are going to interact with.
The data is incredibly specific in its purpose, and it makes it hard to automate. Most data is often manually collected, such as notes from your latest sales demo.
The data will be very specific combined with most people having their own unique way of writing e.g. notes. This means that the data cannot be standardized to a high degree. These factors mean that automating the data collection flow of a CRM is quite complicated. Very often, that makes it hard to export or use in any other context.
Simply put – the data is created for the CRM only. This means the data is controlled by the CRM, and to bring this data into play in other places might prove to be quite a challenge.
Like we mentioned earlier, CDPs operate quite differently. They are used to gather and consolidate fragmented data, so a business knows why, how, and where a customer interacts with it.
Data going into a CDP is collected automatically using different integrations, API keys, and coding. Having the data be automatically collected means that you have access to data from websites, mobile devices, laptops, and your own software all in one place.
The engine in a CDP, like the one in Custimy.io, will clean, sort and organize the data. The CDP can use then send the cleaned data to where it needs to go, all automatically.
The CDP can create profiles of your customers. These profiles will be able to tell who your visitors and customers are and if they have communicated with your brand before. They can tell you what interactions they had with your business, and why they had them.
To create these profiles, the CDP uses many different sources to collect customer data, including CRM systems.
A CDP can filter, consolidate and analyze the data to match it and make it usable in many different tools, for the different teams. Unlike data in a CRM, data in a CDP is created for more. You are controlling the data, and you have the opportunities to activate them in so many more ways than with a CRM.
How do companies use CDP vs CRM
We’ve said it a few times, but it still holds true. The purposes of the two systems are very much different, despite the interchangeable way of talking about them.
CRMs are typically for providing better-personalized interactions with your customers. They provide historical data on interactions and relations between your business and the customer. All for you to create better communication with the individual customers in the future.
In addition to this, we see CRM most typically used in:
- Front-office sales management
- Pipeline analysis and forecasting
- “Win/loss” analysis for go-to-market strategy
- Prospecting for customer acquisition
- Customer service
- Marketing automation through campaign tracking and performance analysis
CDPs most important purpose is to provide better opportunities to understand your customers and their behavior. Customer Data Platforms do this by collecting, consolidating, and analyzing all customer data across all your touchpoints with them. This way you can create a single, unified view of your customers on an individual level.
Add in being able to backtrack and follow the entire customer journey after they purchased from your shop, and you have a unique opportunity to gain incredibly valuable insights for your business.
In addition to this, we see CDPs most typically used in:
- Automation of data management
- Analysis of lifetime customer journeys
- Identification of customer attributes and behavior across systems both offline and online
- Analysis of customer lifetime value
- Analysis of customer behavior to improve segmentation (e.g. pricing or marketing campaigns)
- Predictive analytics of customer behavior (e.g. segmented by “most likely to buy”, or “most likely to churn”)
- Export of segmented customer lists for the campaign, or business intelligence teams.
For every customer, your CDP will be able to tell you if they clicked on a Facebook ad to reach the landing page. You will be able to see if they scheduled tried your product out and if they ended up buying it.
These are the kind of insights that can drive teams to make better decisions through data information. With the in-depth knowledge of your customers, segments, products, and business in general, your marketing team will be able to know which ads work. Your product department will know which actions led to better sales, or an upgrade. Your finance department will know where the to misspend occurs, and which aspects perform well. And finally, your management team will understand the price of acquiring customers, and what their lifetime value is.
Should I use a CDP or a CRM
We would argue that most companies should not make it an either/or decision. CDPs and CRMs complement each other incredibly well, which we covered at the beginning of this blog.
CRMs are really strong tools if you need to manage customer relationships effectively and personally. They work for teams of all sizes and prove to be irreplaceable very quickly. Many companies use these tools. However, they quickly become aware the CRMs are not enough as a stand-alone tool to really use data to get ahead of your competitors.
CRMs have their shortcomings, and they become increasingly apparent as soon as you dive a bit deeper into their use. CRMs can’t create a single, unified view of everything you need to know about each customer. They are designed to help you with your future interactions and are limited in their possibilities to do anything else.
This is why we argue a CDP should be an instrumental part of every ambitious business today. A CDP can help you understand your customers better. They can tell you who they are, and how they engage with your business. You will have a better understanding of your customers, and thus your business. With the many insights of a CDP, you can apply your knowledge in different ways, all the way from marketing, to finance, to product, and to the management level.
You could argue that CRMs are for data going from the inside out, while CDPs bring data from the outside in. A lot of marketers think they have CDP, when they truly have a CRM system, meaning that their competitors are just gaining an unfair advantage from having access to better data from the get-go.
Should you be interested in learning more about a CDP and how to use it, have a look at our whitepaper, or sign up for a free demo of the Custimy CDP.