Feature
The Gist
- Evolving roles. CDPs face competition from integrated marketing and CRM systems.
- Real-time insights. Advanced CDPs now leverage AI and ML for deeper analytics.
- Cost challenge. High implementation costs drive businesses to explore alternatives.
The Customer Data Platform (CDP) initially emerged as a groundbreaking solution, unifying customer data from various sources into a single coherent view. It was celebrated for enabling personalized experiences and data-driven decision-making.
However, as technology continues to evolve, the prominence of CDPs is waning, some say. Or, at the very least, past the peak cycle, as one expert told us.
With the rapid advancement of Customer Relationship Management (CRM) systems and integrated platforms, we must ask: is the hype around CDPs over? This article explores the rise and potential decline of CDPs, examining how new technologies and evolving business needs are shaping the future of customer data management.
Introduction to CDPs
CDPs have significantly evolved since their inception, impacting how businesses manage and leverage customer data. Initially, CDPs basically just aimed to unify customer data sources into a single, coherent view, enabling more personalized and data-driven marketing strategies.
The rise of CDPs responded to the growing need for businesses to manage vast amounts of data from various customer interactions across multiple channels. Traditional data management systems struggled with integration and analysis, leading to fragmented and siloed data. CDPs addressed these challenges by providing a centralized platform to collect, clean, and integrate customer data from diverse sources, offering marketers a comprehensive view of their customers.
Initially, CDPs were widely acknowledged for their potential. Businesses expected these platforms to enable unprecedented levels of personalization and customer engagement. By consolidating data from email campaigns, social media interactions, website visits and purchase histories, CDPs aimed to help marketers deliver highly targeted and relevant messages, driving higher conversion rates, customer satisfaction and loyalty.
Today, CDPs remain a vital component of many organizations' marketing technology stacks, but their role and perception have evolved. The current state of enterprise CDPs is marked by both advancements and challenges. On one hand, CDPs have become more sophisticated, incorporating advanced analytics, artificial intelligence (AI), and machine learning (ML) capabilities to provide deeper insights and predictive analytics. On the other hand, the rapid advancement of integrated marketing platforms and CRM systems has introduced new competition, prompting businesses to reassess the unique value propositions of CDPs.
As data privacy regulations such as the GDPR and CCPA have become more stringent, CDPs have had to adapt to ensure compliance while still providing value. The challenge now lies in balancing the promise of unified customer data with the need for robust data governance and security measures.
David Raab, principal at consulting service Raab Associates and founder of the CDP Institute, told CMSWire that while CDPs may be past the peak of their hype cycle, their functionality remains essential. He noted that many marketing automation and messaging systems have added CDP capabilities.
“The major stand-alone CDP systems are still much more mature than most of the marketing automation and messaging platforms that have added CDP functions,” said Raab, emphasizing that CRM systems have a different data structure that does not adapt well to CDP requirements.
Related Article: What Is a Customer Data Platform (CDP)?
The Golden Age of CDPs
The early adoption of CDPs was marked by significant excitement and optimism. As businesses grappled with the challenges of managing fragmented customer data across various touchpoints, CDPs emerged as a beacon of hope, offering a unified solution. This Golden Age of CDPs saw a rapid uptake of these platforms, driven by their promise to revolutionize marketing and customer engagement.
One of the primary benefits that fueled the early excitement around CDPs was their ability to create a unified customer view. By integrating data from multiple sources, CDPs enabled businesses to develop a comprehensive and cohesive understanding of their customers. This holistic view was instrumental in driving personalized marketing efforts, allowing brands to tailor their messages and offers to individual customer preferences and behaviors.
Logan Mallory, VP of marketing at Motivosity, an employee engagement platform provider, highlighted that CDPs excel in real-time data processing and customer segmentation.
“This real-time capability enables highly personalized marketing strategies, often at a speed and granularity that CRMs struggle to match,” said Mallory. “By leveraging real-time data, businesses can create more relevant and timely marketing messages, enhancing customer engagement and conversion rates.”
In addition to personalized marketing, CDPs promise enhanced data-driven decision-making. With access to a centralized repository of clean and integrated customer data, marketers and decision-makers could leverage advanced analytics and insights to inform their strategies. This capability was particularly valuable in identifying trends, predicting customer needs and optimizing marketing campaigns for better outcomes.
Notable early success stories and case studies underscored the transformative potential of CDPs. For instance, Anheuser-Busch InBev implemented a CDP to consolidate data from its various brands and digital channels. This initiative allowed the company to gain deeper insights into consumer preferences and behaviors, facilitating more effective marketing campaigns and product innovations.
The early use of CDPs was characterized by a wave of early adopters who reaped substantial benefits from these platforms. The promise of a unified customer view, personalized marketing and data-driven decision-making drove widespread enthusiasm and investment in CDPs. These early successes laid the foundation for the continued evolution and adoption of CDPs, highlighting their potential to transform customer data management and marketing practices.
Steve Zisk, senior product marketing manager of Redpoint Global, a CDP and engagement strategy provider, commented on the direction the CDP hype took.
"For starters, a lot of companies jumped into the market championing CDP as the buzz term, but really not in the true spirit of a CDP," he said. "You had companies that offered solutions for personalization and just called them CDPs.” He noted that these companies failed to address the fundamental problems CDPs are meant to solve: unifying data from various channels, ensuring accuracy and presenting it in a usable form.
Related Article: CRM vs. CDP: Key Differences and Which One to Pick
The Shift in Technology Landscape
The technological landscape surrounding customer data management has seen significant shifts, driven by advancements in CRM systems, the integration of marketing platforms and the emergence of new technologies that challenge the dominance of CDPs.
Raab said that he expects to see a continued role for the stand-alone CDPs doing complex data preparation and management and then feeding their results into the other systems.
“The other consideration is that data warehouses, and in particular cloud databases like Snowflake and Google Big Query, are also expanding their customer data management capabilities,” said Raab, who suggested that they’re not yet as mature as traditional CDPs but will get better over time. “In this context, the role of the stand-alone CDP may evolve to be more of an intermediary between a customer data warehouse and marketing and other applications.”
CRMs vs. CDPs
In recent years, CRM systems have evolved far beyond their original purpose of managing customer interactions and sales processes. Modern CRMs, such as Salesforce and Microsoft Dynamics 365, now incorporate sophisticated features like AI-driven insights, predictive analytics and automation capabilities. These enhancements allow CRMs to not only store and manage customer data but also analyze it to predict customer behavior, personalize marketing efforts and streamline sales processes. The integration of AI within CRM systems provides businesses with actionable insights and the ability to automate routine tasks, further enhancing efficiency and decision-making capabilities.
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“The CDP category has slowly added more and more features similar to CRM,” said Caleb Benningfield, head of lakehouse strategy at Amperity, a CDP solution provider. “The CRM category has added more and more features geared towards data management. While it seems unlikely that they will fully converge, several CRM companies have tried to eliminate any threat seen from the CDP market by adding a few data management features and declaring themselves a CDP. We’ve even seen that from marketing automation platforms.”
That doesn’t mean that CRMs have replaced CDPs, nor that their functionality is the same today.
“CRM is a mature technology and is a valuable one for handling human-sourced data,” said Zisk. “The intention with CRMs is to create a record-keeping destination so that every time a contact is made at any point via any channel, an agent or sales person can effectively track every interaction. CRMs were not designed to handle the cleansing or automation of a CDP." Zisk added that although you can layer that onto a CRM, the same can be said for cloud warehouses or customer engagement platforms — you still need that CDP to make the data truly shine.
Related Article: CRM vs. CDP: Key Differences and Which One to Pick
Challenges, Alternatives and the Future of Customer Data Management
Benningfield is in a good position to understand the dynamics behind the change in how CDPs are viewed today. Benningfield told CMSWire that at this point there have been several key problems that have led to the slow decline of that hype to a point where it is fair to question whether the category can be declared dead. Benningfield said that the market wasn’t clear on the specifics of the problem space at the beginning, and so many remarkably different products positioned themselves as CDPs that it created a painful experience for buyers who had trouble differentiating between them.
"The product companies in the CDP space failed to clearly establish a singular understanding of what a CDP product is with the clarity of past categories like CRM," explained Benningfield. "CDP products are largely enterprise SaaS. They are more expensive, more reliant on the vendor, and typically solve the problem using fundamentally different methods. Even if the methods were better, it has always been hard for technical teams to embrace these new models."
Benningfield said that the explosive growth of data warehouses and smaller component products like Fivetran have given technical teams powerful new tools. "At the same time, market conditions have driven every company to become increasingly cost conscious," Benningfield said. "So as the market grew to better understand the problem the CDP was solving, new options that are cheaper and similar to the old way of doing things emerged and gained a lot of traction."
Integrated marketing platforms, such as HubSpot and Adobe Experience Cloud, have become useful for businesses aiming to create cohesive and personalized customer experiences. Zisk believes that although platforms such as Adobe Experience Cloud have their place, they still have not been able to take on the role that CDPs play in the enterprise.
“Adobe Experience Cloud essentially tries to pull in data from all over, but met the same challenge: they still had to do a massive services engagement to build a CDP,” said Zisk, who reiterated that CDPs are meant to be solutions to data problems. “In the end it turns out to be too resource and time-consuming, too clunky, and value is lost in the meantime because of the lengthy, complex process that stretches out in upwards of six months to a year in implementation.”
Several emerging technologies are beginning to challenge the traditional role of CDPs by offering alternative solutions for managing and analyzing customer data. One such technology is Customer Data Infrastructure (CDI), which focuses on the real-time collection and integration of customer data across various channels. CDIs, such as Segment, provide businesses with the flexibility to collect and route customer data to multiple destinations, enabling more dynamic and responsive data management.
Additionally, Data Management Platforms (DMPs) and Identity Resolution Platforms are increasingly being used to manage customer data. DMPs, like Lotame and BlueKai, specialize in collecting and organizing large volumes of data from various sources to build detailed customer profiles. Data collaboration platforms such as LiveRamp specialize in secure data collaboration and identity resolution, helping businesses unify fragmented customer data into a single, cohesive identity. This enhances the accuracy and effectiveness of marketing efforts by ensuring a comprehensive understanding of customer behavior and preferences.
The Challenges Faced by CDPs
CDPs have played a crucial role in unifying customer data from various sources. However, several challenges now threaten their dominance, especially as CRM systems advance. These challenges include technical limitations, high implementation and operational costs, and data privacy and security concerns.
Tony Byrne, founder of advisory and consulting service Real Story Group, told CMSWire that the hype is not over, but the over-hype is passing, which is a good thing for everyone.
"Most large enterprises still need a CDP, but the type and scope of that CDP will differ markedly. Often, brands pick the wrong platform and try to shoehorn it in.” Additionally, Byrne said that many of the problems that businesses face with CDPs come from the limitations of their data. “Enterprise customer data is almost always messier than we think. Start a major inventory and clean-up effort before you start a CDP selection project.”
One of the primary challenges facing CDPs is their technical limitations and integration issues. While CDPs aim to unify customer data from various sources, integrating these disparate data points into a coherent system can be complex and challenging. Businesses often struggle with connecting different data sources, dealing with inconsistent data formats, eliminating data silos, and ensuring data accuracy and completeness. These technical hurdles can limit the effectiveness of CDPs and their ability to deliver a truly unified customer view.
“Unfortunately, CDPs often lack the depth of CRM systems in managing ongoing customer relationships and integrating with sales and support functions,” said Mallory. “This makes CRMs more versatile for businesses seeking a holistic approach to customer engagement. The comprehensive nature of CRMs allows for better tracking of customer interactions and improved service delivery across various departments.”
Additionally, as businesses increasingly adopt advanced tools and platforms like CRMs and marketing automation systems, integrating CDPs with these systems can become problematic. CRMs, with their built-in capabilities and ease of integration, often provide a more cohesive experience, reducing the need for separate CDP solutions.
Another significant challenge for CDPs is the high cost associated with their implementation and ongoing operation. Deploying a CDP typically requires substantial investment in technology, infrastructure and skilled personnel. This includes costs for data integration, software licensing, customization and maintenance. Additionally, the need for continuous data management and governance further escalates operational expenses.
In contrast, modern CRMs have evolved to include many of the data integration and analysis capabilities once exclusive to CDPs. These CRMs often come with more affordable and scalable solutions, making them attractive alternatives for businesses looking to optimize customer data management without incurring excessive costs.
Additionally, CRMs often come with built-in data privacy compliance features and robust security protocols, simplifying adherence to data privacy regulations. This makes CRMs a more attractive option for businesses seeking to manage customer data securely and in compliance with the law.
Final Thoughts
While CDPs have played a significant role in unifying customer data, their dominance is being challenged by evolving technologies and business needs. The future of customer data management likely lies in integrated, adaptable solutions that can meet the complex demands of modern businesses while ensuring compliance and security.
Instead of relying solely on CDPs, companies may benefit from a more holistic approach that combines various technologies to create a comprehensive, agile data ecosystem tailored to their specific needs and goals.
"Like many others, CDP technology has the potential to deliver new levels of analytics, insights, functionality and efficiencies through the development and adoption of AI/ML techniques," CMSWire researchers wrote in the CDP Market Guide. "As these are developed we may start to see a degree of investment and development that could result in convergence of approaches and a clearer vision of the CDP market in the near future."
