glittery sign of word 'hype'
PHOTO: Verena Yunita Yapi

Knowledge of the customer is a priority for marketing organizations. In fact, chief marketing officers report that two-thirds of their budgets go toward supporting customer retention and growth, according to Gartner’s 2017-2018 CMO Survey.

Investments focused on existing customers are rapidly outpacing spending on acquiring new customers. Faced with these retention and growth imperatives, CMOs and their teams are quickly adopting new technologies to help them collect, manage and use their first-party customer data to help inform their decisions.

Enter the next “shiny new thing” in the marketing and data analytics technology category: customer data platforms (CDP). CDPs present an alluring alternative to marketers who are frustrated with perceived, and actual, limitations in how their technology handles customer data management and analytics. 

And while vendor hype and customer expectations have skyrocketed around CDPs, the market has yet to coalesce on standard capabilities — leaving many confused about how best to utilize CDPs to achieve real value.

So, what is, and what isn’t, a CDP? Let’s answer that question.

Related Article: Customer Data Platforms Bring Omnichannel Choreography Within Reach

What Is a CDP

A CDP is a marketing system that unifies a company’s customer data from marketing and other channels to enable customer modeling and optimize the timing and targeting of messages and offers. To fit this definition, the CDP must feature a marketer-friendly, web-based interface that enables data collection, profile unification, segmentation and activation.

Related Article: Keep Your Eyes on Customer Data Platforms: They'll Be Worth $1B by 2019

What Isn’t a CDP

Many vendors have opportunistically repackaged or repositioned existing systems as CDPs, creating confusion around the resulting technology, as well as feature overlap. At Gartner, we have identified and examined 10 technologies that are often mistaken for CDPs. Here they are:

  • Enterprise data warehouse (EDW) platforms: An EDW is a storage architecture designed to hold detailed data extracted from transactional systems, operational data stores and external sources, and then combine that data in an aggregate, summary form suitable for enterprisewide data analysis and reporting. EDWs typically serve as data sources for CDPs.
  • Customer identity and access management (CIAM) systems: CIAM refers to consumer-facing identity and access management capabilities — more specifically, user registration, social login and user profile and consent management tools. CIAM functionality helps provide a secure, unified customer experience across channels. CIAM systems serve as complements to CDPs and customer relationship management systems by aggregating data from customers’ user profiles.
  • Customer relationship management (CRM) systems: Although many marketers may think of a CRM system as simply a database with customer or sales contact information, Gartner defines CRM as both a business strategy and a technology category. As a strategy, CRM is about fostering customer-satisfying behaviors and implementing customer-centric processes. CRM consists of a broad set of applications, of which CDP systems (and other technologies) could be considered a subcategory.
  • Data management platforms (DMP): DMPs are tools that power customer segmentation, audience targeting, optimization of digital advertising and experience personalization, by combining first- and third-party data, aiding in identity management and supporting data enrichment. The data is generally used for online advertising campaigns, personalization and measurement. Because DMPs focus on unifying first- and third-party data for ad targeting and personalization, they can be complements to CDPs, leveraging segments and customer data from the CDP and providing data back.
  • Digital experience platforms (DXP): DXPs are integrated sets of technologies based on a common platform. Organizations use DXPs to build, deploy and continually improve websites, portals, mobile apps and other digital experiences. A DXP is an executional endpoint for a CDP. CDPs provide segments and instructions to DXPs, leaving them to personalize site experiences based on the data.
  • Digital personalization engines (DPE): DPEs identify the optimum experiences for specific individuals based on knowledge about them. For any one customer, a DPE can alter the online presentation layer, trigger an automated response or pass on analyses to the seller or service personnel for action. Because they both focus on personalization, there’s significant overlap between DPE and CDP functionality for segmentation and decision-making.
  • Marketing dashboards: Marketing dashboard technology is designed to integrate and visualize data in a SaaS environment that’s user-friendly for marketers and other business users. As a result, marketing dashboards give marketers better access to data and help them see insights more quickly. Marketing dashboards are another execution endpoint for CDPs. In other words, the CDP collects, unifies and segments customer data, syndicating it to a marketing dashboard system for basic analysis, visualization and reporting.
  • Master data management (MDM) platforms: Master data management is a technology-enabled business discipline in which business and IT work together to ensure the uniformity, accuracy, stewardship, governance, semantic consistency and accountability of the enterprise’s official shared master data assets. An MDM system may be a source of customer data for the CDP, but customer data is not the only type of data under the purview of MDM.
  • Multichannel marketing hubs (MMH): MMHs orchestrate a company’s communications and offers to customer segments across a multichannel environment that can include websites, mobile, social media, direct mail, call centers, paid media and email. Although an MMH can — but does not always — include CDP features, it takes those capabilities further. MMHs orchestrate and deliver campaigns, picking up where CDPs leave off.
  • Tag management systems (TMS): A TMS simplifies the deployment and maintenance of JavaScript and other tags that are used to exchange data between browsers and mobile devices and external applications, such as analytics, advertising and personalization platforms. Multiple tags are replaced by one, which then controls publishing of the appropriate tags and related data flows. A TMS can serve as a source of customer data for a CDP.

Related Article: What Can You Do With a Customer Data Platform?

What to Do Next

It’s important to remember that CDPs aren’t a replacement for existing enterprise systems of record. Instead, marketers should consider a CDP to be an extension of those systems that can help to unlock the value of data to reach marketing objectives. In order for this investment to live up to the ultimate goal of creating a unified, single customer view, the technology must be well integrated and it must adhere to a governance plan.

To do this effectively, marketing leaders responsible for customer data should identify the features of CDP systems that are most appealing to them, evaluate the overlap between CDPs and related technologies and use pace-layering to plan marketing investments in new technology areas.

Armed with an understanding of what a CDP can — and can’t — do, marketers can better navigate this emerging and oftentimes confusing category.