CRM versus CDPs for the enterprise
PHOTO: Shutterstock

Customer relationship management (CRM) and customer data platform (CDP) systems are two of the major marketing and sales technology systems that collect and manage customer data. The Customer Data Platform market will reach $3.3 billion by 2023, according to a study from MarketsandMarkets (fee required). Meanwhile, worldwide CRM software revenue reached $39.5 billion in 2017, beating database management systems (DBMSs) for the top spot as the largest of all software markets, according to Gartner. This year, CRM will be the fastest growing software market with a growth rate of 16 percent, according to Julian Poulter, research director at Gartner. The research firm also reported in its Gartner Marketing Technology Vendor Guide (fee required) that by 2020, customer data platforms will power 20 percent of current multichannel marketing hub deployments. 

These are both important enterprise technologies and while there is some overlap they have very different functions and business leaders need to know that. “Do CRM systems offer some of the same functions as a CDP? Definitely, but they are limited in scope and don't necessarily provide the development environment or integration opportunities to support emerging customer experiences,” said Christopher Hogan, Capterra’s senior director of business analytics and operations.

Definition of a CDP

It’s important to actually define what these systems do before exploring integration paths and making the most out of your CRM and CDP. A CDP is “a marketer-managed system that creates a persistent, unified customer database that is accessible to other systems,” according to David Raab, founder of the Customer Data Platform (CDP) Institute

Customer data platforms "consolidate and integrate data from multiple heterogeneous sources into a single, trusted repository that supplies accurate customer data to analytical and operational systems throughout the martech stack," according to Forrester.

Definition of a CRM

Salesforce, the No. 1 revenue-producing provider of CRM software, defines CRM as “technology for managing all your company’s relationships and interactions with customers and potential customers.” Salesforce officials report the goal of CRM software is to improve business relationships through software “that helps with contact management, sales management, productivity, and more.”

Related Download: Customer Data Platforms Buyer’s Guide

Some Overlap, But Limited in Scope

It's not about choosing between a CDP and a CRM. Rather, marketers should know the difference between CRM and CDP in order to apply it to their specific use cases. And, ultimately, marketers can make the customer data systems work in tandem for marketing execution, according to experts who caught up with CMSWire on the topic. “I think marketers need to be aware of the conceptual distinction between these systems so they are clear on the benefits and limitations of each system,” said Hogan. 

CDPs, Hogan said, can't actually deliver an experience to customers but must integrate with delivery systems. “Ideally CRMs and CDPs work together with CRM systems benefiting from a diverse set of customer feedback signals consolidated and organized within a CDP,” Hogan said. “By centralizing customer interaction data, CDPs help facilitate intelligent and informed customer engagement across delivery systems.”

The easiest way to differentiate between CRM and CDP is that the primary purpose of a CDP is for marketing and tracking activities of customers, while a CRM is used for managing customer interactions, business transactions and internal process management, said Mark Beckner, owner and principal of Inotek Consulting Group.

Related Article: How to Build the Right Team for Cross-Channel CRM and Marketing

Marketers Own the CDP

CDPs help with deep analysis of customer behavior, advanced business intelligence into how customer data interrelates and new ways of engaging with these customers, Beckner said, while CRM would be used for more traditional management of a customer throughout that customer’s engagement with your business.

CDPs are now becoming the primary data source of every detail known about a customer or prospect, and, in contrast to CRMs, CDPs are data marketplaces designed primarily for marketers, according to Frank Moreno, vice president of worldwide marketing at Datawatch. A CRM is usually managed and policed by IT, while a CDP can be maintained and owned by marketing teams.

CDPs enable teams to access, measure and analyze more details about how individuals and organizations interact with your business to determine what influences customer and prospect engagement. “An effective CDP centralizes customer interaction data from a wider range of systems, applications and channels, and tags or maps that data to a specific customer or customer type,” Moreno said. 

Modern CDP systems have added collaboration, data quality and analytics features as well as machine learning capabilities to provide greater data intelligence and value, Moreno added. 

CRM is Primarily for Sales

CRM applications, meanwhile, were designed for sales teams to capture, track and manage the details needed about customers and prospects during a sales process. Marketing activity comes into the CRM through data integrations with marketing automation platforms, or by capturing sales activity from sales reps and their tools. Transactional information is added from financial systems, and service activity is pulled from customer support systems.

Related Article: Customer Data Platforms: A Contrarian's View

Different Data Input, Management

CDPs and CRMs not only differ in the primary user they were designed to engage but also for how they have been architected from a data perspective, in other words, what data inputs they support, according to Heidi Bullock, chief marketing officer at Engagio. Although CRMs were designed with sales in mind, marketing and customer success rely on them now, too. 

The big difference between CRMs and CDPs is in the magic of data collection:

  • CRM tracks transactions, analyzes the pipeline, manages customer health and makes notes about customer bugs or other input. CRM platforms also typically deal with first party data that is sourced by sales and marketing. A CRM does not match data across channels, which is a key distinction, according to Bullock. CRMs also do not pick up offline data, Bullock said.
  • CDPs house a richer view of the customer including historical and behavioral data, and for a marketer to have a complete 360 view of buyers and create personalized experiences at scale. “CDPs were designed intentionally to be hubs and connect disparate/multiple data sources so there is a more complete customer profile — and rules that manage this data,” Bullock said. For example, a CDP can store information on what content or products a buyer prefers. They will track social data, web visits, etc. with the intent to understand a complete view of the buyer so marketing can successfully engage and market to them, Bullock added. CDPs also can identify the same person with different names.

CDP Serves Up CX Data, CRM Executes

While both CRM and CDP store customer data and have overlap, think about a CRM as the execution arm and CDP as a data collector and enabler of “downstream execution” for other marketing systems, according to Capterra’s Hogan. CRMs amount to email automation systems or customer support dashboards that facilitate direct interaction with the customer and are often designed specifically to optimize one type of customer interaction. 

CDPs, meanwhile, “are less about specific use cases and more about consolidating, organizing and exposing customer data for downstream execution by different marketing systems or personalization engines,” Hogan said. “CDPs integrate with CRM and other customer-facing systems to capture and store persistent information about customers such as age and location as well as customer event data like purchases, clicks, or page views that can be used for advanced segmentation and modeling.” 

CDPs “do the dirty work.” They organize information. Analysts and data scientists usually lead the way, and CDPs are more likely to be developed internally due to the complex data consolidation process and required understanding of the customer data stored within a CDP, Hogan added.

Related Article: What Separates One Customer Data Platform From the Next?

Knowing Your Own Business is First Step

Understanding what your business needs goes a long way toward determining whether CRM or CDP — or both — is a likely fit for your martech stack. “For companies that primarily deal with a known customer base, and tangible business processes, such as creating quotes and orders for products sold, the most appropriate solution would be CRM,” Beckner said. “For businesses that reach large potential audiences, have a need to identify both known and unknown customers, and require primarily marketing functionality for reaching out and selling to these audiences, a CDP would be used.”

In summary, marketers should know the difference so they can set expectations and leverage the right platform for the appropriate task, according to Engagio’s Bullock. “Both platforms are quite different and serve distinct purposes," she said. "The key is knowing what is needed for the business. CRMs are critical for sales and customer-facing roles to manage customer data. CDPs are essential if you plan to execute scalable personalized campaigns that depend on inputs from offline transactions or social data. For now, they are a nice complement to each other.”