"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right" — Benjamin Graham
Customer data platforms (CDP) vaulted into the spotlight approximately four years ago amid much publicity. The term CDP was coined by research and consulting firm Raab Associates, which predicted that the market for these applications would reach $1 billion by 2019. That prediction was pretty accurate: Today there are over 50 CDP vendors, a dedicated website (the Customer Data Platform Institute), and more than 2,500 reported implementations.
So what is a CDP? Its purpose is to unify customer data from various sources to optimize marketing analytics and communication. Scott Brinker, VP of platform ecosystem at HubSpot and editor of the blog ChiefMartec.com, looks at CDPs as mechanisms for integrating the many technologies in a marketing environment, calling them the data layer for a digital marketing hub. Other proponents of CDPs highlight several characteristics the systems have in common, including:
- They are managed by marketing.
- They have an integrated, persistent database for unifying customer information across many different sources and channels.
- They have a consistent customer identifier that links all of a customer’s data, regardless of source.
- They are accessible to external applications, exposing data to various marketing and analytics technologies.
CDPs have also made the Gartner Hype Cycle for Digital Marketing and Advertising. The Hype Cycle lists CDPs as nearing the “Peak of Inflated Expectations,” suggesting their popularity stems from the ongoing struggle to unify customer information and use it to improve marketing.
My take? While the potential benefits are significant, these applications are by no means a silver bullet. Despite (or because of) the publicity surrounding CDPs, misconceptions and an incomplete understanding of the possible challenges can quickly turn the peak of inflated expectations from an analyst’s catchy phrase into an expensive reality.
Related Download: Customer Data Platforms Buyer’s Guide
Dispelling Customer Data Platform Myths
The good news is the negative impacts of some of the more popular CDP myths can be mitigated simply by recognizing they exist, and by engaging in careful planning. Let’s take a look at two of those myths.
Myth 1: CDPs Solve a Problem Unique to Marketing
The idea that these platforms (or more accurately, the problem they are solving — unifying customer information) are the sole province of marketing is patently untrue.
Companies have been trying to uniquely identify customers and consolidate first-party customer information since the late 1980s. The initial incarnation was the customer information file developed by the banking industry. Marketing customer information files and customer-oriented data warehouses followed shortly thereafter. As the data sources and volumes grew, the operational data store was developed to serve real-time needs while also refreshing the data warehouse. Next came master data management applications. Their function was and is to provide a consistent customer identifier that links all customer data, regardless of source (sound familiar?). Add in the need for inclusion of digital identity and activity, and the underlying concept of CDP (360-degree customer views in the digital era) is born.
The issue here is the predecessor applications were developed to support the operational and analytical needs of multiple constituents, whereas CDPs are specifically aimed at marketing. While a purpose-built marketing application is not necessarily a bad thing, companies need to be careful that “marketing-managed” does not equate to ignorance of existing customer information architecture or the exclusion of other business needs. The enterprise requirements around the 360-degree customer view are simply too great and the consequences of dropping in yet another silo of customer information too negative.
Questions to consider: Where does the CDP fit into the existing architecture, and how does it differ from the other customer databases? For example, are you simply duplicating existing functionality in the name of a departmental solution? If other customer databases do exist, how will you keep them in sync with the CDP? Does the CDP add functionality that others need? And if so, how will you incorporate those needs into the design and development of this marketing-managed application?
Counterpoint: The Signal digital marketing infographic says, “Make identity an enterprise asset. Choose an identity solution that is durable, flexible and platform-neutral.”
Related Article: Why Customer Data Platforms Are Gaining Traction
Myth 2: “Marketing-Managed” Means You Don’t Need IT’s Help
Much has been written about the value of alleviating marketing’s reliance on IT because CDPs are marketing-managed. I believe this to be a shortsighted and dangerous point of view. I would prefer to see the two groups work together to resolve issues and implement complex technology.
Marketing is unquestionably a technology-driven function today. The latest MarTechToday Marketing Technology Landscape Supergraphic, put together by ChiefMartec’s Brinker, is labeled the “Martec 5000” because it contains more than 5,000 vendor-offered technology solutions spread across six categories, which range from traditional marketing applications (marketing automation, campaign management, analytics) to data management (data quality, metadata, customer identity).
The vast majority of marketers have multiple applications from Brinker’s list that need to work together. Many of these technologies span the enterprise and should be implemented in adherence with enterprise architectural standards. Case in point: The robust customer identity matching solutions required to make a CDP accurate almost always require some sort of tech savvy. They are not solutions a business can drop in and forget. In fact, the technology requirements within the marketing function in general are so complex, Gartner has projected that more than 20 percent of the CIOs of Global 2000 companies will report to the chief marketing officer by 2020.
Going it alone on something as multifaceted as a CDP can easily backfire.
Counterpoint: Brinker’s “Martec’s Law” states: “Technology changes exponentially (fast), yet organizations change logarithmically (slow), and the gap is widening.”
Related Article: What Can You Do With a Customer Data Platform?
CDPs: An Evolving Technology With Unknown Challenges
So, while CDPs are a wonderful idea — systems designed to solve some of the very real problems marketing encounters — they also require consideration and planning. The technology is still evolving, and all of the challenges associated with it have not necessarily surfaced.
Gartner said it best when discussing CDPs in the above mentioned Hype Cycle, comparing CDPs to their predecessor data management platforms: “Data management platforms are in the Trough of Disillusionment as marketers come to terms with integration and adoption challenges.” So if you are considering a CDP, keep in mind Gartner’s advice, again from the Hype Cycle: “Treat this technology investment as a system of innovation because it is still nascent, and expect convergence with adjacent categories.”