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Many brands are revisiting their customer experience initiatives, and are looking into investing in either a customer data platform (CDP) or customer relationship management (CRM) platform. The question is, what are the basic functions of CDPs and CRMs, which would serve a brand better for improving the customer experience, and why?

The Primary Function of a CDP

A Customer Data Platform is a software package that is used to unify transactional, demographic, and behavioral data from all of a brand’s channels, all of which are used to create a persistent, single-person view of each customer. It then makes the customer data available to other systems so it can be used for marketing, personalization, customer service, sales, and customer experience initiatives.

Heidi Bullock, CMO at Tealium, a real-time customer data orchestration solutions provider, believes that brands need to understand their customers by taking a closer look at customer data. Because that data is spread out through multiple channels and departments, the use of a CDP can be vital for gaining actionable insights. “A real-time, vendor-neutral CDP can promote a top-of-the-line experience in a primarily digital environment by helping companies collect, standardize, enrich, activate, and even govern data from all of these channels in real-time. This ultimately creates a holistic view of the customer regardless of where they’re interacting in that moment,” explained Bullock.

The CDP Institute explains that a CDP is able to create a comprehensive view of every customer by capturing the data from various systems, creating personal identifiers that are used to link data relating to the same customer, and storing that data to track customer behavior over time. By using personal identifiers, the CDP can be used to target marketing messages and single-user marketing results. It creates a single-person profile for each customer based on information that comes from all channels and touchpoints in the customer’s journey.

Although there are variations in the functionality of different CDPs, all CDPs have four core capabilities: the ability to create unified, persistent, single-person customer profiles, the ability to develop market-based segments using a variety of data (multi-dimensional segmentation), the ability to respond to each customer according to where they are on their customer journey (customer lifecycle orchestration), and the ability to assess historical customer data, discover patterns and trends, and use that data to create actionable insights (predictive modeling and analytics).

Related Article: CDP vs. DMP: Which is Right for Your Business? 

The Primary Function of CRM

CRMs were created with the intention of simplifying the process of customer relationship management. They enable sales and customer service professionals to store customer and prospect contact info, identify leads, store service tickets, manage marketing campaigns, and facilitate the ability to provide information about each and every interaction between a customer and a brand to anyone at a business that requires access to it.

According to Sridhar Jayaraman, VP of Engineering at Qentelli, a Texas-based digital services provider, a CRM is a one-stop platform that is used to capture all conversations with or about a brand’s customers. “Every professional involved in these conversations — including lead generation specialists, inside sales and field sales reps, sales engineers, account managers, customer support reps — all capture the information in CRM, so it becomes the single source of truth!”

There are three functions that are common to all CRM platforms. Contact management is the function of storing customer contact information, including names, phone numbers, addresses, email addresses, and social media accounts in a searchable database. Interaction tracking is the process of inputting notes and tracking customer interaction history in order to document conversations with each customer. Lead management allows businesses to manage the process of converting prospects into leads (potential customers) by identifying, scoring, and moving leads through the sales funnel.

Types of CRM

Additionally, there are three types of CRMs: operational, analytical, and collaborative. The primary roles of each type of CRM are different.

Operational CRM streamline and automate sales, marketing, and service processes, and their role is to generate leads and convert them into contacts, while at the same time capturing all details. This type of CRM helps to provide service throughout the customer lifecycle.

Analytical CRM fulfill the role of analyzing customer data that has been collected from the various touchpoints in the customer journey and help brands to make more informed decisions, enable the marketing department to evaluate the effectiveness of its campaigns, the sales team to increase sales, and improve the quality and efficiency of customer service.

“CRM is also used for contracts management and forecasting. As the sales process involves efforts from multiple resources, while identifying the probability of a particular opportunity, a CRM platform can offer visibility to the sales leadership with a monthly or quarterly review of best- and worst-case scenarios,” suggested Jayaraman.

Collaborative CRM allow brands to share their customer information between departments such as sales, HR, marketing, IT, customer service, and others, and enable all the departments in a business to share the same goals, which are to improve customer service, increase customer loyalty, and acquire new customers.

The Similarities and Differences of CDPs and CRMs

Customer service professionals and sales professionals typically use CRMs, as they are customer-facing positions. By simplifying the management of customer relationships, CRMs enable customer-facing professionals to gather more leads while retaining current customers.

“While CRMs are a key part of many businesses’ stacks, they are fundamentally different from CDPs. They were designed for a different purpose. It all boils down to the type of data each tool collects — the target user of a CRM is also different from that of a CDP,” said Bullock. They are not mutually exclusive, however, as many brands may find it useful to use a CDP in conjunction with a CRM. “CRMs help manage customer data in a sales-focused environment — but do not collect data across channels — so the two can still accompany each other for varying business needs.”

CDPs, on the other hand, are typically used by marketing professionals, as well as product managers, customer experience professionals, and sales campaign managers, as their roles are non-customer facing positions. CDPs are used to manage and gain a better understanding of all customer data from across all channels, in order to make more accurate business decisions as they relate to the customer journey. This is accomplished by obtaining customer data from every touchpoint a customer has with a brand, and unifying it in one location.

CRMs are able to provide data about the interactions between customers and a brand, and the data is typically used by customer-facing employees who are going to communicate or interact with a customer. Through the use of a CRM, they have access to data about the customer such as their purchase history, customer service tickets, chat history, and more, which enables them to more effectively serve the customer.

CDPs typically use Application Programming Interfaces (APIs) and code to integrate with other software in order to gather data from locations where it may be siloed or otherwise difficult to obtain, and it is usually an automated process. The customer data in a CRM is typically manually gathered, and more challenging to automate, though modern CRMs are beginning to use automated processes as well.

What Role Do CRMs and CDPs Play In CX?

Although CRMs are not typically thought of as being used for improving the customer experience, there are several ways that they can be used for that purpose.

First, they can be very effective tools for enhancing relationships between brands and customers. Many CRMs include functionality that provides the ability to send automated emails to customers after a specified number of days past the customer’s last purchase. This allows brands to stay in touch with customers through the use of personalized emails that deliver relevant content, offers, coupons, seasonal promotions, and incentives.

Second, CRMs provide customer service support staff with instant access to every interaction that the customer has had with a brand. This includes chat history, purchase history, and customer service tickets, and access to this information enables customer service personnel to provide more informed, quick responses that leave customers feeling emotionally satisfied.

Brad Birnbaum, founder & CEO of Kustomer, a customer service CRM platform, told CMSWire that research by his company has indicated that 77% of customers expect problems to be solved immediately upon contacting customer service, and furthermore, 70% will cease to do business with a brand over what they perceive as poor customer service. By using modern CRM platforms “that provide a complete view of the customer, guided self service, and the ability to engage across all communications and social channels,” Birnbaum said, “companies are able to support their customers between 10%-25% more efficiently all while improving both customer and agent satisfaction levels.”

Third, many CRMs use AI and process automation to identify customer sentiment through analytics and facilitate faster responses to customer service inquiries and social media posts.

Finally, CRMs enable a finer degree of customer segmentation, which enables brands to understand how to approach each customer. Similarly, a CDP enables the hyper-segmentation of customers. This allows a brand to target specific groups of customers or exclude specific groups of customers who are not likely to be interested in what the brand is delivering.

By aggregating, unifying and analyzing data from all of a brand’s channels, a CDP provides actionable insights that can be passed on to other tools in the MarTech stack to create the next best step in the customer journey. The single-person profile that is built by the CDP allows the creation of a hyper-personalized, emotionally positive connection with each customer. David Raab, founder of the CDP Institute, explained that a CDP creates a hyper-personalized experience by assembling detailed data and making it accessible in real-time. “Depending on the system, it could simply provide profile data for a personalization system to process, or run models and algorithms to pick the personalized messages itself.”

Additionally, a CDP uses the data that comes from customers that have purchased from or opted-in to a brand to create a holistic view of each customer based on their specific preferences, past history, and current real-time behavior. All of this allows brands to craft an exceptional customer experience through all of a brand’s channels.

Conclusion

Both CDPs and CRMs are useful for enhancing and improving the customer experience. For customer-facing roles, CRMs are difficult to beat, because they provide access to the historical data that enables sales and customer service professionals to interact with customers in a more personalized and effective way. If the brand’s goals are to gain a better understanding of its customers and how they interact with the brand across all of its channels — in real-time — CDPs are invaluable tools in the customer experience toolbox.