The number of customer data platforms (CDPs) in the market is growing. According to the Customer Data Platform Institute’s CDP Industry Update 2018 (registration required), the number of CDP vendors more than doubled in 2017, from 24 in January 2017 to 52 this month. Combined employment at those firms increased from 1,991 to 4,388, marking a 120 percent increase.

The question now is: does your organization need a customer data platform or is it all hype for now?

What Is a Customer Data Platform?

Before we dive into the pros and cons of whether you may need such a platform, what exactly are we discussing? The CDP Institute defines a customer data platform as a: "A Customer Data Platform is a marketer-managed system that creates a persistent, unified customer database that is accessible to other systems." The definition continues to note CDPs are built and controlled by the marketing department and do not require the level of technical skill of a typical data warehouse project. 

“The CDP creates a comprehensive view of each customer by capturing data from multiple systems, linking information related to the same customer, and storing the information to track behavior over time,” David Raab, principal of Raab Associates and CEO of the Customer Data Platform Institute wrote. “The CDP contains personal identifiers used to target marketing messages and track individual-level marketing results.”

Data is stored in the CDP and can be used by other systems for analysis and to manage customer interactions, according to Raab.

Related Article: Why Customer Data Platforms are Gaining Traction

Take the CDP Hype With a Grain of Salt

Not everyone agrees CDPs are unequivocally the right answer. 

“With all the industry buzz, shifting vendor positioning strategies, and an over-abundance of acronyms, understanding the proper role for this new technology category can be a challenge,” wrote Tony Byrne of Real Story Group, a vendor analysis and selection consultancy in the advisory paper, “Do You Need a Customer Data Platform?” 

Some feel the CDP market is immature, with other companies rebranding their offerings to get in on the action. BlueVenn president Curt Bloom wrote CDPs were a “curiously assorted collection of vendors from tag management, multichannel marketing and many other corners of the MarTech world are all claiming to be part of the CDP space. Who can blame them? Who wouldn't want to be part of a market calculated to generate over $1 billion total revenue by 2019?” 

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

Signs You May Need a Customer Data Platform

What are some signs you may need a CDP? According to Raab, you may need a CDP if:

  • Your existing customer-facing systems capture useful data about your customers, but you can’t collect it all in a single place.
  • You can collect customer data from multiple systems but can’t enhance it with data from external sources.
  • You can collect customer data from multiple systems but can’t connect items that refer to the same individual to create a single customer view.
  • You can build a single customer view but only have access to predefined summary information, such as segment assignments, and not underlying details such as details of transactions or web page views.
  • You can build a single customer view with detailed data but can’t analyze it, build predictive models or run machine learning algorithms against it.
  • You can build and analyze a detailed single customer view, but the data isn’t available to systems that create outbound marketing campaigns (e.g. email or advertising audiences) or real time interactions (e.g. website personalization).
  • Your IT department has promised to provide a single customer view but it hasn't said when it will be available, what it will cost or what it will actually do. Or they’ve made promises and failed to deliver.
  • Your marketing cloud vendor has promised to provide a single customer view but it hasn’t said when it will be available, what it will cost or what it will actually do.  Or they’ve made promises and failed to deliver.
  • You have a detailed, actionable single customer view but it’s hard to add new data sources or change how data is processed.
  • You have a detailed, actionable single customer view but it’s hard to connect it to new systems so they can use its data.
  • You have a detailed, actionable single customer view but the data is days or weeks out of date.
  • You have a detailed, actionable single customer view but it costs a fortune to operate.
  • You have customers in the European Union and can’t meet the requirements of General Data Protection Regulation (GDPR) and e-privacy to capture permissions, track usage, respond to data access and removal requests, etc.

Vendors Make the Case for a Customer Data Platform

CDP vendors naturally favor businesses investing in customer data platforms, but what signs would they add to Raab's list? 

All About the Silos

Steve Zisk, senior product marketing manager for CDP provider RedPoint Global, said brands have already invested in data analytics but still cope with functional and channel-specific data silos. “These silos,” he added, “are the result of companies building out their technology stacks to accommodate the growing number of touchpoints within the customer journey.”

Marketers struggle with gathering this disparate data and inserting it into a single location and must deal with manual updating, which leads to outdated customer profiles and subpar personalization, Zisk said.

Learning Opportunities

“CDPs can counteract this technology fragmentation by ingesting enterprise data from all sources and creating an always-on, always-processing unified customer profile,” Zisk said. “If brands want to use their data in real-time for contextually relevant messaging, they must go beyond data analytics and invest in a CDP.”

Related Article: Dismantling Data Silos Isn't Just a Tech Challenge, It's About Meeting Customer Needs

First Party Data Struggles

Priya Aggarwal, vice president of marketing at ActionIQ, said organizations that struggle to deploy first party data across all marketing channels to ensure personalized experiences could benefit from a CDP. 

“Many marketing tools are channel-first and are not built to truly scale to the amount of customer data available to the enterprise,” Aggarwal said. “A CDP allows enterprises to start with an aggregated view of their customer, based on profile data and behaviors across all touchpoints. CDPs allow enterprises to create intelligent audience segments and seamlessly orchestrate them to their marketing tools to better inform personalized experiences across channels.” 

Most marketers measure performance and success of campaigns by channel, such as opens or click through rate for email campaigns, she said. But these marketing applications are channel-specific and cannot tie back engagement to actual revenue-generating activity. 

“Since a CDP sits on top of all customer behavior data, it provides a truly cross-channel view of all engagement,” she added. “A CDP is thus able to uniquely identify what customer behavior resulted in revenue. Furthermore, CDPs allow the enterprise to define custom KPIs. This ensures that the organization is measuring success based on tangible business results and is not restricted to channel-specific KPIs.”

Better Synchronicity with Customers

Darren Guarnaccia, chief marketing officer at Lytics, said some marketers find themselves talking to customers in disjointed ways across every touchpoint or channel. “It appears as if one hand doesn’t know what the other hand is doing in your organization from the customer’s point of view,” Guarnaccia said. “If you are hearing this from your customers, you might need a CDP.”

Oftentimes, you’ll notice launching campaigns takes too much time and resources and data from three or more different marketing tools or channels. Marketers run into this scenario when trying to maximize advertising spend from audiences on a channel like Facebook, where you want to use data from your web experiences or email tools, Guarnaccia said. 

“Tactics like removing existing customers and low propensity prospects are a great way to maximize your advertising dollars, but it can sometimes be very difficult to do well or quickly,” he said. “If you are struggling with this, you might need a CDP.”

Further, if you’ve struggled to coordinate a consumer experience across multiple tools and channels in a way that is nurturing and progressive and doesn’t require you to buy everything from a single vendor, Guarnaccia said you might need a CDP.