“Data matures like wine, applications like fish” ― James Governor, co-founder of RedMonk
Almost a year ago I published an article, "Customer Data Platforms: A Contrarian's View," that garnered negative reactions from a prominent customer data platform (CDP) practitioner. In it, I wrote “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 issues can quickly turn the Peak of Inflated Expectations from a catchy analyst phrase into an expensive reality.”
Not much has changed since I wrote that article.
Concerns in the CDP Market
So today I am doubling down on some of my past impressions. And it seems that in terms of cautionary advice, I am not alone. In its 2018 Market Guide for CDPs, Gartner highlighted the significant attention CDPs are receiving, indicated these technologies are nearing the “Peak of Inflated Expectations” and cautioned that a slide into the “Trough of Disillusionment” is imminently possible. Some of the reasons for these conclusions include:
- A rapidly changing vendor landscape rife with venture capital infusions, acquisitions and rebranding of existing capabilities to fit the perceived market momentum.
- A wide variance in product capabilities and features offered by vendors branding their products as CDPs.
- A nascent implementation landscape with many planned implementations but few examples of documented ROI to date.
- An implementation topography largely comprised of mid-market organizations furthering questions about how well CDPs can handle the complexities of large organizations.
- A potential clash around technology versus marketing-managed in terms of how to overcome integration complexities and account for processing essential business information.
- A need to reconcile overlapping capabilities between CDPs and existing tools in the martech stack.
This is not to say that the demand for CDP capability is manufactured. It is not.
Marketers have a very real need to corral customer data currently residing in disconnected silos both inside and outside the organization. In an HBR survey on using real-time analytics to improve customer experience the top challenges marketers faced were legacy systems, data silos and multichannel complexities. In a Forbes Insights study on the rise of CDPs, only 1 in 5 executives surveyed considered their companies to be leaders in customer data management and only 13% believed they fully utilized customer data.
These difficulties persist despite the fact that we have been trying to uniquely identify customers and consolidate first-party customer information since the late 1980s. As I highlighted last year, these systems have undergone many incantations, but today we still see customer-oriented data warehouses and data lakes facilitating analytics and master data management applications facilitating operational activities. The ongoing excitement around CDPs clearly indicates that these existing applications are not solving marketers’ problems.
Related Article: Is That New CDP Truly a Customer Data Platform?
Making an Informed Buying Decision
So how do marketers avoid the “Trough of Disillusionment”?
First: Cut through the confusion created by the wide array of vendors and capabilities currently in the space. In its recent report on the myth vs. reality for CDPs, Winterberry Group highlights the fact that while more than 100 vendors call their technology CDP, fewer than 20 really fit the criteria defined as follows:
- Ingest and integrate customer data from multiple sources.
- Offer customer profile management.
- Support “real-time” customer segmentation.
- Make customer data accessible to other systems.
This doesn’t mean you shouldn’t look at vendors who don’t fit exactly into these criteria, but it does require a very clear definition of the problems you are trying to solve with the CDP. If that problem centers mainly around integrating customer data into a unified and persistent source, enabling the management of that information, and making it accessible to other applications in the existing martech stack, then it is essential the product you select really does all these things. Gartner's discussions on the varied backgrounds of CDP vendors — operational data management vendors, marketing personalization vendors, and pure-play CDP entrants, each of which carry inherently different strengths and weaknesses — adds another level of urgency to this requirement.
Second: Dispel the notion you will be able to implement or manage this technology independently of IT. While the system may be implemented with outside technical help, e.g. the vendor or a third-party systems integrator, the likelihood of succeeding without ongoing IT involvement is very small. Having spent most of my early career helping companies build customer profile systems of various types, I can categorically say that the robust customer identity matching solutions required to make a CDP accurate always require tech savvy — they are not solutions that business can drop in and forget. Information quality degrades over time, systems generating customer information change, and the business rules regarding how and when to merge duplicate customers are never static. Ongoing support will be needed to ensure the CDP stays in sync with existing customer systems. Keep in mind other solutions providing customer profiles (e.g., MDM) are rarely, if ever, managed by a business unit other than IT.
Furthermore, the volume and complexity of applications that will feed into or receive information from the CDP make it virtually impossible that out-of-the-box APIs will work in every instance, especially in the case of the many legacy applications that generate much of the data a CDP will require.
One very positive change in industry thinking around CDPs from last year to today is reflected in this area. The Winterberry report stipulates that the industry is moving away from “marketing-managed” as a criterion for a CDP and does not include it in its definition. The CDP Institute has also dropped marketing-managed from its description. And, Gartner speculates that one possible future for this technology is it could be subsumed into the more technical data management space.
Third: Clearly delineate between the capabilities of the CDP and the capabilities in your existing martech stack. Unsurprisingly, given the varied backgrounds of participating vendors, CDPs boast many additional capabilities to the core criteria defined by Winterberry Group. These can include audience messaging and testing, householding, next best optimization, journey analytics and discovery, and orchestration engines. Sophisticated marketing groups will already have many of these. Duplicating them in a CDP will simply cause additional confusion.
Related Article: Clearing Up CDP Misconceptions
Establish Your CDP Plan Up Front
The CDP is a wonderful idea: designed to solve some of the very real problems that marketing encounters around unifying customer information. But they also require thoughtful consideration and careful planning. Understanding exactly what problems you need to solve and matching the solution to those problems; gauging clearly the amount of IT support you will need and securing it before purchasing; and mapping how the CDP will fit with existing applications (both integration and capability overlap) can help to ensure you make the right decision regarding a CDP.