What is a Customer Data Platform (CDP)?

Every company is investing in data, and the reasoning is simple: the more you know about your customers, the more you can build and deliver personalized experiences. Personalization is the key to driving business growth, but actually building and delivering personalized experiences requires a complete view of your customer.

This is the exact reason why every company either has or is in the process of implementing a Customer Data Platform (CDP).

This blog post will cover:

• What is a Customer Data Platform (CDP)?
• What’s the Difference Between a CDP, DMP, DSP, and CRM?
• How Do CDPs Work?
• Benefits of CDPs
• The Different Types of CDPs
• CDP Use Cases
• How Much Do CDPs Cost?
• How Do You Implement a CDP?
• The Best Enterprise Customer Data Platforms
• How to Choose a Customer Data Platform?

What is a Customer Data Platform (CDP)?

A Customer Data Platform, or CDP, is a solution or architecture that enables you to collect, store, model, and activate your customer data. The entire purpose of a CDP is to provide a centralized platform where you can create unified customer profiles and build personalized experiences for your customers.

How Data Flows Through a Customer Data Platform

These platforms are built to help you collect and consolidate your first-party data into a central database, acting as the bridge between data and marketing teams to help solve two key functions:

1. Helping your data teams collect, unify, and move data between systems more efficiently
2. Enabling your marketing teams to build self-serve audiences for marketing campaigns

What’s the Difference Between a CDP, DMP, DSP, and CRM?

There are more MarTech tools available on the market today than ever before, and trying to understand the difference between them can be very challenging, so here’s a quick breakdown:

How Do CDPs Work?

At a high level, CDPs provide a central platform or interface where you can easily connect behavioral events, bring in data from other sources, and then route that data to other marketing applications. Architecturally every CDP has four basic components: event tracking, identity resolution, audience management, and data activation.

Event Tracking

Event tracking is the backbone of any CDP. All CDPs provide out-of-the-box software development kits (SDKs) or code snippets that you can implement on your website or mobile app to track user-completed events and traits about your customers. Once you’ve deployed an SDK on your website or mobile app, every time a user takes an action (e.g., add-to-cart), that behavioral data is fired and stored in your CDP or forwarded directly to a downstream destination of your choosing.

How Event Tracking Works

Identity Resolution

Identity resolution is a critical feature of any Customer Data Platform because it allows you to unify different customer datasets and touchpoints across different data sources. This capability ties all of your customer data together, both offline and online, so you can link every interaction and action back to a specific user profile to understand the entire customer journey. CDPs help solve this problem by helping you merge and de-duplicate customer data into rich identity graphs, which you can use to stitch sessions and unique identifiers back to specific individuals or other custom entities like households or subscriptions. For example, if a user visits your website and then returns later and purchases a product, you can use identity resolution to stitch those two sessions together under one unified profile.

How Identity Resolution Works

Audience Management

Without an audience manager, a CDP is just “Customer Data Infrastructure,” so CDPs come equipped with a visual user interface and audience builder. This interface allows you to build and define customer segments and personas without writing SQL, using filters and boolean logic to aggregate customer records based on criteria that you define (e.g., users who abandoned their shopping cart in the last seven days). The entire purpose of this capability is to give your marketing teams self-serve access to customer data so they can create hyper-specific audience segments for marketing campaigns.

How Audience Management Works

Data Activation

CDPs wouldn’t be useful if the data solely stayed in the platform, so CDPs are designed to integrate with various operational tools to power data activation. For many marketers, this includes ad platforms, lifecycle marketing tools, or even CRMs (basically any platform where you interact directly with your customers). The value here is that CDPs automatically integrate with various third-party APIs, so your data team doesn’t have to build and maintain brittle pipelines to try and move data. This means all you have to do is define what data points or attributes you want to sync to your destination, and the CDP will handle the rest.

How Data Activation Works

Benefits of CDPs

Most people don’t realize that many Customer Data platforms were created by accident. Basically, every major CDP vendor available on the market today evolved into the category. Most of the platforms started as CRMs, infrastructure tools, databases, tag managers, email tools, marketing automation systems, or even Reverse ETL platforms. Eventually, all of these SaaS platforms realized the same thing: building and maintaining a persistent customer record is difficult. Subsequently, every platform developed a very similar suite of features, and the CDP category was born.

Before CDPs existed, managing customer data was really difficult. Not only did you have to set up your own internal processes to collect your data, but you also had to ask your data team to build and maintain custom integrations and pipelines to your operational tools to ensure that data was available for your operational use cases.

CDPs are immensely valuable because they solve several challenges:

• Data Unification: Centralizing and unifying your customer data in one platform
• Self-Serve Audiences: Giving your marketers the ability to dynamically build audiences with a no-code UI
• Data Activation: Automatically syncing data to marketing applications (e.g., ad platforms, lifecycle marketing tools, etc.)
• Personalization: Enabling your marketers to build and power personalized customer experiences across any marketing channel
• Team Alignment: Driving better coordination between your data and marketing teams
• Speed and Agility: Allowing your marketers to rapidly launch and test campaigns across different channels

The Diffferent Types of CDPs

Every CDP platform will have some bias or nuance toward a certain industry or use case, but generally, there are five types of CDPs: Traditional CDPs, Composable CDPs, Hybrid CDPs, Infrastructure CDPs, and Marketing Clouds.

CDP Use Cases

While the lofty promise of Customer 360 is one of the main driving forces for all CDP adoption, mpanies usually choose to implement a CDP for one of the following use cases:

How Much Do CDPs Cost?

For the most basic version of a CDP, you can expect to pay between $50,000 and $150,000 annually. For larger companies with more data, this can quickly get into hundreds of thousands or millions of dollars per year. The overall cost is directly linked to two factors:

1. Features: the number of features you need/want within your CDP (e.g., event tracking, identity resolution, audiences, journeys, analytics, etc.)
2. Data Volume: the number of monthly tracked users (MTUs) stored in your CDP and the number of destinations you send that data to.

If you're an enterprise organization with millions of users, you can expect to pay much more than a small-to-mid-sized business with a few hundred thousand users. This steep cost is one of the main reasons that companies are choosing to adopt a more modular Composable CDP architecture, assembling individual components like event collection or identity resolution around their existing infrastructure rather than buying into an all-in-one platform.

How Do You Implement a CDP?

The “black-box” nature of traditional CDPs makes it difficult to implement because you can’t actually use or test the technology without undergoing a lengthy sales process to scope out your needs and requirements. The actual implementation process of a traditional CDP can take anywhere between 6-12 months, and undergoing a proof-of-concept (POC) is nearly impossible for most CDP vendors because there is quite a lot of engineering work involved in getting these platforms up and running.

To implement and start using a CDP, there are four key steps:

1. Define your data collection strategy
2. Configure your identity resolution processes
3. Build and define the audiences for your marketing campaigns
4. Sync your data to your downstream destinations

Keep in mind that traditional CDP architecture makes adapting to dynamic use cases very difficult because they’re designed with a strict event spec that you have to follow, and they have no way of guaranteeing event delivery to your downstream tools if your events fall outside of their spec. Storing data can be equally challenging because most traditional CDPs come with preconceived notions about how you can collect and store data because they each have a unique schema that doesn’t necessarily conform to your specific use cases.

The only solution that’s flexible enough to integrate with your existing data infrastructure and leverage your existing schema is a Composable CDP because you can take advantage of the existing schema that lives in your data warehouse, and you don’t have to re-conform your data to another platform. With technologies like Reverse ETL, you can basically circumvent the entire implementation process and start activating your data immediately.

How to Choose a Customer Data Platform?

To actually select a CDP, you should create a use CDP case roadmap and identify the following:

1. Use cases: What is the key problem you’re trying to solve?
2. Existing Technologies: What technology do you currently have in place?
3. Stakeholders: Who will be using the CDP?
4. Existing data assets: What customer data do you already have access to, and what customer data do you need available in your CDP?
5. Marketing applications: What marketing applications will your CDP be powering (e.g., where do you need to send data to?)
6. KPIs: How will you be measuring the success of your CDP deployment?

Doing this will help you align the technology to your specific business needs.

Choosing a CDP should come down to your specific use case, and you should never buy technology just for the sake of technology. One of the fundamental problems with traditional CDPs is that they come with preconceived notions that inform how you collect and store data.

For example, if you’re a video streaming company, you have to follow the event tracking spec and the schema structure provided by that vendor. Most CDPs only support objects like users and accounts, so if you have custom data science models or other entities like playlists, subscriptions, workspaces, etc., you’ll quickly run into trouble. Anything custom that falls out of the norm is not natively supported, and trying to configure your CDP to enable that type of custom use case is almost impossible.

The Best Enterprise Customer Data Platforms

There are a lot of enterprise customer data platforms available on the market today, and trying to understand the differences between them is extremely challenging. With that in mind, here’s a quick summation of the top ten CDPs:

Closing Thoughts

Every company is converging to a point where they know they need a centralized platform to manage and act on their customer data. However, many companies don’t realize that they already have a data warehouse that is already acting as a single source of truth. This is why leading companies like Bol.com, Zebra, and Chime are turning to the Composable CDP. If you’re looking into CDPs, you should thoroughly evaluate traditional CDPs vs. Composable CDPs.

If you’re interested in learning more about the Composable CDP, book a demo with one of our solution engineers or check out our Composable CDP Hub.