What is a CDP (Customer Data Platform)?

Let’s explore what a customer data platform is – and why you need it for your business.  
Morgan Hugoboom
13 December 2023
Blog

Customers today experience a business through more touchpoints than ever. Customer data includes automated emails, social media, smartphones and other devices – even online and offline interactions. Businesses need a way to manage the data on all of those interactions. 

A customer data platform (CDP) allows businesses to gather all this data across each touchpoint – and organize it into a central database. Providing a comprehensive snapshot of customer behavior, a CDP is a powerful tool for marketers, product teams, sales, and more. 

Let’s explore what a customer data platform is – and why you need it for your business.  

What is a CDP?  

A customer data platform (CDP) is software that collects customer data across multiple sources, devices, and interactions. It then consolidates everything into a central database of customer behavior.  

The database showcases every customer journey across any of their respective touchpoints. Data is collected in real-time, providing a comprehensive and updated customer snapshot. 

Businesses can then disseminate the customer data across their organization. The CDP is easily accessible to teams like marketing, products, and customer experience. 

Departments within an organization can segment the data and analyze specific customer groups. This provides a more streamlined customer experience across multiple channels, creates personalized campaigns, and more. 

A customer data platform allows businesses to collect an overwhelmingly large amount of data about customer behavior – and then make sense of it all. 

Why You Need a CDP 

Data today is more fragmented than ever. You need to move quickly and make informed decisions. If not, you risk losing valuable sales or wasting time on efforts that won’t see results.  

A customer data platform helps teams across your organization see centralized data in real-time. Data comes from all touchpoints, including offline and customer relationship management (CRM) software. The CDP produces unified customer profiles that illustrate customer behavior across all channels.  

Teams can then harness the powerful customer analytics to make data-driven decisions. They can better personalize customer experience and products. CDP marketing also optimizes campaigns and other marketing strategies for higher return on investment (ROI). 

What Does a CDP Do? 

From real-time customer behavior reporting to powerful integrations with other software and artificial intelligence, customer data platforms help businesses create data-driven strategies and campaigns at scale.  

Requiring minimal IT or developer assistance, customer data platforms are easily managed by marketing teams or other professionals in an organization. This puts data management directly in the hands of the teams who need it.  

Customer data platforms at a glance 

Specific capabilities of a customer data platform will vary between each vendor. Typically, CDPs can: 

  • Collect real-time data from any source 
  • Create unified customer profiles 
  • Track customer behavior across multiple channels 
  • Provide customer analytics 
  • Match online customers to relevant offline data 
  • Manage data that is online and offline, known and unknown (POS, CRM, email, etc.) 
  • Share data across systems 
  • Capture the full detail of collected data 
  • Store collected data indefinitely (subject to privacy concerns) 
  • Manage customer data in compliance with privacy and security laws 

How Does a Customer Data Platform (CDP) Work? 

First, a CDP collects data across almost any customer interaction – including known and unknown data from both online and offline channels.   

A customer data platform can collect data from: 

  • Point of sale (POS) 
  • Customer relationship management (CRM) 
  • Automated email 
  • Inquiries 
  • Customer service 
  • Social media 
  • Paid ads 
  • And more 

The CDP then matches customer data points using specific identifiers, organizing the cross-channel data into unified customer profiles. These customer profiles combine the online and offline data, known and unknown, and so on – and create comprehensive snapshots of each customer’s behavior across each touchpoint.  

All of the customer data goes into one centralized database that is updated with real-time information. This customer data platform can then be shared across departments, streamlining efforts and ensuring uniformity as all departments access the same data set.  

Segmentation with customer data platforms 

Customer data platforms have powerful segmentation capabilities. Departments can segment customer data broadly or to a tighter level of detail – such as viewing data for all customers who interacted with both a Facebook campaign and an email sequence. The limitless possibilities of customer profile segmentation means that teams can develop extremely targeted campaigns, marketing efforts, or customer experience updates to fully optimize potential. 

Advantages of CDP Marketing  

The customer data platform is a critical tool for any marketer. With real-time customer data, unique customer profiles, and the detailed level of segmentation and analysis available, CDP marketing uses data to create informed and targeted campaigns for every audience across any channel.  

Integrations with MarTech, AI, and software 

Businesses can also easily integrate their CDP with other software such as artificial intelligence or MarTech. Stacking the software provides more powerful ways to analyze customer data, make projections, and more. It also enables businesses to customize their stack to manage the data in a way that best serves their company’s needs. 

Intuitive, easy-to-manage customer data software 

While the initial integration between a customer data platform and other software might require IT or developer involvement, a CDP typically doesn’t require much technical involvement to manage. Marketers and other organization professionals can easily manage and analyze the data they need to generate data-driven experiences. By reducing the dependency on IT professionals, CDPs allow for faster implementation of data and more agile efforts within an organization. 

What are the Benefits of a Customer Data Platform? 

Customer data platforms help businesses make smarter, more strategic decisions by harnessing the power of real-time customer data collected and synced across all platforms.  

The benefits of a customer data platform (CDP) include: 

  • Real-time data collection 
  • Comprehensive customer profiles from all touchpoints 
  • Unified customer data across an organization (reducing data silos) 
  • Minimal developer or IT involvement needed (can be managed by marketers) 
  • Data-driven customer experiences 
  • More personalized customer experiences and campaigns 
  • Integration with existing technology and MarTech 
  • Better compliance with data privacy and protection laws 

By using a CDP, businesses can streamline their operations, reduce data silos, and provide more personalized customer experiences across all touchpoints (both online and offline).  

A customer data platform also makes it easier to maintain compliance with data privacy regulations. This is especially important as businesses interact with customers internationally.  

Companies operating in European markets (or collecting data from these customers) must follow EU data privacy laws. If these companies also operate or collect data on customers in Canada, their data collection has to meet Canadian privacy standards, too. Privacy laws even exist at more local levels, such as the State of California in the United States.  

Luckily, most customer data platform vendors are already data compliant or certified across major markets. The centralized system of a CDP further allows businesses to exercise more control over their customer data – making it easy to update practices at scale to meet regulations. 

CDP vs. CRM: what’s the difference? 

While a customer relationship management (CRM) tool collects data related to the sales cycle and customer interactions, a customer data platform (CDP) collects data across all customer touchpoints – including across the CRM.  

In short: a CDP tracks customer behavior and a CRM tracks customer interactions. 

Businesses can have multiple CRM scenarios since the information collected is more limited to specific instances, but they will only ever have one CDP because the customer data platform collects all information on all customers and instances. 

Harnessing CDP Marketing, Strategy, and Optimization 

In an age where customer experiences will only become more diverse and data points will continue to multiply, it’s crucial that businesses have a method of harnessing customer data 

The customer data platform (CDP) gives businesses a strategic advantage by presenting a complete database of all customer behavior. A CDP allows businesses to capture customer data, segment it for specific audiences, and create targeted, personalized campaigns and customer experiences. 

When personalization drives ROI – a customer data platform is one tool a business can’t afford to miss. 

Find out how your business can benefit from Dialog Insight.

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