What is a Customer Data Platform (CDP)?

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A Customer Data Platform (CDP) is a new way to organize your sales and marketing data in a single place. Find out why companies set up customer data platforms to gain an edge over their competition and better understand their customers.

You’ll also find out why relying on customer relationship management or checking multiple marketing software platforms is no longer enough to grasp what your customers want.

What is a Customer Data Platform?

Customer Data Platform CDP integrations

A customer data platform (CDP) is a software platform that collects, processes, and manages customer data so that you can market your products and services more effectively.

A CDP works by acting as a central home for customer data so that marketing, sales, and customer service can all come together to serve customers. A CDP works by gathering data from multiple sources like your brand’s social media accounts, website analytics, live chat events, etc.

It’s worth creating and using a customer data platform because you can create more relevant marketing and better understand what your customers want. You can also cut wasted time and money from your sales and marketing efforts. Instead of guessing, you’ll have accurate buyer personas to guide your ads, salespeople, and other departments.

Three Reasons Companies Need a Customer Data Platform

As a concept, a CDP is relatively new. You might not have a CDP in place yet, but traditional digital marketing is no longer effective. There are several key reasons why a customer data platform is no longer optional.

1. The Rise of Omnichannel Communication

More and more companies are using offline sources, Google Ads, and other forms of marketing technology. For example, the marketing department might send direct mail campaigns; the sales team may call potential customers, and customers may visit your locations. Throughout all of these experiences, it is ideal for offering a consistent, personalized experience regardless of how customers interact with your brand.

An accurate customer profile, powered by a customer data platform, is the foundation for successful omnichannel communication. If you lack the marketing software, customers might have a different experience across channels. That’s a problem because confused customers are far less likely to buy.

2. Personalized Marketing Is Now Standard

Sending the same Marketing Messages to every potential and current customer is no longer acceptable. For instance, take the role of customer loyalty in your marketing. If you have one customer who has bought from your company a dozen times and another customer who has only bought once, each of those people has a different relationship with your company.

Marketing technology, especially a customer data platform, makes it possible to tailor marketing messages based on actual customer behavior. Customizing marketing based on customer purchases, frequency of purchase and related activity gives you the best understanding of what a customer wants.

3. The Death of Third-Party Cookies

You might have heard about the death of the traditional cookie. We’ve published an in-depth guide to this development in the future of cookies. In brief, marketing systems based on third-party cookies are no longer practical given the evolution of privacy regulations and changing consumer privacy.

The new approach is to gather first-party customer data directly from your customers. By gathering this data into a centralized customer database, you will be positioned to offer personalized communications. By adapting to the first-party data world, your digital advertising will draw on a wide variety of sources, including customer interactions, customer preferences, and customer purchases.

Customer Data Collection: What Information Do You Need?

For your customer data platform to perform effectively, you need to gather data. The specific data you collect will depend on your business goals. A fully digital business will have minimal need to draw on offline sources. In other cases, you might focus your data collection on Google Ads, email address collection, and first-party cookies.

Before going further, let’s cover one critical point. Your company privacy policy needs to be clear about which data you are gathering and why. Generally speaking, privacy laws do not forbid you from gathering customer insights from your data. However, you need to follow the law and meet the expectations created by laws such as the GDPR (General Data Protection Regulation) in Europe and the CCPA (California Consumer Privacy Act) in California. Consult a legal professional to verify your marketing activities align with privacy laws.

To set the foundation of your customer data collection efforts, start with the following sources of information. Some of these data might be in your marketing software. Other data like product purchases and returns might be in a different database. It’s critical to identify all of these sources to make the most of your customer data platform.

Gather Customer Engagement Data

Start with the most critical types of customer data: customer purchases and returns. Most business intelligence tools make it easy to create reports for the marketing function. Analyzing patterns in purchase data makes it far easier to create engaging product recommendations.

Once you have a firm understanding of purchases, look for data sources closely related to purchases. For example, an e-commerce website might track data on abandonment carts. Analyzing cart abandonment patterns (including interviews with potential and current customers) can be very powerful. You might just learn that buyers are giving up on their purchases due to a  poor customer experience with your checkout process.

Gather Data From Your Marketing Campaigns

Reviewing data from your marketing software and campaigns is the next step to enriching your customer understanding. We recommend drawing on data from several kinds of marketing campaigns: website analytics, email marketing, and social media. Gathering data from online activities is usually the best place to start, so we recommend focusing on these areas first.

Website Analytics

Aside from actual customer purchase data, website analytics provide fantastic insights. You can quickly understand what anonymous users are interested in. Track the pages they visited, which online reviews they click on, and much more. To get more customers on your website, it’s wise to invest more resources in content marketing.

Email Analytics

There are several sources of information to consider in this area. For example, you may have email service providers that send out coupons, newsletters, and other offers to your customers. Tracking which emails are opened and which links are clicked is one of the easiest ways to improve marketing efficiency. Make sure you choose an email service provider that integrates your other marketing tools.

Social Media Analytics

The final ingredient to enable personalized campaigns are social media analytics. Start with the basics like which marketing activity your customers like (e.g., comments or likes on ads and organic posts). Of course, your business decisions cannot be based on social media data alone. Instead, this source needs to be integrated with other customer data tools to build a complete picture of your customers.

Qualitative Data

No marketing team should rely on data, artificial intelligence, predictive models, and other quantitative sources. It is also vital to periodically get on the phone, talk to customers, and use free-form surveys. Reading a customer satisfaction score will only tell you so much. If you have not had these discussions, pull up a few profiles from your customer relationship management app and set up meetings.

Why Is Centralized Customer Data Management Important?

You are trying to solve a marketing problem like how to improve customer retention. Over time, you see more customers complain and cancel accounts. Management asks how to investigate and come back with actionable insights to improve the situation.

You have two choices to get a 360º view of the customer: using a customer data platform or manually reviewing a wide range of marketing analytics tools.

Manually creating a single customer profile could take hours of research. You’d have to pull product purchase data from one system. Then, you would need to see how many customer touchpoints that person had with the sales team. Finally, you need to check how the customer interacted with your company on digital channels. You might even need to ask the customer if they interacted with your brand through offline channels like billboards or events.

With a customer data platform, understanding an individual customer is far more manageable. You might determine that people with low customer lifetime value tend to skip product demo meetings and webinars and immediately sign up for the product. In this scenario, you now have an idea to test to raise customer retention. Adjust your business rules and marketing automation tools to emphasize demos and webinars.

Is Your Company Ready For a Customer Data Platform?

The benefits of using a customer data platform are significant. You can cut marketing costs, raise customer satisfaction and loyalty and become more confident in your marketing efforts. Despite those benefits, a customer data platform is only helpful in some situations.

You need the proper foundation for a customer data platform to produce value. Without these systems, habits, and data sources, there will not be much for a CDP to achieve.

1. Customer Data

A CDP does not generate customer data on its own. Instead, it organizes and analyzes existing customer data sources. You need to have a customer relationship management (CRM) system and website analytics in place. You will gain even more insights as you feed in more significant amounts of customer data to your CDP.

You can get started with a small amount of customer data – even just 30 days’ worth of data is enough to get started. However, your marketing analyses will only become reliable and valuable when you have at least a year of data to review. A year’s worth of data matters because it will help you identify seasonal trends in your data.

By the way, note that we have emphasized customer data, not just marketing data. It is crucially important to focus on people who have bought your product.

2. Sales And Marketing Automation Tools

Marketing automation systems are critically important in getting ready to use a customer data platform. A CDP, even one with advanced analytics, will not create and execute new marketing campaigns. That’s why you need a few tools in place. At a minimum, we suggest using an email marketing service and website analytics platform in place.

3. A Test-And-Learn Outlook In Marketing

The final element for getting ready for a CDP is the right outlook or mentality. Marketing platforms can point out trends. However, it is still up to your marketing team to generate new ideas and campaigns. It is crucial to adopt a “test and learn” approach to your marketing. Come up with different ideas based on your data and put them to the test. Once you find marketing approaches that hit home with your customers (e.g., seasonal discounts), develop that winning idea further.

Do You Need a CDP If You Already Have A Customer Relationship Management (CRM)?

You might be wondering how a CRM and CDP differ. The answer is simple – they are intended to achieve different goals. Putting these software tools together produces even greater results.

How a CRM Helps Your Growth

Most sales departments have CRMs to help the sales team efficiently communicate with prospects. A CRM is a great tool to help salespeople track their activity, plan who to contact next, and navigate complex deals. A well-managed CRM helps management create more accurate sales forecasts and support the sales team.

On its own, a CRM has its limitations. It may not provide a detailed view of the entire customer journey. Further, a CRM usually has limited value for the marketing team.

How a CRM and CDP Work Together

Connecting a CRM to your CDP makes your CRM data much more valuable. In addition to helping your sales team, CRM data is now available to the marketing team. You can make real-time adjustments to marketing campaigns based on what current customers are saying and doing. Since a CDP includes many different data sources – purchase data, website analytics, and much more – it can produce richer customer insights.

Boost Your Customer Data Platform With First-Party Data

Whether you’re focused on improving marketing efficiency, getting more leads, raising customer satisfaction, or simply revenue growth, implementing a customer data platform can help. Gather first-party data with Arena Personas and integrate it to your CDP today.

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