Customer Data Platforms (CDPs) and Data Management Platforms (DMPs) might look similar, but each plays a different role in marketing. In this post, you will learn their main differences and applications.
Connecting the dots between your customers and the dozens of touchpoints with your brand is not an easy assignment. There are multiple roads that lead customers to your channels, and, in the best scenario, to buying your products.
If you were to map the physical and digital interactions that guide your customer through the conversion funnel, you would probably find ad pieces, search queries, social media and proprietary content channels, interactions with customer support, and so on.
With so many channels in mind, your team has to make sure your brand’s message is unified across all of them. You want the path to your content and your products to be as seamless as it can be, right? In order to do that, you need good tools for customer data management.
A report from research company Forrester found that data-driven businesses grow on average 30% more yearly than those ones that don’t systematically harness data within the organization. Data-driven companies are also expected to drive $1.8 trillion by 2021.
Historically, companies have relied on Data Management Platforms (DMPs) and Customer Relationship Management systems (CRM) to gather insights, shape marketing campaigns, and content strategies.
But what if you could complement these tools and engage your customers with even more compelling and personalized messages? That is possible with the emergence of Customer Data Platforms (CDPs), a prominent type of data management system.
In this guide, we will explain exactly how Data Management Platforms and Customer Data Platforms work, their differences, similarities, and how you can use each of them to leverage data-driven marketing in your organization.
What is a Customer Data Platform and what does it do?
A Customer Data Platform (CDP) is a software capable of unifying customer data from different data systems and customer-facing platforms. It gathers quantitative and qualitative information from several touchpoints with customers, regardless if they already repeat customers, new customers, or prospects.
Customer Data Platforms collect all sorts of data in a granular way, combining customer’s demographic data, buying history, social media preferences, call centers, and navigation data.
Basically, CDPs cross data from CRM systems, DMPs, customer support channels, payment methods, social media interactions, and different devices, allowing marketers to build a holistic view of customers and their pain points.
They also gather behavioral information, such as customer’s lifestyle and hobbies, transactional data from the company’s web site, mobile apps, advertising channels, social listening, and email marketing tools.
Here are specific examples of data collected by customer data platforms:
- Transactional and order data: Exact purchases, renewal dates, customer and product value, abandoned baskets, stage in the conversion funnel.
- Behavioral data from web and mobile: Products and categories browsed, clicks, store visits, interaction data, and number of pages visited.
- Profile data: Contact and opt-in data and psychographic data points, like details about lifestyle, context, content, and channel preferences.
As marketing executives are expected to keep track of all customer interactions, another great news is those customer data platforms makes its unified customer database accessible to other systems – and even other departments. Wouldn’t it be great to connect marketing, sales, and customer success data, for example?
Unified customer profiles
You might still be wondering how exactly CDPs can capture so much data. That happens because the software filters the data through algorithms to determine unified customer profiles.
These profiles are based on navigation patterns from your real customers and prospects, because they are mostly based on first-party data – Personal Identified Information (PII) that comes from customers navigating your own channels. Such accurate profiles make it a lot easier for marketers to build personas and segment campaigns. Since the data match is consistent across different platforms, CDP is known for offering deterministic matching.
As the processing of data happens in real-time, CDPs also make it possible for you to Quickly spot changes in customer behavior.
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What is a Data Management Platform (DMP)?
While leading marketing at a large organization, the least you should have is a data management platform to orchestrate your digital marketing efforts. The Data Management Platform (DMP) market size is expected to drive $3 billion a year by 2023, with a Compound Annual Growth Rate (CAGR) of 15% between 2017 and 2023.
If you are still not familiar with Data Management Platforms, it’s time to get acquainted with them. DMPs are intelligent data warehouses that are majorly used to drive customer segmentation and retargeting campaigns.
Their main objective is to increase audience engagement and make your ad targeting more effective. A DMP will monitor campaign strategies, identify conversion points and personalize campaigns according to them.
Segmentation on the Data Management Platform (DMP) can be done according to different data types, sources, end-users, and geolocalization.
These platforms focus on third-party, anonymized data collected through navigation cookies, device IDs, and IP addresses. Since the information captured is anonymous, DMPs automatically select data for marketing campaigns based on a process called probabilistic matching or lookalike modeling – when the system finds customers that are more likely to match your target audience by having similar qualities and behavior.
Here are a few specific examples of data collected by Data Management Platforms:
- Web and app data: General information about customers who visit your website and app, like age, gender, location, browsing, and purchasing history.
- Data from second- and third-party sources: Anonymous data from partner sites and apps and databases bought from other providers.
- Data from first-party systems: Sometimes, DMPs can include valuable, but highly sensitive information like customer’s name, address, email address.
- Data from advertising campaigns: Visualization and navigation data related to search-engine-optimization (SEO) marketing and display advertising campaigns.
If a major publisher wants to send its website data to its DMP, for instance, it can use tags. An e-commerce platform, on the other hand, might choose to send data from marketing automation tools.
What are the main differences between a DMP and a CDP?
If you are just starting to dive into data management tools, it is almost inevitable to mistake DMPs with CDPs. Although they share some similarities, they show far more differences when it comes to managing data. The CDP Institute, a platform-agnostic organization in the realm of data platforms, uses a simple quote to explain the distinction between CDPs and DMPs. They describe:
“CDPs work with both anonymous and known individuals, storing personally identifiable information’ (PII) such as names, postal addresses, email addresses, and phone numbers, while DMPs work almost exclusively with anonymous entities such as cookies, devices, and IP addresses”.
Yes, the main distinction between DMPs and CDPs is about the type of data they rely on. However, there are other important differences that impact how they are used. Let’s explore them in detail.
Types of Data
As the CDP Institute describes, the greatest difference between CDPs and DMPs lies in their use of Personally Identifiable Information (PII) – or data related to customers’ identity. In marketing terms, a PII is a combination of data used to identify a specific customer.
The logic behind CDPs is that you’ll be targeting individuals: the more data you collect about a single customer, the better will be the experience your brand will provide to him, specifically. It can help you analyze if the user can be converted to a customer or understand content affinity based on the customer’s inclination to visit articles, for instance.
DMPs, on the other hand, rely on anonymous data – from cookies, devices, and IP addresses – in hopes to reach customers who match their target profiles. DMPs are useful in capturing generic data, such as noting when a particular user visited a website and how long they spent on the page.
Another major difference between customer data platforms and data management platforms has to do with how long they store data. CDPs are based on historical records, which means you can store customer data for how long you think it will be useful. You could choose to maintain customers’ records for a long period to build in-depth, accurate customer profiles and nurture relationships. Or, you could set a time limit for it, but having a long record about customers make it easier for you to analyze their lifetime value, for instance.
DMPs, however, store data for shorter periods of time, usually up to 90 days (a cookie’s lifespan) to target ads and build lookalike audiences. That’s not always good because it prevents marketers from having the bigger picture of the customer data over time.
Customer Data Platforms are used to gather customer data in its organic form and deploying insights to other marketing platforms. Marketers can use CDPs to coordinate different marketing strategies across different devices and channels. Beyond advertising, CDPs can be used to leverage the integration of marketing teams with other areas, from sales to customer experience (CX). In this post, you can check 20 ways CDPs can be used in marketing.
DMPs, on the other hand, are often constrained to digital advertising activities. They help marketers coordinate campaign optimization, audience modeling, cross-channel segmentation, and retargeting.
In CDPs, database updates happen in real-time, while DPMs only allow scheduled database updates. It doesn’t mean that one model is better than the other, once the way you access and activate data will depend on your strategy.
Marketers can lean on CDPs for ongoing marketing efforts with single customers while relying on DMPs to potentialize specific campaigns and track their performance periodically.
What DMPs and CDPs have in common?
CDPs and DMPs do not necessarily replace one another. CDPs, specifically, can act as a complementary asset for DMPs. That means that the data gathered by CDPs can be enriched for better segmentation in DMPs, creating better lookalike audience segments. Therefore, you could choose either one or both of these platforms according to your marketing needs.
Generally, DMPs and CDPs will work side by side with customer relationship management systems (CRMs), which store data based on historical and general information such as contact, demographics, and notes about customers made by CRM teams.
Now, to set a common ground between DMPs and CDPs, we made a list of the assets they have in common.
- Both CDPs and DMPs aim to establish a Single Customer View (SCV) or a 360-degree view to help businesses understand their customers.
- Both platforms use data for audience activation and for delivering personalized user experiences.
- Both platforms offer reporting, analysis, and optimization tools
3 reasons why a customer data platform (CDP) is the best choice for marketers
While different management platforms are always welcome, many marketers are turning their attention to Customer Data Platforms. Despite the growth of data and spend on marketing technology, many CMOs still struggle to demonstrate the revenue impact of their marketing activities on the business.
In this scenario, CPD emerges as a promising tool to centralize valuable insights, automate marketing integrations, and track performance precisely. A study by Forbes shows that 53% of marketing executives are using CDPs to engage with customer’s needs.
To finish this guide, we made a list of 3 ways your marketing team could benefit from a CDP:
- Accurate personalization
In this day and age, not having a CDP can actually result in a poor experience for your customers. You can’t take the risk of making wrongful recommendations or serve ads that are not relevant within the user’s journey. Because it breaks data silos in organizations, CDPs are generally more effective than DMPs in attracting qualified leads, optimizing marketing budget, and reducing customers’ acquisition costs (CAC).
A CDP allows you to acknowledge what products customers show interest in lately, as well as their purchase intent and how likely they are to churn. You can also find out their favorite interaction channels and stage in the customer journey. From there, you can come up with predictive models and improve content strategies for every channel.
Better data quality
The focus of marketing leaders is also shifting from third-party data and anonymous data to first-party, single customer data, which also addresses CDPs’ importance. As data privacy and compliance regulations become more consolidated, organizations increasingly seek to work with their own, integrated data.
Integration to other software
CDPs can be integrated into different touchpoints called “delivery platforms” or “engagement platforms”. These can be, for instance, your company’s email marketing or marketing automation software, website, or social media management platform.
Delivery systems interact with the platform to send out messages and collect engagement data that will feedback into the system. These integrations enable the planning of campaigns and the set of messages.
We know that there are many data management solutions in the market. But now that you have learned a bit more about DMPs and CDPs applications, maybe it’s worth strengthening your marketing technology stack.
We recommend you check out Arena’s customer data platform blog section to learn more about the potential of CDPs. You can also click here to get in touch with one of Arena’s consultants and learn the specifics about our CDP.