Understanding What a CDP Is and Why Your Business Needs One

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The pandemic has served to both accelerate digital transformations and refocus many organizations attention on their customers overall digital experience. While during the early days of the pandemic marketing budgets were either on pause or reduced, many companies have reinvested and prioritized the digital experience as they realized a customer data platform (CDP) is a critical key piece of infrastructure technology for affecting the overall digital experience.

According to the Customer Data Platform Institute July 2021 Industry Report, “the first half of 2021 saw a flurry of growth, funding and acquisitions as the CDP industry reconfigured itself during the COVID pandemic.” They found that the leading CDP companies added funding and grew significantly in 2021, while many smaller firms were purchased as companies built cross-channel engagement systems. The report estimates CDP Industry revenue for 2021 at $1.6 billion. 

A CDP will enable companies to understand their customers across all touchpoints, and while working in unison with other technology solutions, can modify and tailor that digital experience based on user behaviors for relevant and useful interactions.

Marketing leaders need to keep CDPs in view as a potential area of investment to address their customer-centric communication needs. According to MarketWatch, the CDP Market size is projected to reach $5.17 billion by 2026, from $1.01 billion in 2020, growing at a CAGR of 31.2% during 2021-2026.

What Is a CDP

A customer data platform (CDP) is a data management system that has a unified and persistent database which can be accessed by other martech systems. CDPs consolidate and integrate customer data from multiple channels into a single database which allows an organization to build a unified profile around an individual customer. The structured data from a CDP can then be delivered to other martech systems to enable customer-centric features like personalized messaging campaigns.

Why use a CDP?

By aggregating and unifying data from all the places customers interact with your company, CDPs can help organizations get a more complete understanding of their customer’s behavior in order to deliver them a consistent messaging and transactional experience across all digital channels.

Related Download: Customer Data Platforms Buyer’s Guide

What Are the Core Elements of a CDP?

CDPs need to have three key elements in order to be called a CDP. Be wary martech shopper since many companies are repackaging various legacy solutions and calling them a CDP, so make sure any software you are considering meets the following criteria, as defined by the CDP Institute.

1. CDPs need to be managed and controlled by marketers, with limited ongoing technical support from their IT departments of external vendors. While it’s understood CDPs may need extensive technical support to set them up, marketers should be able to run daily without tech support.

2. A customer data platform at its core need to be a persistent, unified database that collects data from multiple sources and associates that data with an individual customer profile.

3. CDPs need to be accessible by external systems and deliver data to them.

Related Article: Customer Data Platforms Shine Where CRMs Fail

What Are the Key Features of a CDP?

A CDP needs to have an easy-to-use, web-based UI with certain built-in functionality to be called a CDP, according to Gartner and The CDP Institute. Look for the flowing features from any vendor calling their software a CDP.

  • Data Collection – A CDP needs to be able to load in data from multiple customer data sources (websites, server data, CRM, email, etc.) in real-time.
  • Unification – A CDP should have the ability to consolidate and unify customer profiles of a single person.
  • Segmentation – CDPs should have a web-based UI that gives marketers the ability to segment customers into custom audiences.
  • Activation – A CDP needs to be able to push segmented data back out to other platforms and external systems like email, mobile, social media, and web.

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