A customer data platform, otherwise known as a CDP, is a type of software that collects large amounts of customer data in an effort to consolidate information from a variety of different sources.
Once the data has been collected, it is then combined to create a single database containing all customer information. This database is centralised, and from there, it can be used to perform a plethora of different tasks, from personalised, targeted advertising to broader marketing campaigns.
A good CDP will allow you to understand and deal with customers more effectively, ultimately improving business.
What Does a CDP Do?
In the most basic sense, a CDP collects customer data from a variety of different sources, including websites, email, social media and more.
From there, the data is organised into customer profiles that are easy to use and understand. Once these customer profiles have been established, they’re then made accessible to other relevant systems. This may include, for instance, social media advertising management systems for platforms like Facebook or Instagram.
But, how does it actually work? That is, how is a CDP actually able to collect data in this way and perform this function?
How Do CDPs Work?
The general idea of merely collecting data is one thing, but understanding how that actually works is a little more complicated than that.
CDPs make use of SDKs (software development kits), built-in connectors, webhooks and APIs (application programme interfaces) to collect data from multiple sources.
The data collection programme is conducted by means of advanced algorithms that are specifically designed to identify specific types of information. Rather than using a human to collect information manually (which would be both time-consuming and has the potential to introduce errors and miss things), this automated process creates the potential for the collection of big data.
These programmes’ algorithms are implemented to evaluate certain information. For instance, they may be implemented to evaluate a website or something similar. From there, they’re able to quickly and effectively find relevant data that can be fed into the analytical part of the platform’s process.
From there, the platform organises all the data it’s collected. It does so by means of instructions given by whoever is managing the software – they can request individual customer profiles, different customer groupings and more.
Once the data is organised, it is then implemented in various ways. This may involve manual intervention, with marketing teams evaluating customer profiles, behaviour and more in order to make data-driven decisions.
It’s also fed into automated programmes that use the data and analysis done on said data to motivate things like automated targeted marketing campaigns, for instance. This helps ensure that consumers are seeing adverts that are relevant to them, thus increasing the likelihood of advertising being converted into sales.
What Kind of Data Makes Up a CDP?
Now that you know how the data in question is collected, how it’s collected and what happens to it once it’s been collected, it’s important to be aware of exactly what kind of data CDPs look for, so to speak.
Most commonly, the data collected by CDPs is called first-party data. First-party data is data that is collected by businesses and is used for marketing purposes by only the company in question. This information is collected directly from the customer and collection doesn’t require consent as it tends to be information that’s already relatively freely available.
First-party data stands in contrast to third-party data, however, and the main difference is that third-party data normally requires consent from customers. This is because it’s normally used to target and advertise to potential new customers, among other things.
While first-party data is the primary type of data collected by CDPs, there are also other types of data that may be collected. Let’s have a look at the different types of data that CDPs collect:
- Personal Data: Basic customer details including name, contact information (cell phone number and email address), date of birth, social media handles and other demographic info like race, income level, employment status, gender and more.
- Behavioural Data: Behavioural data includes information on what customers do online. This refers to things like the types of websites they visit, what they click on, how they use their cell phone, whether or not they make online purchases, activity on social media, email engagement, interactions with adverts and so on.
- Product Usage Data: If the individual in question uses IoT devices like a smartwatch, as well as info surrounding any subscriptions they may have.
- Transactional Data: All history and activity regarding purchases as well as customer service issues, including submitting reviews, making enquiries and complaints and more.
- Third-Party Data: Data that is purchased from third-party vendors, for instance, including things like more detailed demographic and socioeconomic data that isn’t freely available and has been obtained from external sources.
- CRM Data: All information regarding sales history and interactions, as well as customer loyalty data.
- Location Data: Real-time location data (geolocation information) and IP address information that is obtained from mobile devices and computers respectively for the purpose of regional marketing.
- Consent Data: Customers’ preferences regarding their preferred channels of communication as well as what they’ve opted in and out of with regard to consent and privacy issues.
These are the different types of data that are collected by means of CDPs and are later organised and analysed for marketing purposes, creating customer databases.
Why Businesses Should Use CDPs
CDPs offer a variety of different advantages for businesses that use them. By collecting, organising and analysing this data, they’re able to gain valuable insight into their customers in order to be able to improve and customise marketing efforts, improve customer experiences and satisfaction and ultimately, improve business outcomes.
Here are some specific reasons businesses can benefit from the use of CDPs:
- Customer data is consolidated, ensuring that all information on customers can be used and nothing falls by the wayside. Also, communication with customers is consistent across channels.
- Businesses can interact with customers on a more personal level, customised to their preferences and needs.
- The use of CDPs allow for increased potential for viable scalability.
- Decision-making is motivated by data, making it more insightful and more likely to be successful.
- By dealing with customers on a more personal level, customer retention levels tend to improve.
- CDPs can help manage customer consent and ensure compliance with privacy regulations.
- Marketing becomes easier because it can be more targeted – that is, companies are given clear guidelines on how to direct marketing campaigns and how to deal with certain customers, rather than just guessing and playing a game of averages.
- CDPs improve the integration of data, speeding up time to market.
Overall, by making proper use of CDPs, businesses give themselves the opportunity to gain far deeper insight into their customers which can not only make their lives easier in terms of managing customers and relationships with them, but also ultimately, making customers happy, encouraging them to stay and improving business overall.