What is a customer data platform and how do you build one?
A customer data platform (CDP) is a type of database software that creates a persistent 360-degree view of your customers. It consolidates first-party data from a variety of sources and enables fast and easy search and retrieval of granular customer information.
A CDP is an essential tool for any modern digital marketing organization. To build this platform, you need to collect and integrate key data, clean and organize the data, merge the data into a single database and enrich the data by various means.
Get to know more about CDP to discover the benefits you can get from it.
- A customer data platform is database software that integrates customer data from a variety of sources.
- By integrating a variety of customer data, a customer data platform provides a complete picture of each customer.
- Customer data can include personal attributes, behaviors, transactions and interactions with customer service.
- Building a customer data platform involves integrating data, cleaning and organizing data, identity resolution and data enrichment.
What is a customer data platform?
A customer data platform is database software that enables marketers to learn more about and better understand their customers. By integrating data from across disparate sources, a CDP provides a complete picture of individual customers and their behaviors. It can also segment customers by various factors, enabling highly targeted marketing campaigns.
A full-featured CDP provides the following functionality:
- Collects, normalizes and integrates data from a variety of internal and external sources
- Stores data indefinitely for future use
- Shares data with other systems and channels
- Provides robust reporting and analysis of the collected data
How is a CDP different from DMP and CRM solutions?
A CDP is just one tool for collecting and analyzing business data. It's often compared to similar solutions designed for different departments and functions, such as data management platform (DMP) and customer relationship management (CRM) software.
The most basic difference between these data-based solutions is which departments they're designed for:
- CDP is designed for marketing departments and tracks marketing-related data
- DMP is designed for advertising departments and tracks ad-related data
- CRM is designed for sales departments and tracks sales-related data.
Despite their similar-sounding acronyms, the three solutions offer quite different functionality. For example, only CDP and CRM solutions track first-party customer data and only CDPs provide identity resolution by integrating data from multiple sources.
Bottom line, if you need a marketing-oriented solution, CDP is the solution of choice. If you need a solution for your sales department, CRM is the best choice. And if you're just analyzing advertising performance, go with a DMP.
What are the benefits of using a customer data platform?
According to Deloitte, the average business uses 28 different data sources for generating customer insights. A CDP centralizes all of those sources into a single data source, which offers numerous benefits to today's marketers. Members of the CDP Institute report that the top benefits are creating a unified customer view (88% of members) and providing enhanced analytics (54%).
Other important benefits include:
- Reduces redundancy and errors
- Increases efficiency
- Provides easier data access
- Improves marketing velocity
- Helps you better understand what customers want, need and expect
- Enables you to contextualize customer data to provide more actionable insights
- Enhances data security
- Ensures regulatory compliance
What data does a customer data platform use?
Today’s fast-paced Internet-based environment generates a wealth of data about current and potential customers. The sheer volume of available data makes collecting and analyzing that data a challenge, which is where a customer data platform comes into play.
CDPs focus almost exclusively on first-party data — that is, data collected directly from the customer. Most CDPs work with the following types of customer data:
- Personal attributes — names, street addresses, email addresses, birthdays, education levels, etc.
- Behaviors — users' actions on a website or in a mobile app
- Transactions — purchases, returns and other information garnered from POS and ecommerce systems
- Customer service interactions — data from live chat sessions, session duration, number of sessions, NPS scores and other data collected by CRM systems
Most CDPs also work with metrics generated from marketing campaigns, including impressions, engagement, reach and the like.
How do you build a customer data platform?
According to the 2021 CDP Institute Member Survey, only 24% of consumer businesses currently employ a customer data platform. Unless you're one of those 24%, you need to consider building or buying a CDP for your business.
Building a customer data platform involves four stages:
1. Integrate the data
The first step in any customer data platform is to bring together all relevant first-person customer data into a single centralized database. This includes data from a variety of sources, as previously discussed. You'll want to link the data based on common variables, such as customer name, email address or phone number.
2. Clean and organize the data
Next, you want to make sure that the data is complete and accurate. This means identifying and fixing any missing or incomplete fields, removing duplicates and validating the data for accuracy. The data can then be organized by customer segment, location or other important variables.
3. Implement identity resolution
In the next stage, you need to merge data from multiple sources and link it to individual customer profiles. This is called identity resolution or data unification and it lets you expand the basic information gathered for each customer to provide greater insight.
You can take one of these three approaches to identity resolution:
- Identity graphing, which collects known customer identifiers, such as name or address
- Deterministic matching, which identifies the same users across multiple data sets
- Probabilistic matching, which employs a statistical approach to measure the probability that any two customer records represent the same customer
4. Enrich the data
Finally, you want to transform the data to make it more usable for all involved. This typically involves filling in missing details, standardizing data formats and so forth to ensure higher data quality. Your customer data platform is now ready for your employees to use.
(The following video further details how to build a customer data platform.)
Turn to Optimizely for a superior customer data platform
While you can build your own CDP from scratch, many companies find it easier to deploy proven CDP software instead. The Optimizely Data Platform (ODP) lets you harmonize disparate data, understand customer needs and behavior and act on the opportunities presented. The ODP seamlessly integrates with Optimizely's digital experience platform to help you provide a superior digital experience for all your customers.