CDPs: The Great Transformation

Data and marketing are inextricably linked through time. So it’s no surprise the evolution of database technology continues to help marketers with more advanced strategies and tools. The past few years we have seen cloud based data warehouses like Redshift, Snowflake & HANA/BW continue to evolve. After a few stops and starts a central path forward is emerging for marketers. It’s a path that will not only evolve marketing but might be so important as to transform how business operates across the world.

Customer Data Platforms

If excitement is measured in the number of participants, well, CDPs are the most exciting thing ever in marketing technology. The CDP Institute (which has been around a year and a half) now lists SIXTY start-ups in their CDP Directory. All the biggest names in VC have made their bets. With all this excitement and money these start-ups have been building the market.

With this technology so mission critical to any business, a number of F1000 businesses are design/build/owning the CDP technology themselves. Going rate to build is about $3M and another $500k-$1M per a year to staff and service.

If there is one component all CDPs have in common it is their plumbing. They all take data from everywhere, organize it, and can send it to anywhere. Considering the market is new, most of the CDPs started by doing something else. But the market is here now and it’s heating up. It’s also generating its fair share of confusion. This is the only thing that could derail it besides the top 3 or 4 vendors being picked up before the market fully blossoms. Oracle for one has signaled they will build this themselves with recently acquired assets, so we’ll see.

The reason for all the excitement is CDPs will be transformative. It is because they do two things that CEOs & CMOs have been waiting to happen for a long time. First, they unify customer identity in a first-party business controlled environment. Second, they create a platform for that identity that can be activated, tested and optimized to help inform everything from loyalty to supply-chain.

Let’s dive a little deeper on these two transformative progressions for marketers.

The Great Unification

Website data, search data, A/B testing data, email data, social data, display data, cross-device graphs, attribution models, call center logs…then there is the sales data, merchandise data, satisfaction data…all sorts of data related to customers. All this data about customers, all sitting in different systems.

CDPs take all of this data and unify it behind a single customer identifier. For the first time a single ID becomes the atomic unit of data collection. CDPs take the raw data from anywhere and process it by cleaning it, validating it, de-duping it and merging it into a single table of customers with their dimensions and attributes.

Personalization. 1:1 marketing. From the very first e-commerce systems and CRM systems like ATG & Oracle in 2000, to Oracle buying ATG in 2010 and promising this utopia, to eight years later we’re still waiting for it.

We’re waiting because nobody has connected these systems around identity. No one has provided customers with common business processes and a unified experience across channels. No one has been able to tie in loyalty, supply chain, pricing, real-time recommendations, knowledge management, let alone the ability for a full range of machine learning that can drive orchestration across the consumer journey.

CDPs make this possible.

The Great Activation

The evolution of marketing execution has been about the growth of the channels. Email, Site, Search, Social, Display all channels where brands use multiple vendors and have segmented their customers using different data datasets.

These segments are not portable.

Your email segments are in MailChimp. Your display segments are in Krux. Your site segments are in Adobe Target. This fragmentation led to siloed strategies and learning…and maybe worse of all, different teams. Try coordinating a marketing plan across email, SEO, display, site optimization. It’s impossible not just organizationally, but because these channels have their own segments.

While this “bottoms-up” channel level of customer intelligence is important, it makes highly scaled and strategic “top-down” understanding of your customers nearly impossible. CDPs change that. CDP enabled top-down customer strategy will be a crucial strategic change in how marketing will be conducted. That change will be transformative. If marketing strategies are going to focus on increasing CLV (Customer Lifetime Value), and they are, it is essential to have a top-down approach.

One could argue that marketing optimization being siloed by channel rather than part of a cohesive CLV focused strategy is the very thing that has destroyed leading brands over the last eight years. The focus of brands has moved from overall relevance of their products and services to thinking, strategizing and activating against their customers through a CPA (Cost-per-Acquisition) lens of relevance by channel. Low-price for Amazon, re-targeting for Facebook, conversion from Paid-Search.

It’s a worthwhile argument to explore (maybe in a future post or tweetstorm).

Transformational Questions

With all this promise comes a whole host of questions. With so many vendors there is confusion in the market. With such precious business data and GDPR there are fears and concerns. With these new capabilities there are challenges staffing, strategizing and executing on the incredible power of these platforms. To derive the value from CDPs you need data science, data engineering and analytics people.

The most important questions to answer once you have a CDP are how should you think, learn, predict, measure and segment customers? What does relevance mean now and what are your customer economics? What do we do and how do we organize and structure our business now that we know for the first time everything each customer is doing across all touch-points?

Progress is messy.

CDPs will be transformative.

Customers will win.

The winners will understand their customers.