If there’s ever been a hot acronym (particularly in the restaurant industry) it’s CDP: customer data platform.
We’ve written about this before, but CDP is a glorified database.
That’s it.
A CDP’s job is to collect data/unify customer touchpoints with your business so you can (hopefully) intelligently segment customers into groups and push those groups to places of interest, like a marketing tool (Facebook) or a BI tool (Tableau).
In this way – so the theory goes – the CDP makes your business more efficient at collating, harnessing, and profiting from customer data by putting that data to “work”.
Here’s the world’s most overused CDP visual but it does get the point across:
The real “work” in CDP comes via the integrations… and they’re not all that hard. The value in choosing a mature CDP is that they’ll have those integrations out of the box, while a newer CDP will require that they build the integration.
But frankly, larger merchants move so slowly that a newer CDP would have the integrations done by the time the larger merchant went live.
The other value of CDP is compliance with the ever-sprawling and totally-ridiculous privacy laws (as if the generation that invented dick pics cares about what you do with their data).
Realistically, the odds of privacy becoming a material problem are very small, and we guarantee every organization on the planet is in violation of some privacy law, somewhere.
It’s just a question of risk tolerance. If you’re that worried, buy more insurance.
CDP has been around for over a decade, but one would think it’s a new piece of technology given how little brick and mortar merchants seem to know about it.
That’s because, per usual, brick and mortar industries are not on the leading edge of technology.
Through this three-part series we’ll lay out:
- The use cases and needs of a CDP (hint: you might not need one)
- The types of CDPs and why your use case truly matters in choosing the right provider
- The changing model of CDPs, which we feel is the most important consideration in aligning yourself with the right long term partner
CDP Use Cases
At its core, there are two use cases for CDPs:
Marketing activation, and marketing measurement.
Theoretically one could say this is the same business effort, but the former is owned by the marketing function while the latter can have many more departmental stakeholders.
Before you can activate marketing you need to get all of the customer touchpoints in the same place. That’s because marketing should want to reach customers based upon their individual habits. The more that’s known about a customer the more tailored a marketing message can become, increasing the odds of conversion.
Customer data can reside in a myriad of places; here are a few such silos:
- Websites
- Mobile devices
- Surveys
- Wifi systems
- CRMs
- Loyalty systems
- Point of sales
- Support ticketing systems
Once the data has been integrated and deduped, longitudinal metadata can be appended. For example, maybe you only want to target customers who make more than $200,000 in annual income. Odds are that your customers didn’t volunteer this information, so one could use a service provider to add additional context to your customer records.
With highly confident, real-time customer data aggregated in a single repository, marketing can go to work.
In a perfect world, machine learning would pore over your customer data to build marketing strategies for you. There’s unfortunately no shortcut for building content, which requires human intelligence to be any good in practicality, but machines are getting better at identifying opportunities by analyzing customer behavior.
Tools like Braze and Iterable are often considered best-of-breed and are widely used by larger, mostly e-commerce brands to automatically segment and engage their customers.
These tools work in conjunction with the CDP to push marketing campaigns to different channels on different cadences, usually optimized for the end user. The CDP, therefore, serves as a pipe for marketing activation.
Measurement is the other use case of a CDP.
Obviously one would want to measure the outcome of their marketing campaigns and have that feedback funnel back into their marketing optimization software, but there are a ton of use cases for analyzing data out of your CDP that involve more than just marketing. Think of the following:
- Price changes
- New product launches
- New locations
- Store/website remodels
- Hiring/operational changes
Data from your CDP can be exported to measurement tools to analyze how external stimuli might be influencing your customer behavior. How popular is that new product, should you feature it more widely, and does offering it change customer behavior in a positive manner?
Of course all of this is really interesting and sounds reasonably logical, but who actually needs a CDP?
Should everyone use a CDP?
Meh, most likely not.
The reality is that the math of CDP ownership won’t ever pencil for certain users.
For example, for a small business to integrate into their data silos they’re likely eyeing some multiple of $10,000. A good SWAG would be something like $5,000 per data source as the SMB user is not going to be nearly technical enough to manage integrations on their own.
And you know what this business expects to pay for a CDP?
Prolly ’bout a dollar a month.
CDPs are aspirational products for the vast majority of the market.
There, we said it.
The idea of 1-1 personalized marketing sounds awesome, and further iterating marketing based upon that 1-1 performance makes pants even tighter, but it’s just not realistic for a lot of businesses.
Which is why CDP started with e-commerce/DTC (direct to consumer) brands that had easy access to data and were more technologically sophisticated.
Businesses that don’t make it on the Venn diagram of CDP use cases must settle for a halfway house of a CDP from an existing service provider if they want anything to scratch that itch.
For example, Square does an excellent job for SMB merchants with their marketing tools, automating much of the complexity away even if that means sacrificing functionality.
Is Square’s “CDP” good enough for multi-location merchants?
Likely not.
But for the overwhelming majority of their customer base it should be heralded as a panacea.
In the next article we’ll discuss the kinds of CDP, and why not all CDPs are relevant for consideration depending on the user.