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Why More Advanced Companies are Investing in a CDP

Jayesh Patil
Data Solutions Architect
Feb 1, 2022

CDPs are in high demand! Learn why companies are using a Customer Data Platform to address digital acceleration, mounting martech stack fragmentation, and shifting privacy demands. Spoiler: A CDP platform can enhance insights for marketing, customer experience efforts, and decision-making.

Context for Rapid CDP Platform Adoption

1. The accelerating speed of digital business

The pandemic pushed the world online and accelerated digital business in stunning ways. First, the influx intensified existing trends. For example, in Q4 2019, e-commerce experienced ten years' growth in just three months (source), and 2020 accelerated this.

All that online activity increased the volume, variety, and velocity of data being tracked within organizations. With this increase, the demand for storing, accessing, and utilizing data has also rocketed, along with the need for businesses to operate faster.

In fact, in May of 2021, McKinsey reported that this acceleration has shifted the speed at the of level of core business operations. "What was considered best-in-class speed for most business practices in 2018 is now slower than average. And at companies with the strongest technology endowments, respondents say they are operating at an even faster pace" (source).

2. Mounting marketing-technology (martech) stack fragmentation

Digital acceleration plus increased pressure on data-driven decision-makers have moved businesses toward composable technologies to help fuel digital acceleration. Businesses also increasingly rely on multiple SaaS products. These trends find a company's data cordoned into ever more digital environments.

This data fragmentation will become more of an issue in the coming years as leading companies continue to invest in digital technologies. McKinsey reports that top economic performers plan to "double down on tech as a differentiator."

McKinsey & Company graphic detailing organizations' planned investments in digital and technology.
Graphic source.

3. Shifting customer expectation, especially around data privacy

At the same time that customer behavior has changed so dramatically, so have their expectations. Firstly, customer sentiment favors a privacy-first internet. Regulations and tech leaders have shifted technology and digital business to enfold these sentiments at a rate that has caused disruption for marketers who have long relied on cookies and third-party tracking techniques to help target customers with their products and messages.

Secondly, customers expect exemplary experiences when they interact online with brands. Leading organizations hustle to provide seamless customer experiences as a differentiating factor in an infinitely populated marketplace that exists behind screens. Customer experience has never been more important.

What is a CDP?

A Customer Data Platform is software that integrates, harmonizes, and unifies your customer data, turning it into a strategic asset and enabling you to create more compelling and relevant customer experiences.

A CDP integrates all your customer data into a central database and unifies that data to create a single view of your customer. You can then use that holistic, 360-degree view (complemented with AI/ML) to better understand your customers—who they are, what they like, their shopping history and habits, etc. With that enhanced understanding, you can then engage with them on a 1:1 level.

Six Reasons Why Customer Data Platforms are Popular Right Now

Given these market trends, CDPs are rapidly becoming more popular. That's because CDPs do a great job unifying mass quantities of data, providing data privacy, and producing insights that lead to excellent customer experiences.

1. CDPs satisfy the need to remove data from silos to create a customer-centered data structure.

Historically, data we gathered about customers stayed in the channel in which it was collected. Email data stayed in an email data channel. Call center data stayed in the call center channel, etc. Now, though, the number of channels and tools to facilitate customer interactions has exploded.

Also, customers themselves don't stay neatly in their channels: think about pandemic retail users moved between mobile, telehealth, curbside, and online channels. Customers fragment their own experience, and it's up to marketers to coordinate these.

If organizations want to compete and win, data needs to be focused around customers, not siloed in channels.

Why? Because personalization leads to lower acquisition costs and unsatisfactory customer experiences lead to lost customers. Leading businesses are turning to CDPs because they bring customer data from various sources into a single system to create a single customer view. With single customer views, businesses can understand customer behavior, act on it, and build look-alike models around those views to predict other valuable customers.

2. CDPs unify data across multiple SaaS and cloud solutions.

The SaaS solution market has exploded, currently growing at a rate of about 17% per year. This abundance of tools helps get things done quickly, but they also fragment customers across more different environments.

Organizations that have invested in composable solutions and technologies to accelerate business growth may adopt several products to deal with the complexity of large-scale projects.

"With the average enterprise company's stack topping out at 91 tools, that can translate to a lot of engineering time that could otherwise be used to improve customer experience and product development" (source).

CDPs can unify data across multiple SaaS and cloud solutions to return time and focus to understanding and improving the customer experience.

3. CDPs enable identity-resolution and help marketers understand the customer journey.

When data is unified from multiple sources, marketers can access customer journey analytics with less IT help. CDPs often use deterministic matching to group multiple user profiles into a single customer view. Many CDPs are also adopting more probabilistic matching and some leverage AI to stitch customer profiles. CDPs also help clean and de-duplicate the data before activating the data towards a destination platform.

Who is your customer? If you haven't solved this identity problem, a CDP can help.

4. CDPs use AI to aid in data processing and segmentation for targeting.

Smart CDPs use machine learning models to perform semantic tagging and utilizing matching algorithms to resolve identities. Some CDPs provide out of box machine learning recipes that provide models for reusability targeting customer attribution and segmentation. Using AI, we can find anomalies in customer behavior and discover hidden segments. Running AI on top of a CDP allows us to predict churn, create product recommendations, and do campaign optimizations. AI can be leveraged to show dynamic and curated content for customers using look-alike modeling.

5. CDPs are easy to use and can inform decision-making both for marketers and broadly across an organization.

CDPs are a packaged customer data solution designed with self-serve, user-friendly interfaces so marketers can easily gain insights and act to deliver data-informed experiences. In the past, marketers might have had to rely on IT to isolate and pull customer data from data warehouses before it became useful, but CDPs deliver insights in an interface that help marketers personalize at scale to create better engagements and more conversions.

A big challenge when it comes to implementing a CDP adoption and buy-in across departments. A CDP spans anywhere your data spans: From marketing to privacy teams, naturally, and also to analytics teams and IT. Best practice for implementing a CDP is to help different stakeholders buy in early to the value of a CDP for the entire business.

6.  CDPs help companies maintain a privacy-first approach with first-party data

With the depreciation of third-party cookies and privacy-first web and mobile applications, gaining customer trust is critical. Companies are preparing for a tidal wave of first-party data while the seemingly oppositional forces of personalization compete within the various SaaS and cloud platforms businesses are turning to.

CDPs can make privacy-first and personalization work together because consent and effective governance controls can capture and augment first-party data. Customer data platforms create controls to manage PII and procedures to handle GDPR and CCPA-related requests, supporting the needs of customers to have the power to control their personal data and businesses' needs for consistent, effective data governance.

How Search Discovery can help you evaluate or implement a CDP

At Search Discovery, we help our clients assess their technology stacks and business needs and provide assistance with evaluating CDPs that best suit their objectives. We also utilize our extensive experience and partnership with various CDP vendors to help our clients navigate through CDP implementation. We help connect the missing pieces in the CDP and provide clients with the best expert advice for implementation.

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Jayesh Patil
Data Solutions Architect

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