CDP: Is the Future Now? 

CDPs (Customer Data Platforms) continue to be at the forefront of most martech conversations. During 2021, many marketers added CDPs to their tech stack, and at the same time a great number of marketers were/are asking “what the heck is a CDP and do I really need one? 

Josh Francia, Chief Growth Officer, Blueshift and “CDP godfather”, David Raab, Founder, Customer Data Platform Institute had a dynamic discussion covering the trends occurring in the world of CDPs and what to expect in 2022…

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The following discussion includes:

• What exactly is a CDP and has that definition evolved over the last year?
• Why do CDPs matter for marketers?
• Where will CDPs evolve in 2022?

Josh Francia:  I’m excited to talk to David Raab, who I’ve dubbed the godfather of CDPs. David, back in 2016, started the customer data platform Institute or the CDPI, which is an Institute about the mission of customer data platforms. He himself coined the term CDP a few years before that and has led a lot of the initiative to drive CDPs: what they are, how they’re valuable, and how companies are gaining a lot of return from their use.

David Raab: Yeah, back in 2013, I did coin the term customer data platform. I’ve spent most of my career as a marketing technology consultant and an industry analyst. Now I do spend my time just sort of evangelizing and trying to help companies do a better job with their customer data, which in many situations means they need a CDP. So those two things go together quite nicely.

What is a CDP?

David Raab: The official CDP Institute definition states a “CDP is a packaged software offering that builds a unified persistent customer database, that’s accessible to other systems”. There are three components to that packaged software: It’s something that you buy. It’s not something that you build, like you build a data warehouse or a data lake or something like that, 2) a unified persistent customer data.  It takes data from all different sources, unified. 3) It stores it in its own data store. That’s very important. It’s not just pulling it from one place on demand, which means you couldn’t view the history very easily and then make it accessible to other systems.

Josh Francia: I remember working in marketing in travel and finance and salivating over all the data that companies gather. Then you get really disappointed when you’re using your email marketing platform or your social media marketing platform. You say, well, all know from the platform is what the platform has told me about the customer, but I know we [company] have a ton of data about this customer. I just have no way of accessing it when I want to use it to influence the marketing I do. And I felt that struggle a lot, right? It’s like, if only we had access to this rich data, campaigns would be so much more relevant and much better.

That’s how a CDP has gotten a lot of adoption. Originally, it was saying that need was real and it became more and more real as you got more channels where people were producing data on. Right? You know, maybe 10, 15 years ago, all of the email data floating only in email systems was okay, right? Because there wasn’t a ton of data being produced outside of that system that was relevant to influence that system. But now there is. People are on mobile, they’re on desktop, they’re in the store.

That’s all producing data inside the company. And now marketers are struggling if they can’t get access to all that data to make relevant touchpoints or offers for those customers. So that’s kind of where the issue of the friction lies. So how has CDPs evolved since then? You know, there’s been an explosion in CDPs.  Everyday someone else is saying they’re a CDP. So talk to us about how it’s evolved since maybe the beginning and when you initially coined the term as well as when the CDPI was started.

What about the build versus buy debate?

David Raab: There’s interestingly enough, a resurgence of the build versus buy debate. By definition CDP is packaged software, you buy, you don’t build it. But once the IT department gets involved, they say, “oh yeah, that’s a database. We can build a database.” And of course, it’s way harder than it looks. And two years later they’re still shooting blanks.

Josh Francia: The bill versus buy debate, it comes up all the time. IT engineering groups who know data better than anyone else they want to build. They feel they can build a customized version, very specific to their needs that maybe even offers a market advantage, they say, “this is our proprietary technology, and it’s what’s going to allow us to get an advantage over our competitors.” But what ends up happening more times than not is the enthusiasm quickly wanes when they start getting their first feature and bug requests, and the development teams lose interest.

Plus, typically there’s no documentation on how the solution was built. And now you have incoming engineers that say, well, I don’t know how this thing works, but apparently everyone really wants it. And I’m not exactly sure how to fix this. So we got to rewrite it. And all of a sudden, you know, if you, if you just fast forward, they could have actually bought something and been miles ahead of where they are versus building it and have, and still have the customization they need. That’s one of the greatest things about CDPs. And as you talk about as platforms, they ingest the data from a variety of sources, the customer that the company has, but they have a lot of flexibility to how they use that data.

And so, you know, different companies can get wildly different results from the exact same implementation, right? It’s not necessarily the CDP itself. It’s the facilitation of getting the value to your customers and what you do with that. It’s really up to your business and how you do that. Have you seen that a lot?

David Raab: It’s exactly what you said. They start out enthusiastic and then they find out it’s a lot harder than they thought. Regardless, some will plunge ahead. Often the marketing department or whatever business user sponsored the project will get frustrated, often forcing the issue. As you know, by definition, CDPs are built to be flexible. They’re built to take all data sources. They’re built to share data with all destination systems. They are inherently a very flexible technology. As you just said, ultimately, it’s up to the user to make good use of it, the finest CDP or home-built technology.

If the users don’t take the time to learn and to take advantage of the system, you’re not going to get much value.

Josh Francia: You know, there’s a lot of different CCPs out there. Blueshift we say, we’re more of an activation CDP.

We focus more on the campaign management side and connecting the omni-channel journey. There’s other CDPs out there that are very data focused and they don’t really talk about the orchestration side.

How would you classify CDPs; what buckets should the different CDPs fall into?

David Raab: Well, we have five buckets at the moment. Although to be honest, I think the two that you just laid out, which is one of the focus on data, the ones that focus on application or activation are probably all you really need. We started with three different classes of CDPs and it’s now evolved up into five, but, and we talk about data CDPs, which are CDPs that just build the unified persistent database and that’s all they do. And that’s what makes them CDP. Then we talked about analytics, CDPs, which build a database and have an analytical capability, which is usually predictive recommendations, sometimes it’s attribution.

There’s different kinds of analysis you might see in a CDP. Then we talk about campaign CDPs, which do the data, plus the analytics plus message selection, which we abbreviate as campaign because message selection is too long to fit on a slide. So that’s picking the message for an individual and your CDP creates a scheme with that. That’s part of the core CDP capability, but to actually say, you know, Josh is on my list, but Josh should get this message and David’s should get that message. Even though they’re in the same segment, that’s message selection. That’s what a campaign CDP does. And that might be for an outbound campaign, like an email campaign or for a real-time interaction on a web personalization.

Beyond that, we talked about delivery CDPs, which do all the stuff I just talked about, but also deliver the message. So they have an email system built in, or a web personalization engine that actually sends out the web pages and so on. And then finally we talk about operational CDPs, which are CDPs that are embedded in a larger system, like say an e-commerce system, even an ERP system. So part of the actual operating system or reservation system, the operating system of the company, but they all have that CDP at the center. If they don’t build that unified persistent database, they’re not a CDP, obviously there’s a lot more going on there than just building profiles.

Josh Francia: If we simplify to a marketing focus, activation and data focused management as maybe the two higher level categories, they all kind of fall into how do the two align? Can two CDPs work together? Can you have companies that have a data management CDP and a marketing activation CDP, and also what types of customers do they attract? What types of people are they going after? Are they going after the same group? And they have to make the decision? Are they going after two different groups, two different use cases and they can work kind of in harmony. 

David Raab: It’s surprisingly common for a company to have two different CDPs. It usually is one that’s really good at data management, the data collection bits. A lot of the CDP vendors who started out as tag managers for analytical tools, where they were really designed specifically to assemble data, tend to be strong with that. And then you might hook that up to an activation CDP or a campaign CDP that, you know, has really strong functions for that message selection capability. And you know, again, by definition, we wouldn’t call it a CDP if it couldn’t assemble the data, but yeah, some are better at than others.            

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What’s the difference between a CDP and a marketing automation tool? And if you combine these together, is that called an activation CDP? 

David Raab: That’s a good question. More and more people think the CDP is a marketing automation system of the future.

To some extent, it’s a similar issue about optimizing for different use cases, but marketing automation is much closer to CDP in terms of design. Again, as you say, do bulk segmentation on large lists quickly, you know, most marketing automation tools are basically used for email.  So if you think about a delivery CDP, which has an email system built in, or some delivery channel, usually it’s email that works for a campaign CDP, which has that functionality built in. Well, yeah, that pretty much by definition could replace a marketing automation system, but not all CDPs fall into those categories. 

What are the similarities and differences between CDP versus DMP technologies? 

David Raab: Interestingly, DMP in Europe was really sold as all of your first party data will be stored in the system. So the sales pitch for DMP and we’re talking a little bit, five years ago now, it was quite similar to the CDP sales pitch. In the US not so much us. It was pretty clear that DMPs were really about cookies and they were about audiences for display advertising. Now, again, the way you optimize a cookie store is basically a big flat file where you have just one row with all the attributes of every profile or we’ll call it a cookie. It doesn’t have to be a cookie, but it usually has a cookie.

That means that there’s only so much data in every attribute or a column in that data structure. So it’s a tick male. Yes. Female. Yes. You know, lives in New York, you know, made a purchase in the last 30 days. You can have thousands of those columns, but you cannot store all the details. We can’t store the transaction record. So if I want to find people who bought red shoes on a Tuesday morning and a size eight, we’re not going to have a column for that. And you inevitably lose detail when you use the structure.  It’s fine for DMPs, because they are just about, I want to plot out all the people who bought in the last 30 days who live in New York, no sweat.

Again, they’re designed to be good at pulling out those columns. They’re not designed to store all the granular detail that we might use for say a predictive model. 

Josh Francia: I always looked at DMPs by definition, especially in the US which didn’t allow you to have PII data in them. So you can’t have PII data. You can’t have the customers, first name, last name, email address, phone number. You can’t have that in the DMP. And it is much more about allowing acquisition marketers to say, find me people that are in market for my product in broad senses, right? Because if they go out to the general market and just start blasting display ads or blasting programmatic ads, they’re not going to be very efficient, but they say, hey, I can use this DMP.

And they can tell me people that are in-market for this category that I’m selling or in-market for this or something, then you’re influencing your acquisition strategy. Now your dollar goes a little further, but what they’re not doing is finding out the individuals of any of those. Whereas CDPs tend to focus on once you’ve identified the customer, right? Once they’ve actually become a customer, how you continue to engage with them and continue to reactivate them and make them a more loyal customer over time. And so I almost look to them as, as you know, they can work together in a lot of ways. Now I think obviously DMPs main struggle is they have a lot of cookies that are being deprecated.

And that is their main source of getting that data of who’s in-market. And so there’s a lot of different technologies right now. They’re trying to solve some of those issues, but those are some issues that are currently prevalent in that world where CDPs don’t really struggle so much with that because it’s very known data, right? It’s first party cookies its not third-party cookies and things like that.

I want to invest in a CDP, what kind of cleanup do I need to do with my current data in my systems before I properly implement a CDP? 

David Raab: Start with a couple of basic things. You know, there’s a lot of data sources out there we’ll see counts on a big company of 150 sources, not uncommon in a CDP, even a smaller company you’ll have a dozen or so, but you might only need two or three to get started for for your core use cases. And then the data elements within those sources. Cause you’re not going to use all the fields in the database. You would just use a few. So start kind of simple and, and look at those things. And once you have a process in place, once you have the data flowing through the systems, then you can begin to expand your scope a little and look at a few more fields and check the quality of those. But again, always, always, always in relation to a particular application. 

Josh Francia: Yeah. And I think we’ve seen that a lot where our advice to a lot of people is to start with the end in mind. So what are some things you want to accomplish? And again, we talk to most marketers because we’re more of an activation focused CDP. And so we say, well, what kind of things do you want to be able to do in your campaigns that you can’t do today? And they said, well, we want to be able to do this, this and this. Okay. Well, great. Which ones are most valuable, like stack rank them your top, top ones versus your lower ones. And we said, okay, what data are you missing today to be able to do one through five is say, oh, we don’t have this record. Okay. Where does that record live? 

And so you kind of work backwards from that because then you have applicability for the data, which makes getting the data ingested far easier because now you know how to use it. And those types of things versus the approach of just put everything in and we’ll figure it out later, that feels like a very big hill to climb and no applicability at the end. Right. And so we kind of go in that same direction. You find out a few use cases that you can get some value out of. And then the nice thing about CDPs is they’re flexible, right? They’re flexible on purpose. So you can add data in and not disrupt the data that you had before. Right?

You don’t have to reset everything every time. And so I think that’s a main, big difference from a lot of other more standard kind of relational septate type tables where, you know, changing one thing here actually could influence a ton of things in the system where in CDPs is not so much like that it’s built to be flexible. It’s built to be scalable and adjust to your business as your business changes.

What are the trends that you see happening in 2022, in the CDP landscape?

David Raab: People have been very confused about all of the different things that our CDPs meet. I still hear a lot of complaints about that, but I think people kind of began to get, you know, they really are these two sort of clusters of capabilities that are both CDPs. I still argue that they’re both CDPs, but they are pretty different and you kind of probably want one or the other, you know, there shouldn’t be that much confusion about them.

I think that clarity will help. You know, what we’ve seen just recently is we’ve seen some of the big independent CDP vendors raise a lot of money, like, you know, a couple hundred million dollars type, a lot of money.

And those guys are going to spend that on something.

They’ll spend it on marketing to some extent, but there’s only so much marketing you can do. So I’m expecting to see some more acquisitions by those vendors, which is not historically something that we’ve seen. And they actually just was one last week by mParticle. But I suspect we’re going to see a lot more of that as those guys try to flesh out their systems, particularly if they’re on the activation side and they want to become more of a full suite tool, because that’s the other thing that we’re seeing that we’ve seen over the last few years is companies that already have activation tools, email, and things like that.

Buying a CDP that kind of mergers all the channels together because often they bought separate systems for SMS over here and email over then personalization over there and there. And, and they need something to glue it together, which of course is a CDP. So we’ve seen around of acquisitions. So I think those are going to mature because those acquisitions have already happened in many cases, but now they’ll let you do the acquisition.  And then finally, as I say, the build versus buy, there are now more tools that you can purchase to assemble a CDP with if you’re so inclined, if you’re not a cheap department that wants to do that. So that also is going to have more and more of an impact on the market.

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