More media companies are investing in customer data platforms (CDPs) as they look to gather and monetize audience data. With the demand comes a growing number of CDP vendors, which increased by 60% last year, according to the Customer Data Platform Institute.
While CDPs can help publishers identify key audience segments and drive sales, the key to success is choosing a vendor carefully, says David Raab, founder of the Customer Data Platform Institute.
“It really does pay to take your time and select [a CDP] right because there is so much choice,” said Raab at the FUSE Digital Marketing Summit in November. “Doing it right gives great success; doing it wrong means you’ve wasted a lot of time and money.”
In his presentation at the summit, Raab broke down the key functions of a CDP, explained how CDPs differ from other customer databases, and shared tips for smart selection. Keep reading for important takeaways from his talk and watch the video above for his full presentation.
Defining a CDP
Raab defines a CDP as “packaged software that builds a unified, persistent customer database that is accessible to other systems.” Here’s what each element of this definition means, and how it benefits the CDP user.
- Packaged software: The pre-built components and flows of a CDP make it fast and easy to implement, which translates into low cost and risk for the adopter.
- Unified, persistent customer database: A CDP gathers data from “all the sources and all the details” and organizes it around a customer view, says Raab. “It includes primarily first-party data, but there’s no reason you can’t put in third-party data.” Likewise, it has mostly identified data, but you can input anonymous data.
- Accessible to other systems: “These are systems that are designed to share,” says Raab, who emphasized that a CDP helps eliminate data redundancy. You can seamlessly switch email systems or change other tools in your media tech stack without worrying about losing customer data, which is safely stored in the CDP.
Combined, these attributes differentiate CDPs from data management platforms (DMPs), CRM systems, and other database tools.
When choosing a customer database solution, you need to assess the gaps in your business needs and determine which tool best equips you to fill them, advises Raab.
Selecting a CDP
All CDPs have three core functions: to ingest, process, and expose data. However, some vendors also provide analytics and engagement tools for segmentation, prediction, personalization, and orchestration. In the B2B market, many CDP vendors also package in their own external database.
“CDPs come in three flavors, if you will,” says Raab. “We have CDPs that just do the data piece, CDPs that do the data and analytics piece, and CDPs that do all three [data, analytics, and engagement].”
No matter a CDP’s “flavor” it can be used for five primary purposes, which Raab outlines as follows:
- Access a single source of customer data that was previously inaccessible
- Analyze unified customer data from multiple sources
- Access a unified customer view and connect data to other systems
- Orchestrate data across other systems
- Reduce operating cost and time spent by analysts
To narrow in on vendors that will serve your needs, start with use cases and determine what you need your CDP system to do, says Raab. If you want to use it for digital advertising, for instance, the system should have audience API and cookie synching. For analytics, seek out segmentation and automated predictive capabilities.
The chart above overviews the Customer Data Platform Institute’s CDP differentiators, which can help you pinpoint systems suited to your goals. To further help buyers make sense of a confusing marketplace, the CDP Institute recently launched the RealCDPTM program, which will certify CDPs that meet the CDP Institute’s standards.
Raab also stresses the value of vendor references, which can illustrate how an organization of similar size and resources is using a CDP system. These references can also serve as red flags that a particular system may not be a good match for your company’s own use cases. To make sure your needs are met, he says you should build scenarios and request proof of concept (PoC) from vendors.
“Careful selection is what yields the best value,” Raab reiterates.
Learn about publisher applications of CDPs in Raab’s previous post about using CDPs to analyze and act on audience data.