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What is a Customer Data Platform, and Why You Need It?
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According to a report by Markets and Markets, the customer data platform market size is expected to grow from USD 3.5 billion in 2021 to USD 15.3 billion by 2026, at a Compound Annual Growth Rate (CAGR) of 34.6% during the forecast period.
The report cites various factors for this expected growth, including increased spending on marketing and advertising activities by enterprises, changing landscape of customer intelligence to drive market, and proliferation of customer channels.
Therefore, as an emerging business tool, and a popular one at that, customer data platforms do deserve a close examination of their purported benefits.
A Customer Data Platform (CDP) is a software solution that can collect the data from all customer touchpoints and then sanitize that data to make it usable for various teams in the organization.
The touchpoints may include, among others, transaction history, social channels, sales and service interactions, and smart device usage data.
This may sound like a simple function, in theory, but any reasonably large organization with independent departments generally faces a lot of problems in collating the data from different streams and then making it actionable.
Needless to say, being able to compile, analyze, and act on all your customer data from a single platform can provide you incredible insights into your business and help you manage it so much better.
Now, with this in mind, let’s look at the main benefits of customer data platform.
Most organizations today get data from multiple sources, including first, second, and third-party data, while struggling to decide what part of this data is relevant for them.
The situation is made more complex because it is impossible to get the full picture regarding a specific business operation when the data streams are coming from different sources, making the information decentralized.
A CDP solves this problem by allowing you, as a marketeer, to get all your data in one place, combine it to make sense of the bigger picture, and allow you to form a fuller picture of your customers.
That brings us to the next benefit.
A CDP provides you with a 360-degree view of the customer and enables you to recognize and understand each part of the customer journey, including the different transactions between the customer and your business.
It helps the organization truly comprehend customer behavior and take decisions that can make the customer experience as good as possible. The marketing and customer support teams can also make use of this more detailed perspective to target the right people at the right time.
Being able to tailor the experience for each individual customer is becoming increasingly important, and it can have a serious impact on your revenue since as many as 72% of consumers say they’ll only engage with marketing that’s personalized.
Offering customers quality service results in a higher level of customer satisfaction and increased loyalty with more chances of customers returning to your brand again.
Segmenting your prospective customers is an essential part of any marketing strategy because it allows you to target each segment in a way that’s best suited for it. When implemented the right way, a CDP allows you to discover new segments because it lets you apply analytics to all your customer data at the same time, at the same place.
The analytics software will still need you to set up the conditions and parameters (gender, age, location, frequency of transactions, for example) of audience segmentation depending on the nature of your business, but CDP makes the process a whole lot more optimized.
Making the segments smaller by dividing them further makes it possible for your business to implement a more specific marketing strategy and communicate with the customers in a personalized, humane way.
Most of the CDPs allow businesses to gain insights into how a specific marketing campaign is performing, and which platforms are giving the most favorable returns on investment.
By implementing a customer data platform, business owners can easily analyze the efficiency and results of their marketing efforts and decide where they should put in their resources to get maximum impact.
They can also get into a cycle of constantly improving future promotions by leveraging the in-depth understanding gained from analyzing the last ones.
This means that not only does a CDP offer insights to solve immediate problems like high marketings costs and mismatched content for the target audience, it also proves its merit as a long-term resource because each campaign can be improved upon for the next iteration. This results in saving up precious resources and achieves high conversion rates.
Applications like SalesForce often charge organizations for the data stored in them. CDPs can reduce this cost because the data is present in the platform managed by the organization itself, and not a third-party application.
Also, compared to the cost of handling data on the cloud, especially with an app, it is much cheaper to collect and sanitize data with a central view.
Other than these benefits, having all your data at one place also makes it easy for you to become compliant with the necessary guidelines. You can easily make your contacts anonymous and also offer your customers a better level of data protection and privacy.
In today’s world where the customers want personalized interaction with brands without compromising on their digital privacy, the ability to prevent data leaks by monitoring all the data from the same platform can give you an edge over your competitors.
In the end, whether the cost of getting a customer data platform outweighs its benefits for you depends on what exactly your business goals are and at what pace you want to achieve them.
Also, getting software solutions without the expertise necessary to use them efficiently can often lead to new problems and a burden on available resources.