How to tell if you need a customer data platform

Your organization may need a customer data platform (CDP), or you may be better off solving data issues with better data management strategies. Here’s what to consider before you leap to invest in a CDP.

How do you know if a customer data platform is right for your business?

You want to predict future customer actions by consolidating all available data.
You are a medium or large business that wants to establish a solid marketing technology culture.
You are capable of making the sizable investment (time, resources and money) a CDP requires.

How to know if a CDP isn’t the right answer, right now.

Your marketing stack is limited.
Your customer data is fairly simple.
Your product or service does not lend itself naturally to personalization

With customer data more abundant than ever, data management is the next major challenge facing marketing teams. Properly implemented, a customer data platform (CDP) — software that unifies disparate customer data into a single interface — can streamline the process of turning raw data into insights and actions. It provides a holistic view of your customer and is accessible to other systems so the marketing team can better serve the customer’s needs.

CDPs are forecasted to play a major role for years to come, and the market for them is large and growing. Their widespread use speaks to the advantages they can bring, but it does not necessarily follow that every marketing team should invest in one. So how do you know if it’s the right solution for your business? Here we will raise and address some of the most pertinent questions around the utility and applicability of CDPs.

A sizable investment

As with any tool, before getting to use it you have to pay for it. At an estimated annual cost of $100,000 to $300,000, a CDP is worthy of real deliberation before purchase. Some signs that you may benefit from a CDP include:

You are shifting from a multichannel to an omnichannel strategy.
You want to predict future customer actions by consolidating all available data.
You are a medium or large business that wants to establish a solid marketing technology culture.

Bear in mind that if you are buying a CDP you are not only investing money but time, as the integration of data can take four to five weeks, or more if your data is highly fragmented. In our CDP roundtable, our CTO Shawn McCabe touched on what it takes to plan for the implementation of a CDP. This is a very useful read if you want to get an idea of the scope of implementation.

Before jumping into getting a CDP, it is worth taking a moment to consider what would happen if you maintained the status quo. Projecting into the future from the starting point of doing nothing allows you to set a baseline from which to assess all the possible implications of your next move. This can bring clarity to your list of pros and cons. Are your data management best practices sufficient for the workload at hand?

Customer data security

In addition to money and time, customers are also being asked to trust you with the safekeeping of their information.

As Daniel Newman at Forbes puts it:

“After all, every piece of data you collect is a security risk; you need to make the risk justifiable. Where does your company stand in terms of being intentional with the data it collects?”

This concern is legitimate. With a CDP more data will likely be collected than will be used, and with such a wide net being cast it is incumbent upon your business to behave responsibly and assure your customer that all their data is safe. Further complicating matters is the fact that no two CDPs are the same and currently there is no general oversight of them as a product. Be sure to do your due diligence on whatever vendors you may wind up working with before entrusting them with access to your customers’ data.

It is worth noting there is also a case to be made that the more fragmented your customers’ data is, the less safe it is, which, if believed to be true, is another point in favour of the CDP.

Non-CDP solutions

If you are considering a CDP it is likely that you already use a Data Management Platform (DMP) and/or a Customer Relationship Management tool (CRM). A CDP may appear similar but it is distinct from both. Unlike a CRM, it does not require the active interaction of a customer to collect data, and while a DMP works with anonymous entities such as IP addresses and cookies, a CDP stores names, phone numbers, email addresses, and the like to form a more accurate picture of the customer. It may well be the case that simpler tools such as DMPs or CRMs are enough for your business. In the end, it is a question of scale and complexity. You may not need a CDP if any or all of the following conditions apply:

Your marketing stack is limited.
Your customer data is fairly simple.
Your product or service does not lend itself naturally to personalization.

When a CDP becomes necessary

There may come a point at which a CDP is simply a must-have. Think of a CDP as a bridge between your DMP and CRM. Not only does it bring all your data together into one place, but it also analyzes and enriches the data, a capability that neither of the other tools possesses. It is more a difference of degree than of kind but if your focus is on tailoring each marketing campaign to each specific client, a CDP is more than likely a necessity to remain competitive.

Further insights from Acro Commerce

Have more questions about CDPs or other data management tools? Acro Commerce’s expert consultants are here to offer valuable guidance. Our team is dedicated to client-first, relationship-based solutions and would love to help you grow your business.

_{Rafael Carillo is a writer, editor and tutor living in Brooklyn, NY.}