Imagine you have a big box of LEGO bricks where each brick represents a piece of information about a person like their name, favourite colour, what movies they like, among others. Now, before building a castle, you will need to organise the bricks so you won’t have to struggle to find the right ones. A Customer Data Platform (CDP) is like the LEGO organiser, but for information about people who use a company’s services or buy their products. It helps companies keep all their information in one place so they can understand their customers better and make better decisions. Just like having your LEGO bricks sorted helps you build something awesome, a CDP helps companies use the information they have to make their customers happy and offer them what they might like.
According to MarketsAndMarkets, the customer data platform market size as per revenue surpassed $5.1 billion in 2023 and is anticipated to hit a revenue around $28.2 billion by the end of 2028, with a CAGR (compound annual growth rate) of 39.9% during the forecast period. “Customer Data Platforms are critical to collect and harness customer information with a view to arrive at a singular source of truth. They track customer activity in real time and provide actionable insights.” Sanjay Trehan, digital and new media advisor, said. At their core, CDPs are designed to collect, unify, and manage customer data from multiple sources into a single, comprehensive profile. This process involves aggregating data from various touchpoints, such as websites, mobile apps, social media, and offline interactions, to create a detailed and consistent view of each customer. By integrating and harmonising this data, CDPs provide businesses with a clearer understanding of customer behaviours, preferences, and interactions, enabling more targeted and personalised marketing efforts. Unlike traditional data management systems, CDPs are built to be accessible and actionable for marketing teams, offering real-time insights and data-driven strategies.
How is CRM different from CDP?
Customer Data Platforms (CDPs) and Customer Relationship Management (CRM) systems are both essential tools in managing customer interactions, but they serve different functions and have distinct capabilities. From what is understood, a CDP is designed to integrate data from multiple sources—such as websites, social media, email, and offline interactions—into a single, comprehensive customer profile. This integration allows businesses to create a unified view of each customer, which enhances the ability to deliver personalised marketing messages and targeted campaigns based on a complete understanding of customer behaviour and preferences. However, a CRM system focuses on managing and streamlining customer interactions, sales processes, and service activities. It primarily tracks interactions and relationships with existing customers, such as communication history, sales opportunities, and service requests. While CRMs are valuable for managing day-to-day customer relationships and improving customer service, they typically do not aggregate data from as many sources or provide the same depth of data integration and analysis as CDPs. “In my view, CDP doesn’t compete with customer relationship management but complements it by providing analytics that help in generating marketing insights. By deploying segmentation, one can narrowcast marketing messaging for better effectiveness and engagement.” Trehan said.
What about data privacy?
CDP relies on customer data in order to operate. From what is understood, it collects first party data that is sourced by the company from the consumers directly. Furthermore, third party data is acquired from external sources in order to target new consumers, personalise experience for new visitors and generate additional revenue. However, due to the frequent transfer of third-party data, it is challenging to verify if it was obtained with proper consent.
“They track customer activity in real time and provide actionable insights. A smart CDP is not in conflict with data privacy. In fact, it ensures data integrity and security, and by filtering and layering access control, it prevents misuse of data.” Trehan added.