Marketing TechnologyCustomer data platforms: The next step in customer experiences

Customer data platforms: The next step in customer experiences

CEO of Lytics, James McDermott, discusses available solutions for CDPs, as well as questions to ask when choosing and evaluating a platform.

Tune into any marketing technology conversation, and you’re likely to hear the term customer data platform (CDP) come up sooner rather than later. CDPs are being heralded as the next big thing in martech — and with good reason. Done right, CDPs can allow marketers to finally deliver on the holy grail of one-to-one marketing at scale.

But like any “next big thing,” there’s a large number of vendors competing for a slice of the CDP market, including repackaging of existing marketing solutions that tout CDP-like capabilities but fail to deliver on the real promise of personalized, omnichannel experiences. So what type of solutions are available today and how can they be used for real measurable success?

Before I begin, let’s step back and define what a CDP is supposed to do.

What does a CDP do?

At a high level, a CDP brings a meaningful set of data intelligence and insights to bear on marketing decision-making for individual customers and prospects.

This fundamentally improves traditional marketing segmentation, which looks to group experiences and individuals together based on shared behaviors and attributes. CDPs can also enable a path allowing you to personalize your marketing campaigns to a segment of one, in real-time, holistically across all marketing channels, over the complete customer lifecycle, one touchpoint at a time.

Several approaches to delivering CDP capabilities

1. The best-of-breed CDP is a single platform that integrates across the marketing stack (via APIs) and leverages existing marketing tools to drive personalized experiences across multiple channels.

It’s designed to augment and optimize your marketing workflow while providing minimal disruption to your existing martech infrastructure.

2. Suite-based CDPs are, in some ways, a reaction to the success of best-of-breed CDPs. They typically bundle an existing martech offering, such as a CRM or BI solution, with CDP-styled capabilities as an integrated suite of tools.

Generally, suite-based CDPs presume that marketers will move the majority of their marketing infrastructure to a single vendor platform.

3. Finally, there is a quasi-CDP approach called customer data infrastructure that focuses primarily on data collection and distribution.

Choosing the right platform

Although each approach has its advantages, best-of-breed platforms are purpose-built for personalized, omnichannel, real-time marketing.

There are four key areas where best-of-breed CDPs are designed to excel:

1. Time to value

Best-of-breed CDPs don’t require months of IT work to get customer data together to deliver customer intelligence and insights. Instead, data connectors and built-in machine learning surface insights to inform marketing campaigns before deployment leading to much faster (and more accurate) campaigns.

2. Customer-centric (vs. campaign-centric) decision-making

Best-of-breed CDPs enable marketers to build campaigns from the inside out—that is, by creating campaigns around what you know about your customers, CDPs enhance your current segmentation process to deliver more personalized experiences and provide a path to 1:1.

3. Recommendations

Data without context is simply noise. For example, knowing that customer X has spent 50% less year over year is informative but not actionable.

Best-of-breed CDPs not only seek to provide insights — for example, customer X is disengaged from your brand — but can also deliver recommendations such as “send a win-back message by mobile push today.”

4. Journey management

Suite-based CDPs can execute marketing campaigns within their tool-set, but make it difficult to share data or campaigns across different tools or applications. Best-of-breed CDPs allow marketers to centrally manage and control campaigns across any channel or tool, choosing the right channel for orchestrating that experience across other touchpoints.

How is it working?

Marketing departments no longer measure success by intangibles such as brand recognition or customer sentiment. Today’s marketers use many of the same metrics as accountants — customer lifetime value, return on investment, and more. Measuring the success of a CDP comes down to a few important metrics that will become increasingly important in the years ahead.

If you want to accurately measure your CDP’s performance, ask yourself these four questions:

1. Is our customer lifetime value (CLV) improving?

CLV is a common metric for many marketing initiatives, but it’s critical for measuring the success of your CDP. That’s because your CDP should be driving deeper engagement, better experiences, and more relevant cross-sell/up-sell opportunities — all factors that increase CLV.

2. Does it take us less time to launch a campaign or experience?

This should be an easy question to answer if you have the right CDP solution. You should be seeing an exponential increase in campaign agility, on the magnitude of 5X to 10X faster, particularly if your CDP gives you the ability to launch campaigns directly from your database.

3. Are we spending less money to get the same or better marketing results?

Not every customer is a lifetime customer, and CDPs should help marketers align spending with opportunity. If a customer isn’t going to convert or a campaign is likely to fail, your CDP should tell you that and save you the expended cost and effort.

4. How many of our customer experiences are delivered based on data or a recommendation?

This is an important and emerging metric for marketers because the more that data-based decisions and content recommendations drive customer experiences, the more effectively CDPs are transforming your workflow.

Ultimately, CDPs are more than just another piece of the marketing technology stack. Done right, CDPs should transform the way you interact with customers, optimize workflows to realize greater levels of efficiency, and deliver on the promise of data-driven decision-making. It’s more than connecting data and customers. It’s about connecting experiences that, together, create a meaningful customer journey for years to come.

James McDermott is co-founder and CEO of Lytics. He can be found on Twitter @jamesnmcdermott.

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