Customer Data Platforms

Companies that want to engage customers effectively must build actionable intelligence on top of their first-party customer data. Actionable intelligence means improving their customer relationships, building consumer trust to capture rich first-party data, and utilizing that data to build intelligence that can be activated to continuously optimize the customer experience. Many companies turn to customer data platforms (CDPs) to help overcome these significant challenges.

Note: Throughout this article, we use terms like “customer,” “audience” and “member” interchangeably. They represent the end user, and are typically specific to an industry (e.g., “customer” in retail, “audience” in media and entertainment, “member” in banking). When you see the term “customer,” it is equally relevant to think “audience” or “member” based on your industry and specific use cases.

What Is a Customer Data Platform (CDP)?

A customer data platform is defined by Gartner as software applications that support marketing and customer experience use cases by unifying a company’s customer data from marketing and other channels. CDPs centralize data about customers, for use in optimizing the timing and targeting of messages, offers and customer engagement activities, and enabling the analysis of individual-level customer behavior over time, among other uses.

CDPs are used synonymously with specific commercial point solutions from software vendors, but the general premise of a customer data platform is not vendor specific. A CDP is simply a data platform that centralizes customer data to enable activity and engagement with customers.

What Is the Purpose of a CDP?

Why do you need a customer data platform? Typically, there are three purposes for a CDP, which are classified into the following categories:

• Data collection: CDPs are designed to collect customer events from a number of different sources (onsite, mobile applications and server-side) and append these activities to the customer profile. These events typically contain metadata to provide detailed context about the customer’s specific digital interactions. Event collection is typically designed to support marketing use cases such as marketing automation.
• Data management and modeling: CDPs provide a unified repository of data that aggregates and manages different sources of customer data collected from most of the business’s SaaS and internal applications. The database is a 360-degree view of each customer and a central source of truth for the business. Many commercial CDPs have out-of-the-box customer identity resolution functionality and tools to create custom traits on user profiles.
• Data activation: CDPs offer the ability to build audience segments leveraging the data available in the platform. Thanks to a wide array of pre-built integrations, these audiences and other customer data points are then able to be pushed both to and from various marketing channels.

What Is a Composable CDP?

A composable customer data platform (CDP) is a pattern for customer data platforms that allows organizations to select the best-in-class product at each layer of the CDP, including data collection, data storage and modeling, and data activation. This modular approach enables organizations to choose the best solution and components for their business, and to future-proof and swap out specific components down the line when necessary.

A composable CDP is built to leverage the existing single source of truth in an organization’s data lakehouse, rather than being locked into a single vendor product. Customer-facing systems, such as proprietary CDPs, DSPs, customer service systems, personalization engines and more, can easily integrate into this centralized view.

What Are the Benefits of a Composable CDP?

By harnessing the power of best-in-class tooling to create a composable CDP, there are four key benefits over an off-the-shelf CDP:

• Lower cost and risk: Companies often outgrow the capabilities of their customer engagement platforms and want to upgrade their capabilities. With point-solution CDPs, customer data can be locked into proprietary systems and formats. Migrating to another platform requires rebuilding the entire customer data stack, including integrations up- and downstream. A composable CDP places customer data in an open lakehouse, and enables companies to easily connect new systems.
• Better data governance and compliance: In today’s privacy-conscious world and with ever-evolving data legislation, taking ownership and having full control of your customer data is paramount. Rather than an off-the-shelf CDP managing all of your customer data, a composable CDP provides you with full transparency, lineage, assurance and auditability at each step of your customer’s data architecture.

  Controlling what personally identifiable information is collected, how data is stored and modeled, and what data is shared with your marketing partners ensures that you can comply with GDPR and CCPA and future legislation.

• Greater accuracy due to better data: Advanced personalization and segmentation of your campaigns rely on a consistent source of well-structured, reliable, accurate, explainable and compliant behavioral data describing what customers are doing minute by minute. With a composable CDP, you can determine the events and entities that match your business and decide how your data is modeled for activation.

  Although behavioral data can be exported from an off-the-shelf CDP, in reality their data models were never intended to be used outside of their platform. CDP data exports from irregular table structures requiring complex joins and transformation before data can be activated.

  With a composable CDP, data science teams can directly leverage the behavioral data in your lakehouse, along with Databricks' enormous data processing capability, to build AI models specific to your data, product or business goal instead of relying on the black box models offered by off-the-shelf CDPs. And the lakehouse enables companies to start extracting customer insights from unstructured data sources such as call transcripts, social media and more. These richer data sets drive greater model accuracy, enabling companies to create additional opportunities and revenue from your campaigns.

• Future-proof and modular by design: Composable CDPs are future-proof by design, allowing you to avoid the vendor lock-in and one-size-fits-all approach associated with off-the-shelf CDPs. With every element in a composable CDP modular, you can choose the best-in-class collection, storage, modeling and activation tools that fit the requirements of each of your teams. As the requirements of the business evolve, you can continue to invest on top of your composable CDP as opposed to implementing a new stack from scratch, which has high risk and cost to the business.

  With a modular design, you also have the flexibility to determine your approach to identity resolution to ensure your team is able to deliver accurate and compliant marketing campaigns. Your business has complete control over how and when to stitch together user identities — leveraging every customer data point available.

• Single source of truth across marketing and other teams: Instead of adding another data silo to the tech stack, teams can do more with the single source of truth they already have, their lakehouse. With the lakehouse as the single source of truth for the composable CDP, all teams have access to the most comprehensive customer profiles and insights from across the business and can activate it through Hightouch with an easy-to-use UI and workflow.

  The single source of truth also has applications outside just marketing use cases — it can also power other use cases ranging from internal reporting to product analytics.

What Are Common Use Cases for a Composable CDP?

The two most common use cases for a composable CDP are the personalization of customer experiences and developing more targeted advertising, but CDPs can be used across a wide variety of data and AI use cases to advance business objectives:

Personalization and targeting:

• CDPs enable businesses to create personalized experiences by leveraging unified customer data. This includes targeted messaging, tailored offers and individualized content recommendations.

Customer journey optimization:

• CDPs help map and analyze customer journeys across different touch points. By understanding customer behavior and preferences, businesses can optimize the customer journey, identify pain points and deliver seamless experiences.

Cross-channel campaigns:

• CDPs facilitate coordinated and consistent messaging across multiple marketing channels, such as email, social media, websites, mobile apps and more. They enable businesses to orchestrate cross-channel campaigns based on unified customer data.

Customer segmentation:

• CDPs allow businesses to segment their customer base effectively. By categorizing customers based on demographics, behavior, preferences or other criteria, companies can create targeted marketing segments and deliver more relevant communications.

Customer analytics and reporting:

• CDPs provide valuable insights into customer behavior, engagement and lifetime value. Businesses can leverage these analytics to measure campaign effectiveness, identify trends and make data-driven decisions.

Data integration and unification:

• CDPs excel in collecting and integrating customer data from various sources, including CRM systems, website interactions, mobile apps, social media and more. They unify this data into a single customer profile, providing a comprehensive view of each individual.

Retention and loyalty programs:

• CDPs support the implementation of retention strategies and loyalty programs. By analyzing customer data, businesses can identify opportunities for personalized retention initiatives, loyalty rewards and tailored customer communications.

Compliance and data governance:

• CDPs help ensure data compliance and governance by managing customer data in a secure and privacy-conscious manner. They provide tools for data protection, consent management, and compliance with regulations like GDPR or CCPA.

In addition to these traditional customer experience platforms, customers are leveraging the composable CDP to drive customer engagement across other areas of the business, ranging from customer service systems and call center chatbots to demand-side platforms, shopper insights and much more.

What Are the Common Challenges With Implementing a CDP?

Customer data platform implementations can be challenging or have limited support if not built as an extension of your broader data management strategy. Here are the most common challenges within each component of the CDP:

Data Collection

• No support for streaming
• Doesn’t support federated queries for internal systems
• Fixed number of connectors for data ingest
• Required to ingest raw data and then pay based on the number of records stored
• Requires SDK for data collection (can degrade performance)
• Data is limited to structured data sources

Data Management

• Lack of support for using multiple identity graphs at a time
• Insufficient tooling for ETL
• Inaccessible for use case adjacent to the CDP
• Leads to a fragmented and siloed ecosystem (multiple versions of truth)
• More complexity for managing GDPR compliance
• Dashboard visualizations are difficult to customize

Activation

• No full support for machine learning
• Lack of flexibility to support custom audience segmentation
• Fixed number of connectors for data activation

Why Should Marketers Care About CDPs?

Composable CDPs enable marketers to deliver a more accurate and timely customer experience in a consistent manner across all areas of customer engagement. This leads to higher return on marketing investment as spending is better targeted, and better customer satisfaction scores due to the avoidance of irrelevant personalization.

A composable CDP empowers marketers with valuable customer insights, personalized marketing capabilities, cross-channel coordination and improved marketing efficiency. By leveraging the power of a CDP, marketers can drive better customer experiences, increase engagement and achieve their marketing objectives more effectively.

• Unified customer view: A CDP allows marketers to create a unified view of their customers by consolidating and integrating data from multiple sources. This comprehensive customer profile helps them understand customer behavior, preferences and interactions across various touch points.
• Enhanced personalization: With a unified customer view, marketers can deliver highly personalized and targeted experiences. By leveraging the rich customer data within a CDP, marketers can segment their audience, tailor messaging and create customized campaigns that resonate with individual customers.
• Improved customer insights: CDPs provide valuable insights into customer behavior, enabling marketers to make data-driven decisions. By analyzing customer data, marketers can identify trends, preferences and patterns, which can inform marketing strategies, campaign optimizations and product development.
• Cross-channel campaign coordination: CDPs enable marketers to orchestrate cross-channel marketing campaigns seamlessly. By integrating data from various channels like email, social media, websites and more, marketers can deliver consistent messaging and personalized experiences across different touch points, ensuring a unified and cohesive customer journey.
• Enhanced customer engagement and loyalty: With personalized and targeted marketing efforts, marketers can foster deeper engagement and loyalty from customers. By understanding their needs and preferences, marketers can deliver relevant offers, recommendations and communications, thereby building stronger relationships with customers.
• Improved marketing efficiency and effectiveness: A CDP streamlines marketing operations by providing a centralized platform for managing customer data and executing campaigns. It eliminates data silos, reduces manual efforts and enables automated workflows, leading to improved marketing efficiency and effectiveness.
• Optimal customer segmentation: CDPs empower marketers to segment their customer base more effectively. By creating meaningful segments based on demographics, behaviors, preferences or other criteria, marketers can target specific customer groups with tailored messages and offers, resulting in higher conversion rates and ROI.
• Compliance and data governance: CDPs assist marketers in adhering to data privacy regulations and ensuring compliance. By centralizing customer data and implementing proper consent management, marketers can easily respond to GDPR and CCPA requests, maintain data governance standards, protect customer privacy, and mitigate legal risks.

What Are Important CDP Strategies to Consider?

Implementing and operating a customer data platform (CDP) effectively requires a strategic approach. Here are key strategies to consider:

1. Clearly define your goals and objectives. Identify the specific outcomes you aim to achieve with the CDP, such as improved personalization, enhanced customer insights or streamlined cross-channel campaigns. This clarity will guide your implementation and usage strategies, ensuring you focus on what matters most for your business.
2. Prioritize data quality and governance. Establish processes and protocols to ensure the accuracy, completeness and reliability of your customer data within the CDP. By setting up data cleansing routines and data stewardship roles and implementing data governance policies, you can maintain data integrity and make informed decisions based on trustworthy information.
3. Focus on seamless data integration and unification. Invest time and effort in integrating data from various sources, allowing the CDP to create a holistic view of your customers. By establishing smooth data flows between systems, applications and channels, you can unlock the power of unified customer profiles, enabling comprehensive segmentation, personalized messaging and deeper insights.
4. Prioritize user training and adoption. Provide thorough training and support to the individuals who will work with the CDP. Help them understand its capabilities, how it aligns with their roles and responsibilities, and the benefits they can expect. Encouraging user adoption by showcasing success stories and highlighting the value they will experience will ensure the CDP becomes an integral part of your marketing operations.

By implementing these strategies, you can effectively harness the power of a CDP to drive personalized customer experiences, gain deeper insights, optimize your marketing efforts and improve operational efficiency. Remember to continuously measure and optimize your CDP strategy, leveraging customer feedback and evolving industry trends to refine your approach over time.

CDP as an Extension of Broader Data Management

Thinking of customer data platforms (CDPs) as an extension of your broader data management strategy is critical for successful implementation. A CDP is not a stand-alone solution but rather a key component that integrates with your existing data infrastructure and workflows. By aligning the CDP with your broader data management strategy, you can ensure seamless integration, data consistency, and data governance, and maximize the value of your customer data.

Here, alignment between IT and marketing teams is crucial for the successful implementation and ongoing operation of a CDP. IT teams play a pivotal role in integrating the CDP with existing systems, ensuring data security, and maintaining infrastructure stability. They possess the technical expertise required to handle data integration, perform system configurations and ensure scalability — while marketing teams bring domain knowledge and understand the specific requirements for utilizing the CDP effectively. Collaboration between IT and marketing enables a deeper understanding of each other’s perspectives and fosters alignment on technical requirements, data governance and usage policies.

Working together, IT and marketing teams can ensure a smooth implementation process, align the CDP with business objectives and optimize its ongoing operation. This collaboration promotes effective data management, facilitates data-driven marketing initiatives, and supports continuous improvement based on user feedback and evolving business needs.

Ultimately, by treating CDPs as an extension of your broader data management strategy and fostering alignment between IT and marketing, you can unlock the full potential of the CDP, optimize customer experiences and drive business growth.

Composable CDP with Snowplow, Databricks and Hightouch

To learn more about how a composable CDP comes together on Databricks, read our blog on the Emergence of the Composable CDP.

Best practices

When evaluating and implementing a customer data platform (CDP), consider the following important best practices:

• Clearly define your objectives: Clearly articulate your goals and objectives for implementing a CDP. Identify the specific business outcomes you aim to achieve, such as improving personalization, enhancing customer insights or optimizing cross-channel campaigns. This clarity will help you assess the suitability of different CDP solutions and align them with your organizational needs.
• Conduct a thorough needs assessment: Evaluate your organization’s current data management practices, existing technology stack, and data sources. Understand the specific data challenges, integration requirements and functionalities that are critical for your business. This assessment will help you identify the features and capabilities you require in a CDP.
• Ensure data privacy and security: Data privacy and security are paramount when it comes to customer data. Ensure that the CDP solution you choose adheres to stringent data protection regulations and offers robust security measures. Consider factors such as data encryption, access controls, consent management, and compliance with privacy laws.
• Scalability and flexibility: Consider the scalability and flexibility of the CDP. Assess whether the solution can handle increasing data volumes and support future growth. Additionally, evaluate its ability to integrate with existing systems and adapt to evolving marketing technologies and channels.
• Data integration capabilities: Evaluate the CDP’s data integration capabilities. Assess its ability to seamlessly ingest and unify data from various sources, such as CRM systems, marketing automation platforms, website analytics, social media and more. A robust data integration framework ensures that your CDP can collect, process and centralize data effectively.