What Is a Customer Data Platform (CDP)?
Learn everything there is to know about CDPs including data ingestion, identity resolution, audience management, and data sharing.
February 8, 2023
Today, every vendor in Martech is trying to sell you a solution to create a single unified view of your customer. The problem is building and operationalizing a 360-degree view of your customer profile is complex.
With an ever-increasing number of both first-party data and third-party data sources, this is only getting more difficult, and this is the exact reason why customer data platforms (CDPs) have risen in such popularity.
What is a CDP?
A customer data platform or CDP is an all-in-one marketing and data platform that enables you to collect and store your customer data in a centralized database. CDPs help you synthesize your customer data into a unified profile and automatically ingest that information into your operational tools so your teams can build personalized experiences to drive business outcomes.
Chances are you're collecting behavioral data through a website, app, or server. The goal of a Customer Data Platform is to collect and consolidate all of your event data into a centralized and persistent database so that you can implement personalization at scale. At their core, CDPs help you create actionable insights so you can power your operational use cases.
Why Were CDPs Created?
Most CDPs were created by accident. Basically every major CDP vendor stumbled into the category, initially starting as CRMs, infrastructure tools, databases, tag managers, or marketing tools.
As these SaaS solutions expanded their product, they inevitably built a persistent customer record. Once they reached a certain maturity level, they remarketed themselves as a CDP and developed their platform to integrate with other data sources and tools.
All CDPs are built around flexible APIs that let you ingest data into the platform. These APIs are also optimized to integrate with various SaaS applications and third-party tools, which means it's relatively easy to send customer data to your various business tools.
Although CDPs are data tools, they're tailored toward marketers to help reduce silos and bridge the gap between data distributed across systems. CDPs were designed to help you build and segment custom audiences for personalized campaigns, but they're also used to automate business processes so you can create consistent customer experiences.
Until CDPs came around, developers had to build an API integration every time they wanted to send data from one system to another. Managing and maintaining custom integrations at scale took a lot of work. CDPs introduced a single standardized API that made it easy to ingest data from any source and push it back out again.
How Does a CDP Work?
Although many CDP offerings are available on the market, all CDPs share several core components. Every CDP supports both sources and destinations. Sources represent the data flowing into CDP, and destinations represent the end location where that data is sent for activation.
Since CDPs are unified customer databases, they need a way to ingest data. This is achieved through an exposed API that allows you to import events and customer attributes. Although most CDPs have some out-of-the-box capabilities to "listen" or pull data from other SaaS tools, the primary method of ingestion often involves tracking SDKs that need to be "instrumented" on your website or mobile apps directly by product engineers.
Identity resolution is essential to any CDP because it allows you to unify your different customer data sets across ingestion channels. Most CDPs maintain identity graphs of user profiles to map unique identifiers like cookies, mobile advertising IDs, and PII (personal identifying information) back to a single customer profile.
For example, if a user visits multiple pages on your website and eventually signs up to place an order, you can link that anonymous customer behavior to a specific user profile–thus giving you a complete 360-degree view of every action in the customer journey. Beyond this web session, you will likely have data on this customer living in other places (e.g., your application database, support tools, etc.), so ideally, you're able to import that information into the CDP as well.
Without audience management, a CDP is just "Customer Data Infrastructure." CDPs are advantageous because they can consolidate and combine your customer data. Still, marketers need a way to orchestrate and manage that data, so all CDPs come equipped with an audience builder. An audience builder is a visual user interface that lets you define customer segments and personas without SQL. However, in many cases, some SQL is needed to transform/model the data before you can define it in an audience builder.
CDPs wouldn't be helpful unless they helped you act on this data. In the same way, these platforms collect and ingest data, they also help you activate that data in your downstream go-to-market tools (e.g., Salesforce, Hubspot, Marketo, Iterable, Braze, etc.) They do this by integrating automatically with various third-party APIs and sending data automatically to your specified destination based on the parameters that you’ve defined.
Types of CDPs
According to the CDP Institute, all CDPs fall into a few broad categories:
- Data CDPs gather data from various source systems, link it to specific customer identities, and make it available to external business applications via audience segments.
- Analytics CDPs offer general data assembly and collection, but their capabilities extend to machine learning, journey mapping, predictive modeling, and revenue attribution.
- Campaign CDPs are focused solely on segmentation. Their core capabilities center around analytics and customer treatments. They're used to orchestrate customer interactions across marketing channels (e.g., personalized messages, outbound marketing campaigns, real-time interactions, recommendations, etc.)
- Delivery CDPs provide all of the capabilities of a conventional CDP, but they specialize in message delivery (e.g., email, website, mobile apps, advertising platforms, CRMs, etc.)
CDP Use Cases
While CDPs can address a wide range of use cases, their core value proposition aligns mainly with marketing teams. Ultimately there are three core use cases: customer 360, audience targeting, and omnichannel marketing.
Because most CDPs have built-in identity resolution, it’s also relatively straightforward to link your offline data (e.g., when a user is signed out) to your online data (e.g., when a user is signed in), so you can understand the starting point for every user and exactly where a conversion happened.
Audience segmentation is arguably the backbone of any CDP vendor and is probably the most prevalent use case. Having all your event data in one unified customer profile allows you to easily build and manage user cohorts. For example, maybe you want to enroll a list of users who visited your pricing page in an email marketing campaign, or maybe you want to target new signups with a unique call to action. With a CDP, you create audiences based on the criteria you define.
Since CDPs automatically integrate with your downstream operational tools, you can efficiently orchestrate omnichannel experiences across your various channels. That means taking all your custom audiences and ingesting them into your marketing channels (e.g., Facebook, Braze, Hubspot, Salesforce, Iterable, etc.)
Should You Buy a CDP?
If you have zero cloud infrastructure and minimal data engineering resources, a traditional CDP can be an immense value add, especially if you’re looking to level up your data collection efforts and optimize your marketing campaigns.
However, if you already have a relatively mature data stack, a traditional CDP likely won’t suffice your needs. The problem with most off-the-shelf CDPs is that they’re limited to events, so you don’t have access to your existing first-party customer data. CDPs are also built around rigid data models; they only store data for a limited period, significantly limiting your flexibility in creating custom audiences.
Many companies are turning to a Composable CDP because it integrates natively with your existing data warehouse (e.g., your single source of truth) and offers a more modular, scalable, and flexible approach compared to traditional CDPs.