In 2017, companies spent $10.1 billion on US audience data activation. And with 70% of IT executives saying data technology contributes to revenue growth, who could blame them? Data is the foundation of modern marketing. And that truth only grows clearer as time goes by.
But here’s the catch: As the importance of data continues to grow and more technology platforms hit the market to collect it, manage it, and activate on it, it’s tough to know what kind of data platform is right for your business.
The two most prominent options are the Customer Data Platform (CDP) and the Data Management Platform (DMP). But what’s the difference between the two? Which one is right for your business? Which one is going to deliver real business results—increasing revenue, engagement, customer lifetime value, and other important marketing metrics? And is there a way for them to work together?
In our latest white paper, CDPs and DMPs: Demystifying Data Management for Marketers, these are the questions we take on. You can download the full PDF here or read on for some key insights.
What is a CDP?
1. They collect data from a variety of sources (such as your website, email marketing program, CRM, and customer service ticketing system).
2. They unify that data from dozens of sources and channels into user profiles that you can use to understand customers and prospects at an individual level.
3. They segment that data so that you can target customers based on things like their affinity of certain types of content or their previous engagement with particular channels or ads.
4. And they activate that data by pushing it out to other marketing tools like email or Facebook.
In our experience, there’s one last essential element that Gartner leaves out: Data science. Because the truth is that CDPs with built-in data science perform better than those without. In some cases, as much as 20x better. And if you’re going to invest in a CDP, why pick one that won’t perform as well?
What is a DMP?
Similar to CDPs (and quite possibly the reason the two get confused), DMPs promise a place to store data and get customer insights.
But where CDPs focus on getting to know and personalize for customers and prospects who are already interacting with your brand, DMPs are best at targeting new prospective customers around the web through advertising.
According to Gartner, “Data management platforms ingest de-identified data from multiple different sources (including internal CRM systems and external data vendors), normalize and configure it, and make it available to marketers to build segments and targets for activation in online advertising campaigns, personalization, and measurement.”
CDP vs. DMP: The core differences
So, CDPs are focused on customers and prospects who interact directly with your brand and DMPs are focused on prospects who don’t yet know your brand. But the core differences between the two run a little deeper than that. Data accuracy, personalization capabilities, privacy regulation compliance, and use cases also differ greatly.
CDPs focus on first-party data—data you collect directly from your customers through their engagement with your brand. This includes everything from the status of their help tickets to information they provided through a form on your site to which emails they open and which blog posts they read. This data is collected across channels and in real time to give you an up-to-date, robust understanding of your customers.
DMPs, on the other hand, focus on third-party data—data that is collected and sold to you by a third party like Facebook or a survey site.
First-party data is totally within your control. You know where you got it from, how recent it is, how your system collects it…and thus it tends to be more accurate and real-time. Third-party data accuracy is trickier. It’s anonymous and gathered from multiple sources. And 82% of marketers believe it’s pretty unreliable.
That lack of accuracy means that third-party data may work well for a large campaign where the goal is simply to get as many new web visitors as possible or generate more brand awareness, but it’s likely not accurate enough to truly personalize 1:1. Which means if personalization is your priority, first-party data with a CDP is the way to go.
Privacy regulation compliance
Because CDPs are collecting proprietary, first-party data that your users have agreed to share with you and because that data is centralized and fully within your control, they can actually help you comply with GDPR and other privacy regulations.
Because the truth is that siloed data is non-compliant data. If you don’t know where your customer data comes from, where it lives in the organization, and how to connect it, you can’t provide users with a way to opt out. And if they can’t opt out, you aren’t compliant.
With a good CDP, all your data is in one place. You know where it comes from and where it goes. And you’ve got unified customer profiles that make edit requests or opt-outs simple to keep track of and implement in real time.
DMPs are a trickier case. They rely on third-party data and new regulations mean those data collectors need explicit consent to sell that data. With less than 17% of consumers saying they’re okay with third parties collecting their data, that consent is getting harder to come by.
If you do choose to use a DMP (and you wouldn’t be alone; 50% of Enterprise companies have incorporated the technology into their marketing efforts), make sure to ask the hard questions about where the data comes from, how they’re obtaining consent, how they handle the GDPR’s opt-out requirement, etc.
Finally, with the differences in data, accuracy, privacy regulations, and personalization capabilities, it may come as no surprise that CDPs and DMPs have extremely different use cases.
CDPs are poised to help you match your content, offers, and campaigns to the right audiences at the right time—driving exceptional marketing results through targeting and personalization.
CDPs are 1:1. They’re about getting in the customer’s head. Watching their journey unfold. And making it as easy as possible for them to move along your sales funnel or do whatever task they’ve come to your brand to do.
On the other side of the coin, DMPs are best with quantity, not quality. They’re positioned to get a high volume of new users onto your site or in front of your brand. And if volume is the goal, data that’s 40% accurate doesn’t matter as much as it does at a 1:1 level.
And once the DMP gets those new prospects to your site? Your CDP can start gathering that much-more-accurate, much-more-valuable first-party data that will help you match that new prospect with the right content.
Does your business need a CDP, DMP, or both?
Download your free copy of CDPs and DMPs: Demystifying Data Management for Marketers today for a more in-depth look at the differences between the two and how they can work together.
Or reach out to our team. We’d love to set up a demo or answer any questions you might have.