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What is a Customer Data Platform (CDP)—and why does it matter?

Do you really know what a CDP is and what it can do for your business?

According to Forbes, companies that prioritize data-driven marketing are six times more likely to be profitable year-over-year than companies that don’t. 75% of those data-driven companies see an uptick in engagement. And data-driven strategies produce 5 – 8 times as much ROI as strategies without.

It’s figures like these that support what many marketers have known for years:

The future of marketing lies with data.

And not just any data. Behavioral data. Real-time data. Accurate, interconnected data enhanced by machine learning and Artificial Intelligence.

But how do enterprise-level marketers get that kind of data—the accurate, real-time, behavioral data that drives real business results? How do we harness it? How do we make it actionable? How do we, in other words, use customer data to take over our respective industries like data-driven giants Amazon, Spotify, and Netflix have done?

The answer? A Customer Data Platform.

So what is a Customer Data Platform?

CDPs consolidate data

According to the CDP institute, “a Customer Data Platform is packaged software that creates a persistent, unified customer database that is accessible to other systems.”

In other words, at its simplest, a CDP is a platform that stores, connects, and unifies customer data to give you an up-to-date, holistic view of your customers no matter how many devices they’re using or channels they interact with.

So, if Customer X follows you on social media, has a ticket in with your customer service ticketing system, browses your website, and subscribes by email, all of the data on that customer—their behavior, the kinds of content they like and interact with, the emails they open, the troubleshooting they went through with customer service—is stored in one place and updated in real time.

This is what companies are talking about when they say they want a 360-degree view of the customer. One place where everything you know about your customer is brought together so that you—the marketer—can better understand and personalize for that person.

CDPs integrate with your marketing efforts

Okay, so at its simplest, a CDP is about stitching together customer data into up-to-date, unified profiles. But here’s a key truth:

Customer profiles only benefit your business when you can act on them.

In other words, unifying your data is only a first step. A good CDP should also enable you to take action on the data.

This means integrating with your current marketing channels and tools—not only bringing data in and unifying it but also pushing the right data back out to those channels to improve targeting, personalization, and, ultimately, marketing results across all channels.

A good CDP should come with plenty of enterprise integrations out-of-the-box, allowing you to immediately start using the data you gather to better target prospects and customers across your marketing channels.

CDPs help companies comply with data privacy regulations like the GDPR

Every year, privacy law compliance becomes a bigger priority. One study found that in 2018 only 38% of companies reported collecting consumer consent in line with the GDPR. In 2019, that number rose to 64%. And with serious lawsuits hitting data powerhouses like Facebook and Google in the wake of these new laws, it’s no wonder companies are taking them more seriously.

The good news is that while compliance may seem daunting, a good CDP can simplify it—and quick.

Because the key to compliance is knowing exactly what data you have, where it comes from and where it goes—and providing users with profiles they can verify, change, or delete.

Without a CDP, this is tricky to do. A user who opts out of email may still receive ads on their tablet. A user who requests an edit to their profile with your customer service team might not see that edit reflected in marketing communications. Siloed customer data is, by its very nature, not compliant with these new regulations.

But once you truly centralize your data? Compliance is simplified. You know what data you have, where it comes from, and where it goes—and you have a single, unified user profile, which makes edits and opt-outs simple to keep track of and implement in real time.

The best CDPs set you up for 1:1 personalization

Best-in-breed CDPs take everything above and push it a step further, using machine-learning and AI to not just collect customer data, but interpret customer behavior, identify top prospects, and personalize marketing based on real customer behavior and interests.

You won’t find these features in every CDP, so it’s always smart to ask about machine-learning and AI before you choose a technology partner.

CDP capabilities and features

So, those are the four primary use cases of a CDP. But let’s dig deeper. What are the features and capabilities that make privacy law compliance, unified data, segmentation, and personalization possible? What are the features you should ask about when you’re researching CDPs?

Unified first-party data

A CDP’s first order of business is collecting first-party data, unifying that data into useful customer profiles, and centralizing all that data in one single place easily accessible by your marketing team. If a CDP doesn’t unify data, it isn’t a CDP.

(And with lots of new technologies popping up claiming to be CDPs or do what CDPs do, it’s more important than ever to be skeptical and ask specifically about features that are important to your business.)

Segmentation and suppression

A good CDP should allow you to segment and suppress audiences for smarter ad targeting.

This means identifying specific audiences—like users most likely to buy, customers who’ve already purchased, prospects who’ve abandoned their shopping carts, readers who have an affinity for a certain topic on your site—and either targeting them with ads that are specifically relevant to them or suppressing them from an ad campaign that isn’t relevant to them.

Behavioral scoring and data science

Here’s a core marketing truth: Behavior is more predictive than demographics.

Targeting women in their 30s with diaper ads is less effective than targeting customers who’ve actually purchased diapers or ordered a copy of What to Expect When You’re Expecting. Sending ads for avocado toast to every Millennial who visits your site is less effective than sending those same ads to people—regardless of age—who’ve actually engaged and taken action with your avocado toast recipes in the last week.

A good CDP should gather behavioral data on your users and empower you to target, suppress, and connected based on those behaviors. It should—with the help of built-in data science—help you better understand who your customers are and what they need.

Automation and 1:1 personalization through AI and machine learning

This is where we separate the basic CDPs, designed just to centralize data and leave your team to figure out the rest, and best-in-breed CDPs, designed to move your brand toward the kind of 1:1 personalization that drives incredible successes for giants like Amazon or Netflix.

With millions of users, those tech leaders aren’t relying on their marketing and tech teams to do the heavy lifting of personalization. There isn’t a Netflix employee sitting behind their computer customizing the art on your Netflix homepage. There’s not a person behind your unique Spotify Discovery Playlists.

No. Companies like Netflix and Spotify are using technology—artificial intelligence, machine learning, and data science—to not only get to know you and to automate personalization based on what they know about you. They’re letting smart machines make the decisions about what music or movies you’ll probably like based on your history and what art or description is likely to catch your eye.

This is the power of a CDP with built-in AI and machine learning. The power to understand customers at an individual level based on their behavior and affinities and deliver experiences that are customized to them.

And the kind of results that come from that level of personalization? Well, in the case of Amazon, its personalized recommendation engine drives 35% of its revenue.

GDPR compliance

As we mentioned above, any CDP worth its salt should have centralized, unified customer profiles. This makes it simple to serve those profiles up to your users and make changes to them if they request an edit, review, or opt-out under the GDPR.

Cross-channel campaign activation

When it comes to engagement and purchases, omni-channel marketing outperforms single-channel marketing by 250%. Which is why a good CDP will always allow you to sync your data to personalize across marketing channels.

Benefits of a Customer Data Platform

So, now you know what a CDP is and what it does. But how do those capabilities and features support real business goals? How do they help you acquire new customers, engage your web visitors, monetize traffic, or win back customers?

The answers depend on your specific business, which CDP you choose, and how you use it. Here are some of the ways we’ve seen clients succeeding in common business goals with Lytics CDP.

Acquiring new customers

One of the simplest and quickest successes our clients usually see is in acquiring new customers. Once you have data feeding into Lytics, you can start to create audiences of your best, most engaged, highest value customers.

Feed those ideal audiences into a tool like Facebook and create a lookalike audience and—et voila!—suddenly you’re not only reaching new prospects…you’re reaching new prospects who look like your best customers.

Engaging your web visitors

By understanding what your web visitors engage with on your site—what content they read, what campaigns they engage with, etc.—you can better target them with relevant content, ads, and offers, creating higher engagement and more sales.

This strategy helped Lytics’ client The Economist grow subscriptions by 300%. They used Lytics to understand who their customers are, how they interact with the brand, and what they want and need. With that information in hand, they targeted web users who were not already subscribers and who were likely to subscribe with relevant ads on the site. In addition to driving subscriptions up 300%, this strategy decreased cost per acquisition by 80%.

Monetizing your traffic

Understanding your customers also means being able to serve them content they love and point them toward things they want to engage with. This means more time on site and more paths to monetization through targeted advertising for your own products and services as well as your advertisers’.

For Agora Financial, targeting web users with Lytics resulted in a 167% increase in web-specific revenue.

Cross-selling and up-selling

Understanding what your customers like and how they buy also means better opportunities for cross-selling and upselling.

In fact, in one recent study, 49% of customers said they purchased something they didn’t intend to purchase because of a personalized recommendation from a brand. 85% of those buyers were happy with what they bought and only 5% returned their impulse buys.

Renewing customer relationships

If there’s one thing every marketer knows, it’s this: It’s cheaper to keep an existing customer than to get a new one. Which is why using data to keep customers renewing their memberships, subscriptions, and regular purchases is a particularly smart move.

Agora Financial spent some time automating their renewal offers to target customers likely to churn. They identified these customers in Lytics and automated a series of special discounts to encourage them to re-engage. The automated campaign reduced churn by 5% with no work required from the sales team.

Winning back customers

Interested in re-targeting shopping cart abandoners or customers whose engagement with your brand is dropping off? This is a perfect use case for a CDP.

One Lytics client—a brand that offers car rental services—used Lytics to identify shopping cart abandoners and connect with Facebook to target those prospective customers and encourage them to re-engage. The results? A 10% lift in reservations and revenue.

CDPs vs. DMPs

But wait, you may be saying, our brand has been researching DMPs—another technology that promises to harness customer data to drive business results. Is there a difference between the two technologies? And if so, what do I need to know about it?

We wrote a pretty robust guide on CDPs and DMPs, but here’s the short version:

CDPs use first-party data collected directly from your customers to help you better connect with and personalize for those customers. DMPs, on the other hand, use anonymous, purchased third-party data. Where CDPs are about knowing your customers better, DMPs are designed to aggregate data from a variety of third-party sites (of variable quality) and use that data to target advertising at new prospects around the web.

The difference here is use cases and data accuracy.

DMPs are designed to help you reach new prospects through advertising. But since they use third-party data, their accuracy is questionable (in fact, 82% of marketers say third-party data is unreliable). They’re best for when you’re casting a wide net and trying to grow brand awareness quickly.

CDPs, on the other hand, are designed to help you hone in on current prospects and customers. Once you’ve got new prospects coming in, a CDP helps you understand who they are, what content they connect with, and how you can best move them along your sales funnel. And because the data used by CDPs is first-party—collected directly from your website and marketing channels in real time—it’s much more reliable and up-to-date.

Why Lytics?

According to the Relevancy Ring CDP Buyer’s Guide, Lytics is the best overall Customer Data Platform software on the market. We earned our stellar scores for our robust, integrated user profiles, our natural language processing (which helps you serve the right content to the right users), our extensive partner network, and our data science tools.

We also ranked highest for customer satisfaction. (And with client successes like these, it’s no wonder.)

We’d love to show you how our Customer Data Platform—which was one of the first on the market and is still leading the CDP charge today—can help you drive real business results. From centralizing your data and complying with data privacy regulations to personalizing content 1:1 like Netflix or Spotify, we’ve got you covered.

Reach out today to set up a demo or ask a question.

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