What’s the Future of Customer Personalization? Industry Experts on the Evolution of DMPs, CDPs, and Data Enhancement

In recent years, data management platforms (DMPs) and customer data platforms (CDPs) have competed to be the top choice for extracting actionable insights from customer data. Ignoring all the hype—which one really is the most effective for delivering highly relevant experiences on the right channels? What’s the most savvy martech investment for personalization today, and why?

A recent conversation between Treasure Data’s Steve LeTourneau and Acxiom’s Mike Danley dove deep into DMPs, CDPs, and the best practices for effective personalization. Here are some of the highlights.

1. Martech is in the midst of a transition, evolving from DMPs towards CDPs.

As an enterprise architect with decades in the industry, Danley has witnessed the evolution of digital marketing platforms firsthand. In the 1990s he saw the growth of customer relationship management (CRM) systems and customer databases. When DMPs came into focus more recently, they were seen as something of a silver bullet for marketers. Now CDPs are gaining traction. Danley sees this progression as moving from basic broadcasting to one-on-one conversations.

Behind this evolution is the changing landscape of customer data available to digital platforms. To understand why CDPs are now eclipsing DMPs, it helps to understand the differences between the two.

Essentially, DMPs rely on third party data, like cookies, and anonymized first party data. As such, DMPs are best suited for syncing anonymous identities with cookies and then syncing this data with ad networks. DMPs ultimately drive ad tech; they’re most suited for use cases such as improving ad targeting and increasing media purchase efficiency.

“[DMPs] are a lot about managing prospect acquisition use cases and lookalikes,” explains LeTourneau. But ultimately they’ve “struggled with adoption because everything is anonymized.”

Compare that to CDPs, which take first-party customer data from a multitude of internal data silos and then combine it with second-party and third-party data to achieve a complete view of individual customers. As such, CDP use cases are much broader. And because they come with multiple out-of-the-box integrations, marketers can reach customers with relevant messages and retarget them on almost any channel.

“Whether customers are out on an ad network or on the publisher side or on a website, CDPs have the ability to speak to each individual customer and really connect with who they are as a person,” says Danley.

Both Danley and LeTourneau think the main reason that CDPs are eclipsing DMPs is because CDPs create persistent, unified customer profiles. This enables marketers to activate their data based on a true view of individual customers, personalizing messages across every channel and delivering more customized experiences.

2. Data collection is changing, and it’s accelerating the transition to CDPs.

First-party data is collected by brands directly from customers. Second-party is data collected in partnership with a vendor. And third-party data is aggregated by an external vendor like Acxiom. Right now, the landscape for both first- and third-party data is rapidly shifting.

Due to COVID-19, first-party data is growing exponentially as consumers increasingly gravitate toward ecommerce options, like buying online and picking up in store (BOPUS). Many brands are also rolling out direct-to-consumer business models to streamline operations and capture more first-party data.

At the same time, data privacy protection and collection laws—like the European Union’s General Data Privacy Regulation (GDPR) and the California Consumer Privacy Act (CCPA)—are becoming the norm. This shift makes third-party cookies problematic if marketers aren’t vigilant about how they’re collected and used. Moreover, with Google’s plan to eliminate third-party cookies by 2022, marketers have already started preparing for a brave, new, cookie-less world.

These trends are pushing marketers toward CDPs. Because CDPs offer a high level of control for exactly how data is used, they ensure privacy compliance especially in combination with ethically collected third-party data sourced from reputable agency/publisher networks like Acxiom. Together, this data can deliver sophisticated marketing insights about every interaction between customers and the brand.

3. There are now a multitude of use cases that are tailor-made for CDPs.

As a data-driven strategist at Treasure Data, Tourneau has witnessed the impact of CDPs across industries and use cases. LeTourneau uses himself as an example: “[Say] I told you I live in Colorado and I [gave] you my phone number and basic personally identifiable information (PII).” By taking this PII and enhancing it with second- and third-party data, there’s the potential for deep insights and personalization. A CDP’s machine learning can extrapolate that “I like to snowboard and do these other outdoor activities. Now [brands] can begin to paint a real picture of who I am.” It’s these small details that enable brands to create lookalike audiences and segments within their activations to expand targeting of their highest value customers.

And the impact goes beyond these benefits. Brands can also map the customer journey using their CDPs. “What if you could connect the story of how [customers] came to you even before they visited your website?,” asks LeTourneau. “The customer journey can look so different across each vertical. And it can be very dynamic—meaning, it can be very short in retail or it can be very long in automotive, even weeks at a time before [customers] actually transact during the research phase.” With a CDP, marketers can move past generalized audience statistics to determine the context and motivations behind each stage of the customer journey.

4. The future of personalization is customer identity.

Marketers can’t effectively personalize unless they can recognize exactly whom they’re talking to. Says Danely, “Customer identity is core to getting personalization right.”

Brands have been aiming to create their own enterprise view of the customer for a while now. However, according to LeTourneu, they frequently run into challenges with an internal approach. “What I’ve seen, and what we’re hearing is that data lakes don’t allow…a [complete] marketing view of the customer or the channels or the integrations for reactivation.”

CDPs avoid roadblocks to progress by connecting data across applications or silos for identity resolution. While each may have its own format for storing data (e.g., first and last name in one field versus two), CDPs use a process called stitching to directly match data and standardize it to create a single view of the customer. Then, using historical third-party data enhancement, they extend that identity to generate a very powerful identity graph that’s usable by the enterprise.

Danley notes that the value of third-party data enhancement today is a lot different than in the past. “Where third-party data [can now] come into play is really understanding the person behind that profile—their likes, their dislikes, their demographics, their propensities. [Marketing] becomes much more relevant to that person.”

Some third-party networks like Acxiom not only provide household demographic data but also advice for how to use data enhancement. “The goal is to create experiences that are captivating and engaging without straying into the realm of creepy,” says Danley.

CDPs bring all data together to offer the possibility of an omnichannel experience for customers. “This requires not only bringing together known data but also being able to connect non-anonymous interactions over time [so that marketers] can really know the individuals behind the device or cookie and make their experiences personal,” says LeTourneau.

Finally, CDPs help marketers truly map customers’ contextualized journey and decision-making process over time, understand real-time wants, and predict possible future actions. Altogether this means better personalization and more authentic automated communication across channels.

For more insights into where the tech stack revolution is headed and the future of personalization, listen to the full webinar, “Data Enhancement and the Evolution of Marketing Data Platforms.”