What’s the Difference Between CRM & CDP?
When Salesforce introduced its CRM product in the 2000s, it revolutionized how marketing and sales could keep track of their customers. A customizable, cloud application gave companies a whole new view into their customer relationships. CDPs are poised to help companies take the next leap forward in customer experience – not only helping them understand a 360 degree view of customer better, but actually analyzing and predicting customer behavior. So what are the key differences between CRM and CDP that are driving this change? Here’s a quick primer….
What is the definition of CRM and CDP?
One common misconception is that a CRM and a CDP do the same things and provide the same value. After all, your CRM contains a lot of data about your customers, prospects and targets. How is a CDP any different?
The truth is that both a CRM and a CDP offer unique value to your organization. They are not mutually exclusive; each works with the other to provide a holistic view of the customer.
Let’s start by looking at a definition for each, and what they were originally designed to do. Then we’ll look at use cases for each, and the major differences between the two.
A customer relationship management (CRM) system is a platform for managing all your company’s relationships and interactions with customers and potential customers. CRM systems grew out of businesses’ need to manage their customer relationships better: staying connected, streamlining processes, and improving profitability.
A customer data platform (CDP) is “a marketer-managed system that creates a persistent, unified customer database that is accessible to other systems.” It is a central location for all customer data – from the digital and physical worlds – that helps marketers profile and segment customers based on both their attributes and their behavior. CDP systems emerged out of businesses’ need to personalize their customer experience at scale.
If we compare the way companies are using the two systems, the differences become more apparent. We begin to see that companies use their CRM as an operational tool, while they rely on their CDP for analysis and insights.
How do companies use their CRM?
- Front-office sales management
- Pipeline analysis and forecasting
- “Win/loss” analysis for go-to-market strategy
- Prospecting for customer acquisition
- Post-sales customer service
- Quote-to-cash processes for easy purchasing
- Marketing automation through campaign tracking and performance analysis
How do companies use CDPs?
- Automation of data management (integration, validation and cleaning)
- Identification and classification of all customer attributes and behavior across systems – both online and offline
- Definition of persistent customer profiles and management for future use
- Analysis of lifetime customer journeys
- Analysis of customer behavior to improve segmentation (i.e. pricing or marketing campaigns)
- Analysis of customer purchasing history and other behavior to inform eCommerce or content recommendations
- Predictive analysis for modeling customer behavior (i.e. segmentation based on most likely to buy, or most likely to churn)
- Export of segmented customer lists for campaign execution or business intelligence
What are the benefits of CRM and CDP?
CRM is mostly operational – a tool to help sales, marketing and customer support carry out their day-to-day business. It relies on direct inputs of customer data to work effectively. A CRM has virtually become a requirement to do business today for any company from a small business to a multinational enterprise, and is no longer a differentiable capability.
CDP is mostly analytical – helping business leaders analyze customer profiles (and using CRM as one source). It incorporates data from all customer-facing systems including website analytics, in-store POS systems, and billing systems and more. And thanks to powerful machine learning, CDP also offers predictive analytics capabilities, creating deep customer insights and actionable next steps.
What’s different about the data in CRM and CDP?
CRM’s data is transactional by nature. A CRM aggregates customer attributes and transaction histories to simply understand who purchased which products, when they purchased them, and what they went through to buy them. With this information, they inform salespeople about potential next steps.
CDP’s data is multi-dimensional and available minute by minute. A CDP uses raw behavioral data that indicates who purchased which products, when they purchased them, and what they went through to buy them – as well as why. Simply put, a CDP enables deeper analysis to feed a CRM with better information from website behavior and even offline sources, such as POS systems.
From a scope perspective, CRM systems define the sources of data that you can integrate, and require you to collect it within a predefined identity structure (i.e. customer ID, email address, cookie). It can take some time to define the data before it can be integrated and used with a CRM system.
CDP systems don’t define the data you can collect; there are no limits or parameters set, allowing you to store unstructured data, which is immediately available and accessible when needed for analysis. CDPs are made for all sources of customer data – including product engagement or interaction data – and are designed for ease of integration.
CDP: Tool of Disruptor Companies
Who are today’s disruptors? The media companies who highlight viewers’ favorite programming when they sign on. The retailers who show personalized messages or coupons based on in-store sensors. The manufacturers who can predict which products will be in demand among customers of a certain demographic or geographic. In the 21st century digital economy, customer data reigns as the competitive differentiator of market success.
What we are seeing is that the CDP is quickly becoming the tool of disruptors vs. companies who are just looking to conduct business as usual. Because a CDP is analytical by nature, it offers insights into ways to disrupt – through a combination of customer data and analytics. Can you imagine your day-to-day CRM delivering insights that could drive a 46% increase in in-store revenue over two years? Or informing data-driven hero optimization for a VR gaming company?
Data is the key to offering cheaper, faster products and more personalized experiences.
And because different types of data are required to understand the why (which indicates ways to disrupt), including unstructured data support (like IoT), a CDP offers a more complete view of the customer journey, with data no one else has.
Our team is active in helping companies differentiate when they need a CRM or a CDP every day. See Quora for more details.
For more information on how data is key to disruption, see Forbes Insights’ DATA VERSUS GOLIATH: Customer Data Strategies To Disrupt The Disruptors.