What’s the Future for CDPs?
An Interview with the CDP Institute’s David Raab
Customer Data Platforms, or CDPs, are a major topic of discussion these days amongst marketing, marketing operations, and IT leaders.
With rising volumes of data, and increasing pressure on companies to mine it for customer insights, CDPs have become a key way for many companies to ingest, unify and better utilize customer data that lives in various data sources within the enterprise. To help you better understand the CDP space, we recently had the honor of interviewing David Raab, founder of the Customer Data Platform Institute, where we asked him about CDP myths, use cases, verticals, and the future of the technology. Without further ado, here is our conversation with David:
Q: What is the definition of a Customer Data Platform (CDP)?
A: The official CDP Institute definition is “packaged software that creates a persistent, unified customer database that is accessible to other systems”. Key points are that it’s packaged software, rather than a custom-build project like a data warehouse or data lake, which makes it quicker, easier and cheaper to deploy; builds an actual database rather than assembling information on the fly by querying external systems, which yields better performance and allows time-series analysis; works with identified customers, not just anonymous cookies like a DMP; and lets other systems read its data rather than just holding it internally. One critical thing to realize is the distinction between a customer database in general and a CDP in particular: a CDP is packaged software to build a customer database; you could also get a customer database by building it yourself or buying a larger product that included it.
Q: You recently removed “marketer-managed” from your CDP definition. Which company functions can benefit from a CDP?
A: Any department that deals with customer data can benefit. This would most obviously include sales and customer service. But also risk, fraud, compliance and even finance. And there are many operational uses for customer data, such as predicting workloads or optimizing distribution planning. As Digital Transformation projects become more popular, we see more activities that cross traditional departmental boundaries, with customer data as the connecting thread.
Q: CDPs, as a topic, are very much on people’s minds (featured in Scott Brinker’s Martech East keynote, featured in many articles by CMO’s, etc.). Why are they such a big topic now? What’s driving that?
A: There’s a realization that customers demand a personalized, consistent experience, which requires unified customer data at its foundation. At the same time, there are more data sources, more delivery channels, and more marketers who understand what’s possible. These all create pressure to build a customer database and the CDP is often the fastest, cheapest, safest way to do this.
Q: What are the main use cases that are unlocked by adding a CDP?
A: Primary CDP use cases include access to data that can’t be used in its native format or accessed directly in its source system; analyzing and activating unified customer data, where only separate, partial views were available; and reducing data management costs. There are many specific use cases under each category, such as reducing the cost to assemble audience lists for ad targeting campaigns.
Q: What are the more innovative ways that companies that are pushing the envelope of what a CDP can do?
A: On the data management front, I’m seeing innovation in using AI to simplify the addition of new data streams and to extract meaning from unstructured inputs, as well as incorporating new data types such as IoT, where the ‘customer’ may be a device, not a human. In data activation, I see innovation in having AI identify opportunities such as underperforming customer segments or products and suggesting changes to improve results. Eventually, the AI will do still more such as writing new copy and offers to test.
Q: What’s next for CDP? What do you think is the next big capability (solution) that no one is addressing with holistic customer data sets, today?
A: There are so many creative people working in this field that it’s hard to imagine something that no one is addressing. But I’d say the big problem to be solved is moving from a transactional relationship to a service relationship, along the lines of systems that manage chores like automobile maintenance, buying groceries, upgrading my computer, etc. It takes great customer data for those services to deliver such good results that people are willing to delegate responsibility to them.
Q: Are there particular verticals that you feel really benefit from a CDP? Has this evolved over the last few years (in terms of new verticals adopting CDPs)?
A: CDP deployment was originally focused in retail and publishing/media industries. We’re now seeing more use in financial services, telecommunication, and travel/hospitality/entertainment. Healthcare and education are on the horizon. We’re also seeing some movement to offer CDPs for small business, although I suspect that most small businesses will want their customer database to be part of a larger system, not a stand-alone solution like a CDP.
Q: Are all CDPs created equal? If not, how would you characterize different types of CDPs?
A: The biggest difference we see is the scope: all CDPs build a unified customer database. Some add analytics such as predictive modeling or attribution. Some add orchestration such as selecting the right message for each person in a given situation. The step beyond orchestration is actually delivering the messages, but then you’re probably talking about a system that is no longer a CDP. We also see some differentiation by technology: there are some CDP products that are very good at handling extreme data volumes and/or working in real time.
Q: What are the most important things a potential buyer needs to consider when looking at acquiring a CDP?
A: It always comes down to understanding what you want to do with the system, a.k.a. use cases. These determine specifics such as what kinds of connectors you need to ingest and share data, what sorts of data you need to process, and what additional functions (if any) you need for analytics and orchestration.
Q: What are 2-3 big CDP myths that you think need to be busted?
A: Probably the biggest myth is that CDP is a one size fits all solution. Companies have different needs and there are different CDP products that fit those needs. So it’s important to find the CDP that’s right for you, not look for some mythical CDP that’s best for everything. Other myths are that CDP doesn’t need IT involvement (it does and it should) and that CDP is a new technology (the components inside a CDP have existed for some time; what’s new is having them pre-assembled in a package).
Q: What do you see in the future for the CDP market in the next 3-5 years?
A: I expect that a central customer database will be a standard part of everyone’s marketing and/or corporate IT architecture. CDPs will be recognized as one way to build that database and in many cases will still be the best way. So the hype will have died down, but the real value will remain.
About David Raab
David Raab is founder and CEO of the Customer Data Platform Institute, a vendor-neutral organization that educates marketers and technologists about customer data management. Mr. Raab has a long career as a marketing technology consultant and analyst. He coined the term Customer Data Platform in 2013. Visit them at the CDP Institute website.