A New Urgency: How CDPs Power Digital Transformation
Digital transformation—specifically the practice of using data throughout a business to make it more data-driven and therefore more efficient and profitable—has been a long-term goal of many organizations for at least the last several years. But recently, intensifying competitive pressure and COVID-19 have caused many businesses to accelerate their digital transformation plans if they already had them, or to jump-start new initiatives quickly if they hadn’t. And they’re turning to Customer Data Platforms (CDPs) as one of the key technologies to underpin these increasingly important initiatives, leaving many to ask with new urgency, “What are CDPs, and how do they help with digital transformation?”
First, a customer data platform is a type of packaged—often cloud-based—software that creates a persistent, unified customer database that is accessible to other systems. CDPs pull data from multiple sources and databases, clean it up, match it with other customer data, and combine it to create a single customer profile. This data is then made available to other marketing systems and other teams throughout an organization.
How Are CDPs Used in Digital Transformation?
A company that’s already ahead of the curve in using CDPs for digital transformation is AB InBev. Why did the company decide on a CDP (by Treasure Data)?
“Here at ABI, the CDP is our single source of truth talking about our consumer data and it is in a strategic place in our martech stack,” says Lucas Borges, senior manager, consumer data strategy at AB InBev.
Borges adds that the company’s emphasis on CDP-powered digital transformation, long before the pandemic struck, has helped it roll with the punches as shutdowns of many retail outlets made it more difficult to keep the channel open for purchases. For example, the company was able to quickly pull together apps and open up limited new direct-to-consumer channels to show consumers where and how to buy their favorite beverages, something that probably would not have been possible pre-digital transformation.
What Is Digital Transformation?
Digital transformation is the process of becoming a company where digitized data is available throughout an organization, is easily viewable and understandable, and can be used to make good decisions about all aspects of managing the business.
What Does Digital Transformation Really Mean?
That’s a good definition, but it’s difficult to picture. Is there a way to understand and define those initiatives that could be truly “digital transformations,” and understand what makes them transformative? Let’s look at some real-world examples:
- Research from Frost & Sullivan and Treasure Data indicates that as many as one out of two automotive dealerships have seen a consistent increase in digital traffic, despite the COVID-19 pandemic. But long before the pandemic, Subaru was leveraging a Treasure Data Customer Data Platform (CDP) to understand whether its ad buys were paying off, and how to get more from its advertising budget. This kickstarted a digital transformation of Subaru’s marketing department and eventually led to customer data being used in new ways such as product design—a classic example of departmental digital transformation spreading throughout the larger organization when leaders realize its power.
- The management of Stripe International Inc. had a similar experience. The international retailer and brand manager began with marketing, then started to experiment with new ways to digitally transform its business, even moving to rationalize its reordering logistics and supply chain. “We used to outsource reporting of access analysis, communication scenarios, and MA tool implementation quite often,” said Shigeki Yamazaki, advisor of the Digital Transformation Division, managing director and general manager of the Marketing Division of Stripe International Inc., in a presentation entitled “Case Examples of Stripe’s CDP Utilization.”
“Now that we have customer data capabilities and can manage in-house, we are motivated to look at problems and say, ‘Let’s try this too.’ Also, our CDP helps us understand how our actions bring our customers closer,” says Yamazaki. “By increasing the accuracy of our work, I feel we have come closer to understanding our customers, the original goal of introducing Treasure Data.”
- Financial institutions are also starting to use data to address one or two key objectives, then realizing how transformational having easily available customer data and analytics can really be. “We wanted to find new leads and new customers,” says Nicole Rothman, director of acquisition marketing at National Debt Relief.
“With Treasure Data CDP giving us the insights that we need to optimize our Facebook program, we’ve cut our cost per lead (CPL) by 10 percent while increasing sign-ups by 46 percent year-over-year,” says Rothman. “Plus, we can now offer personalized customer experiences, improve targeting and segmentation, and acquire new customers much more effectively.”
An Easy Way to Understand Digital Transformation
If digital transformation seems a little akin to saying, “And here, a miracle occurs,” here’s a model that can help us understand how companies come to adopt the transformative technology—such as CDPs—that help change their organization for good: the SAMR model, developed by Dr. Ruben R. Puentedura. SAMR stands for:
- Substitution: Technology acts as a direct substitute with no functional change
- Augmentation: Technology acts as a direct substitute with functional improvement
- Modification: Technology allows for significant process redesign
- Redefinition: Technology allows for the creation of new, previously inconceivable processes
Let’s look at an example from the energy utility sector to better understand these levels. Imagine a line worker sent out in a repair truck to fix power outages caused by an ice storm. In the past, the repair worker would have had a clipboard of paperwork to guide the work to be done. Now consider this process in the age of smartphones:
Substitution: The paperwork is digitized as a PDF and displayed in a smartphone app; the app is essentially acting as digital “paper.”
Augmentation: The paperwork (and its fields / content) is digitized and replicated in the app, but now rather than being a static PDF, information such as location of the work can automatically be populated. This automation saves time and effort, and allows the worker to focus on higher value tasks (such as fixing the downed electric line).
Modification: The paperwork is digitized and replicated in the app, but now the app can use data such as weather, the number of households without power, and distance between trouble spots to optimize the worker’s route and prioritize the work tickets, driving even further time saving and value.
Redefinition: In addition to all of the above, the app uses the accelerometer in the phone to measure acceleration. If a sudden acceleration is then immediately followed by rapid deceleration, there are a couple of likely scenarios: either the worker has dropped the phone while working in the elevated bucket or more critically, the worker has had an accident and fallen from the bucket. In these scenarios, the app could alert dispatch to have another worker check on the situation, or the app could even automatically contact emergency responders with the exact location of the potential accident.
As you can see from these examples, value progressively increases with each level in the SAMR model. Organizations that focus their digital transformation on “Modification” and “Redefinition” will see the greatest value and the highest level of competitive differentiation.
Why is the Customer Data Platform (CDP) a Critical Component of Digital Transformation?
For any business with a revenue model predicated on customer facing activities, “Know Your Customer” is the goal of a CDP. But how do you start?
If you are unfamiliar with CDPs, a great place to start would be CDP 101 in the CDP Academy. You’ll learn how a CDP unifies customer data from both online and offline interactions, informing analytics and insights so you can truly understand your customers. Think of a CDP as providing the fuel for data-driven decision making, which is foundational to digital transformation initiatives.
Let’s look at three areas where a CDP helps enable digital transformation.
1. Revolutionizing the Customer Experience
What does it mean to revolutionize the customer experience? In describing how to accelerate digital business transformation, Gartner describes an “Everything Customer.” What is the Everything Customer?
According to Gartner, “The future customer is not a pure digital customer, but a customer who wants everything to be in-person and digital. This includes the speed and ease of digital and the hand-holding of human interaction.”1 Clearly, to satisfy the needs and wants of the Everything Customer requires a deep understanding of their online and offline activities, behaviors, and brand touchpoints.
In the automotive sector, the Everything Customer could be thought of as not just the car shopper, but the (post-purchase) car owner as well; maintaining brand loyalty for an automotive manufacturer requires at least a Modification (in the SAMR model) of the end-to-end customer journey. Subaru is using Treasure Data’s CDP to revolutionize the customer experience, from pre-purchase intent all the way to multi-generational ownership and brand loyalty.
For example, Subaru has unified 200 data points and 80 billion data records, while collecting more than 8 million new transactions daily, across the entire customer journey. This data drives an improved customer experience during website interactions, in dealer showrooms, and post purchase. In 2018, Subaru actually formalized its goal to evolve from “a company making things, to a company making people smile.” That’s a textbook definition of a revolutionized customer experience.
2. Enabling New Business Models and Opportunities
Going back to the SAMR model, we can see that the most advanced level is “Redefinition”—enabling a process that would not be possible without using components of a digital transformation.
The automotive industry, given its history of innovation and engineering excellence, is often at the leading edge of using new technologies especially when it comes to safety. Anti-lock brakes, traction control systems, air bags and LIDAR based cruise control are just a few of the safety innovations that automotive manufacturers have developed.
Could a better understanding of driver (i.e. customer) data be used to power AI algorithms that improve safety and provide marketplace differentiation for OEM manufacturers? This is exactly the question being answered by Pioneer, using data harmonized by Treasure Data’s CDP. Pioneer combines external data, such as weather conditions, with customer data to reach an AI-based predictive score of potential accident risk called “YOUR SCORING”. YOUR SCORING is an in-car display feature that shows drivers a real-time, constantly changing estimate of their accident risk using predictive modeling. By combining and analyzing a massive data set to create an overall picture of a journey in real time, YOUR SCORING is able to help drivers reduce their risks. It also serves as an excellent data source for understanding how customers really drive—paving the way for using customer data to design new features, products, and services for drivers.
3. Driving Product and Services Innovation
Digital transformation, by its nature, transforms fragmented and siloed data into actionable and useful data. Beyond improving the customer experience, this data can be leveraged to drive innovation in the development of new products and services.
Lion Corporation is using insights gleaned from Treasure Data’s CDP to not only increase the relevance of marketing campaigns, but also to understand consumer behavior and motivations. This understanding has helped shape the development and introduction of new products. For example, the company has long been interested in sustainability issues and was quick to introduce phosphate-free detergents decades ago. Insights into current consumer attitudes serve as inputs into the development of new sustainability products and campaigns that can be deployed rapidly into the marketplace.
The CDP Is the Customer Data Foundation for Digital Transformation
So what is it about CDPs that make them uniquely suited to act as the central martech to power digital transformation? It’s not just a CDP’s ability to unify your customer data into accurate, unified customer profiles that gives it this power. It’s also the power to orchestrate—to coordinate and execute all of the elements of a campaign or strategic initiative—that helps CDPs serve as the martech that connects your tech stack. That’s why CDPs are such a popular choice for the foundation of digital transformation. They help all of your infrastructure—whether legacy tools, homegrown systems, data lakes, SaaS-based sales or marketing tools and customer support systems—to read from a single source of truth about each customer. In addition, they help you activate actions across the stack based on customer interactions, interests and ML-driven insights.
In short, it makes your entire stack more valuable by allowing each component to leverage the insights and information from the other technologies. This foundation allows you to accelerate your digital transformation efforts and makes it easy to swap in and out tools, as needed.
For many companies, a CDP is exactly the kind of martech that can transform their organizations from running on fragmented, siloed systems to companies that easily use customer data not just to automate the kind of personalized customer journeys that build loyalty and CLV, but transform their organizations as well.
And the good news is, in helping with the digital transformations of hundreds of international companies, Treasure Data has observed that transformation often begins modestly, with leaders trying to solve a few well-defined problems. Then, when they achieve initial success, they typically decide to apply their new-found digital transformation capabilities to change their entire organizations for the better.
But they all started out with their leaders trying to solve one or two important problems—maybe similar to problems your business faces now. Perhaps, in your search for a solution, you could put your company on track to being a much more data-driven organization. So maybe now’s the time to consider: Which problems could your organization solve with customer data and a Treasure Data CDP? Could your organization use some customer data-driven insights now? Get this free 16-page report from Raconteur, published in the UK publication, The Times.
1 Smarter With Gartner, “How CIOs Design for the Everything Customer,” October 23, 2019. https://www.gartner.com/smarterwithgartner/how-cios-design-for-the-everything-customer/