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Sep 8, 2023

Here’s What You Need to Consider When Choosing a Customer Data Platform (CDP)

According to IDC, the worldwide customer data platform (CDP) market is expected to reach $5.7 billion by 2026, up from $2 billion in 2022, with the growth rate attributed to customer experience (CX) being a top business driver for brands transforming into digital-first businesses.

The reason CX is a top business driver is because personalized experiences across all channels of engagement is what consumers expect. Consider a 2023 Broadridge CX and Communications survey where more than half of respondents (54 percent) said they will stop doing business with a company that does a poor job personalizing the customer experience.

Because there are many CDP use cases and equally many variations of the CDP itself, organizations considering a CDP should have a firm understanding of their business objectives – now and in the future – when evaluating which type of CDP will best suit their needs. Those objectives should align with other considerations, including the needed level of sophistication as well as the overall reach of the CDP into the enterprise, i.e. what depth and breadth of features and functions are required to meet the desired level of transformation?

The Reach of a CDP

On the sophistication front, one question to ask is whether the CDP is intended solely for marketing use cases, or intended more broadly for CX use cases across the organization. If the former, the breadth of the types of interactions that you need to support will be somewhat limited, and so will the data needed to handle these.

For the latter scenario – supporting CX use cases across the organization – the CDP will be responsible for improving all interactions on all channels – digital, offline and in-person. A greater level of sophistication will be needed in terms of how you approach the data, as well as how to configure the CDP to handle various use cases for marketing and beyond.

Going a level deeper, what we mean by the reach of the CDP into the enterprise is what is needed in terms of breadth and depth to support specific use cases. Reach can be understood in terms of three components: data handling, connectivity and enterprise reach.

Data handling considerations involve what will be required of the CDP in terms of functions and features such as data cleansing, identity resolution, parsing, third-party data enrichment, etc., with the knowledge that different CDPs handle these functions differently. Other points to consider involve how much reach into the data world does the CDP need to have, i.e., whether the CDP needs to handle message queues, web logs, a loyalty app or other types of data in an active and real-time fashion, or whether it’s enough to simply feed files into the CDP or drive data through an API.

Connectivity is a measure of how much reach into your Martech and channel world your CDP needs. By this, we mean where do you need orchestration to take place, and how do you expect to manage either single-channel, multiple-channel or omnichannel orchestration.

In other words, if your organization is happy with existing channel-specific teams, orchestrating experiences across those teams is not a priority, and what you really need from a CDP is high quality segmentation, the scope of the CDP narrows considerably. But if you need to understand a customer’s journey and meet a customer in the journey with a consistent voice by orchestrating real-time, omnichannel experiences, then your CDP will require additional capabilities.

Standalone vs. Integrated CDP

When considering enterprise reach, you will need to consider other parts of your enterprise stack, determine whether the CDP will operate as a standalone technology or will need to be composable, integrated and work tightly together with other elements of your stack, such as ecommerce, digital experience or content platforms, or even product or supply chain systems. This consideration goes beyond just working in tandem with the Martech stack or different channels to whether the CDP will need to integrate with new technologies and trends such as generative AI.

If a CDP is intended to be the enterprise hub to orchestrate CX through a single point of operational control, a key consideration will be knowing how a CDP is set up to optimize services for data management, journey orchestration and real-time interactions to support business functions across the enterprise.

If the primary goal of a CDP is to ingest all customer data to create a single customer view and you’re not concerned with, say, attribution, personalization or CX improvements, that narrows the scope of the CDP and there can be a much simpler set of integrations. But if the CDP is going to be additionally tasked with calculating propensities using internal or external models, content customization, next-best-action decisions, etc., then your CDP will have to either have those capabilities or be designed to integrate smoothly with solutions that handle those aspects of customer experience.

Another broader question to answer in the context of a CDP’s intended use cases is where you anticipate your sources of intelligence coming from. Beyond the internal data, how will the CDP support experimentation, optimization and orchestration at the API level? This is more than simply tapping into data that already resides in a data warehouse, but instead requires bringing results back from channels in ongoing campaigns and analyzing those results for attribution, journey optimization, and additional CX prediction or measurement. It is a recognition that there may be other enterprise sources of information and other consumers of (and actors on) CX insights the CDP offers. If a CDP is intended to be the enterprise hub to orchestrate CX through a single point of operational control, a key consideration will be knowing how a CDP is set up to optimize services for data management, journey orchestration and real-time interactions to support business functions across the enterprise.

A final point to make about deciding what type of CDP will best suit your business is to think about how your needs will change, and whether a CDP will be able to adapt to future change. You may have simple use cases today, but as you anticipate meeting the changing needs or demands of your customers – or business – your use cases may become more complex. Will your CDP offer an opportunity to ask and answer different questions about your customers, will it be able to automate some of the things that may have been manual in the past such as segmentation, visualization of customer differences and a calculation and understanding of aggregates around customer journeys?

You will not know precisely what’s in store for your customers or your business next year and beyond, but you do know that there will, in all likelihood, be a certain level of disruption. The type of CDP you choose may very well determine what side of the disruption your company is on.