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How to Choose a CDP

Choosing a Customer Data Platform [CDP]

CDPs have become incredibly popular for companies looking to get more out of their data. It’s easy to see why. CDPs help companies unify their data, get a better understanding of their customers and create more personalized marketing campaigns.

Finding the right CDP for your company isn’t an easy process. There are a lot to choose from, but it’s not something that should be taken lightly. That’s why we put together this guide to help you easily identify the best CDP for your company.

CDPs do this by consolidating data from different customer touch points. By breaking down da and bringing together first-party data covering all customer interactions, you can get a detailed, 360-degree view of how customers use your product and what those customers do on your website or mobile app.

A potential customer might start with an organic search on a laptop that leads her to a blog post. The next day, she visits your website again from her phone while commuting to work. Two days later, she signs up for email updates from you. A week later, she clicks through an email for a free trial. Her free trial expires after a week, and then nothing. She doesn’t visit your website again for a month. Eventually, she does come back to your website, and signs up for a monthly subscription to become a new customer.

Without a CDP, that scenario would be hard to track. You’d have all these data points, but it would be stored in multiple places. As a result, you might only know that she took a free trial and then made a purchase. Your CDP brings all of those interactions across different data sources together and consolidates them into a single omnichannel customer profile to help you get a full understanding of customer behavior and engagement.

With that knowledge, marketers can create better marketing campaigns that facilitate customer engagement at the most opportune times. A single customer view enables detailed segmentation (e.g. using demographic or behavioral data) that marketing teams can further use to create personalized experiences and improve conversion rates by targeting the ideal customer profile.

And, CDPs can help with more than just marketing. With a superior understanding of your existing customers and how they use your product, you can improve customer loyalty and retention.

If you’re ready to take that jump and use a CDP to make your company more data-driven, you need to start by comparing different CDPs to find the best one for your company.

Finding the right CDP for your company isn’t an easy process. There are a lot to choose from, but it’s not something that should be taken lightly. Your CDP is going to be handling customer data. Anytime you’re dealing with your customers’ data, you need to be extra sure that their data is safely and ethically handled.

That’s why we put together this guide to help you easily identify the best CDP for your company.

6 steps to choose the best customer data platform (CDP)

Below we walk through 6 important steps that you should go through when choosing a CDP. Following these steps will ensure that you choose a CDP fitted to your goals and resources.

Step 1: Bring stakeholders into the process

Before you even decide which CDPs you’re going to evaluate, you need to bring internal stakeholders into the process. The CDP you choose is going to be working with data from different departments within your company, so it’s important that everyone is bought in.

The question you need to ask yourself at this point is: Who else collects data that your CDP will handle?

There’s a good chance your sales team’s customer relationship management (CRM) platform stores data that your CDP will need access to. A stakeholder from sales should be part of the buying process.

What about your customer success team? There’s a good chance that your customer success team uses tools that handle customer data. A stakeholder from the customer success team will likely be part of this process too.

You don’t need each stakeholder individually evaluating each CDP, but you will need their input on various parts of the buying process. At the very least, talk to each stakeholder and let them know why you’re looking to purchase a CDP and what you hope to get out of it.

Step 2: Define use cases

There’s another big question you need to answer before deciding which CDP is best for your company: What is the reason you’re looking to use a CDP?

It’s easy to get caught up in the fact that you need a CDP because it will consolidate your data into a single customer database, but what are you actually hoping to get out of that? Consolidating your data isn’t going to make you more data-driven. It’s just a step along the way. To choose the right CDP, you need to define your use cases ahead of time.

Take some time to think about what you want your CDP to help with. Then, talk to the other stakeholders about their ideal use cases. From there, try to identify three or fewer ideal use cases. Limiting your use cases to just the top three will make it easier to evaluate all of the CDP vendors.

Here are a few of the most common use cases:

  • Fully understanding our customer journey
  • Creating a more personalized customer experience on our website
  • Creating more targeted multichannel advertising campaigns
  • Combining online and offline data

Once you’ve defined your use cases, spend some time studying your potential CDPs. Look at their website; read reviews of their products; talk to colleagues at other companies who use these tools. Does your ideal use case fit with what any of these companies are doing? If yes, make a list of those companies. At this point, it’s probably going to be a pretty big list.

Step 3: Determine the tools needed

You need to get a handle on the tools your company uses that will be connected to your CDP.

To get an idea of what tools and functionality you’ll need, start by focusing on your use cases. Which tools do you need to accomplish the specific use cases that you laid out in Step 2? Make a list of those tools.

Next, make a list of all the tools that interact with your customer in one way or another. You’ll want to include website tools, CRM systems, real-time live chat, payment processors, email platforms, and help desk systems, just to name a few.

At this point, go to your other stakeholders and double-check that you haven’t missed any important tools that will need to be connected.

Most often, we see customers start with:

Once you’ve determined the tools you need, make sure the CDPs you’re evaluating already have those integrations. If one doesn’t have the majority of the tools you use, knock it out of contention. This step might narrow your list by a large number.

Step 4: Gather requirements

There’s more to a CDP than a way to consolidate data and solve your use cases. You also need to think of the other requirements for your CDP. Requirements are different than your use cases because a requirement is more like a feature, rather than an outcome.

For example, let’s say one of your requirements is that the CDP you choose should help you get a solid understanding of each piece of data that you’re collecting. To pull that off, you’ll need a CDP that can help you build a data-tracking plan.

If you’re not sure what other requirements you need to consider, here’s a list of common requirements that our customers have:

  • We’d like our CDP to help with GDPR and CCPA compliance. If that’s something you’re interested in, then you’ll need a CDP that will that will enable you to suppress data collection or delete customer data when requested, which is a requirement for both the GDPR and CCPA.
  • Our CDP should help us get a full view of our customer journey. If this is a requirement for your company, make sure that the CDP you’re evaluating has some form of identity resolution, which helps identify users across different channels.
  • Our CDP needs to have top-notch security. This is becoming a more frequent requirement. Make sure the CDP you’re evaluating has a credible, independent security certification like ISO 27001 or SOC 2. Those certifications ensure that the CDP is continuously monitoring and upgrading their security practices.

Another good place to gather requirements from are the pricing pages of each CDP. Read through the features that are listed on those pages, and make a note of anything that’s going to be important to your company.

For example, you might see that one CDP has an uptime guarantee, while another doesn’t. If an uptime guarantee is important, you might want to make it a requirement.

Step 5: Compare vendors

At this point, you should have a list of just a few CDPs that fit your use cases, have the necessary integrations, and meet all of your requirements. Now, it’s time to compare each CDP. Don’t take pricing into consideration yet. We’ll get to that in the next step.

Start by considering your industry. Find CDPs that have customers most similar to your company. If you work at an enterprise-level company, find a CDP that has a track record of working with companies at that level. If you work at a startup, make sure the CDPs you’re evaluating have experience in that space. Chances are there will be an overlap with CDPs that have a track record in all industries, but that’s okay.

If you’ve determined that all of the CDPs you’re considering have the right experience, it’s time to go a step deeper. Make sure each CDP has:

  • A track record of accomplishing the use cases that you defined in Step 2.
  • A solution for data compliance. CDPs handle data, so they should enable your compliance with the GDPR or the CCPA.
  • The right integrations for your current and future use cases. Is each CDP continually adding new integrations to their integration catalog?
  • Excellent customer service to help you set up, use, and maintain your CDP.

Don’t forget to look at review websites for user reviews of each CDP too. G2and Capterra both have dedicated pages for CDP reviews.

Step 6: Consider ROI

The ROI of the CDPs you’re evaluating is the final piece you need to consider. ROI doesn’t mean that you should choose the cheapest option. It’s more about which option will give you the best value. How do you determine that value upfront, before you choose your CDP?

Start by using our ROI worksheet. This will help you determine the cost of your engineers’ time. Without a CDP, your engineers have to spend hours building and maintaining integrations for each tool. Those hours add up quickly, which can result in significant costs just to build and maintain one integration. If you have ten integrations that need to be handled by your engineering team, you can see that the hours will quickly become unmanageable.

That cost is one of the biggest reasons to use a CDP. Good CDPs should reduce the amount of time your engineers spend building integrations between tools, which can result in a huge cost savings.

That’s why you need to calculate the costs and consider ROI ahead of time. If you choose a CDP that doesn’t give your engineering team the maximum amount of time-savings, it may not be worth the cost at all.

What CDP do you need?

Choosing a CDP isn’t a quick process. You need to make sure you’re doing your due diligence to find the right CDP based on your specific use-cases and requirements.

Once you’ve done that, you’ll be able to get more value out of your data and get a better understanding of your customers. Plus, your engineering team will thank you for reducing their workload since they won’t have to spend time building and maintaining integrations with your tools.

Courtesy: Segment

A CDP is even more critical for the Martech Stack in 2021

The rapid shift to digital channels during COVID-19 grabbed headlines through out 2020. But for marketers, it was only one change among many in an eventful year.

Google Chrome joined Safari and Mozilla in announcing it would end support for third-party cookies, eliminating a tool marketers had long relied on to accurately attribute ad spend and market. The passage of the California Privacy Rights Act (CPRA) in November left them with more data privacy rules to address. And marketers were expected to handle all of these changes with budgets that had been reduced due to a sudden economic recession.

To understand how marketers have responded to these changes and what that means for the future of CDPs in 2021, through surveys of 300 U.S. marketers in the travel, hospitality, finance, retail and healthcare industries in November 2020

Research found that CDPs have been vital to marketers’ efforts to address the many challenges of 2020. These experiences have solidified the CDP’s position in the center of organizations’ marketing stacks and increased marketers’ confidence that the technology is here to stay. In our 2021 report, 68% of respondents said CDPs will remain a must-have technology in 2025, compared to only 57% in 2020.

The pandemic shifted marketers’ priorities

All of the organizations in our survey (100%) saw at least some
marketing budget cuts due to COVID-19, and 41% saw cuts over 20%. Though the pandemic made organizations more reliant on digital channels for reaching their customers, most marketers couldn’t afford to invest in new tech solutions. More than three-quarters (77%) of organizations cut tech initiatives in 2020 due to COVID-19.

At the same time as budget cuts were forcing them to do more with less, marketers shifted their priorities to address new challenges caused by the pandemic. For marketers without a developed first-party data strategy, the demise of third-party cookies made it harder to manage ad spend across digital channels. Tighter budgets made customer acquisition and retention more difficult. And finally, the restriction or elimination of in- person experiences put incredible pressure on marketers to offer a unified customer experience across channels — particularly digital ones.

Results suggest that marketers are using their CDPs to address
these challenges head-on. For example, in 2020 report, respondents focused on various forms of real-time functionality as the most useful capabilities of a CDP. Now, the emphasis has shifted to managing data across multiple channels and resolving customer identity — which are important for delivering seamless digital experiences in a post-cookie world.

2021 may see a rise in CDP investment

Despite the drop in tech investment overall, there wasn’t a drop-off
in CDP investment during COVID-19 — likely because CDPs are so important for addressing marketers’ pandemic-related concerns. Eighty-nine percent of marketers we surveyed had a CDP, and nearly a tenth (9%) had adopted a CDP since the beginning of the pandemic in March 2020.

Key takeaway

Marketers understand that CDPs are key to unlocking the full potential of first-party data. The right CDP will anchor a robust customer data supply chain that frees your organization from excessive reliance on third-party data. It will also enable accurate attribution of ad spend and market, enabling more effective ad spend management. Finally, a CDP will support a unified customer experience across channels, built on first-party data acquired with customers’ consent.

Recommendation

With third-party cookie loss, a first-party data strategy is no longer optional. As tech spending rebounds in 2021, look to invest in a CDP that is equipped to meet the challenge of third-party cookie loss, while also supporting better customer experiences.

State of the CDP 2021

In 2021, marketers will make up for lost time by increasing their tech investments. Eighty-nine percent of organizations will spend more on tech in 2021 than they did in 2020, and almost one-third (32%) will spend significantly more. Perhaps because they were hit harder by the pandemic, travel and hospitality marketers were most likely to say they’ll spend significantly more. The big question: Where will marketers allocate these funds in 2021?

The importance of integrations

As first-party data becomes more central to marketing strategy, CDPs are becoming more central to martech stacks, too. That means they need to integrate with more solutions across the organization — and they need to do so easily and quickly.

As a result, marketers are demanding more from their CDPs. Integration with more third-party solutions shot up from the No. 4 improvement marketers want in their CDPs in 2020 to No. 1 in the 2021.

Unfortunately, many marketers feel their existing solutions aren’t delivering. Almost two-thirds (62%) of respondents said it’s difficult to integrate new third-party solutions into their martech stacks. And 63% said they have struggled to achieve marketing goals due to the difficulty of integration since March 2020.

A barrier to cross-compatibility

When it comes to more and faster third-party integrations, one major barrier stands in marketers’ way. A majority (53%) of marketers strongly agreed that their martech stacks are walled gardens — meaning they consist mostly of solutions from one vendor that are designed to work together. Products that are part of a walled garden will almost always have limited cross-compatibility with third-party solutions.

It’s no surprise that many marketers are actively seeking new solutions that won’t limit their options: Seventy percent said they’ve discussed adapting their martech stack to incorporate third-party solutions more easily

Key takeaway

With marketers under pressure to do more with less, speed and efficiency are at a premium. Marketers need to be able to integrate new solutions into their martech stacks fast. Unfortunately, tools that are part of walled gardens — including some CDPs — can’t deliver the fast, seamless integrations marketers need.

Recommendation

It’s time for marketers to break out of their walled gardens. Look for a vendor-neutral CDP that will integrate quickly and easily into your existing martech stack, and also work with any new solutions you add to the stack later. By building the stack you want based on your organization’s particular needs — not the options available from one particular vendor — you’ll take the first step toward unlocking the full power of your customer data.

The changing privacy landscape

Data privacy regulations continued to evolve rapidly during the COVID-19 pandemic. Some organizations are still getting up to speed with the California Consumer Privacy Act (CCPA), which went into effect on January 1, 2020, just months before the pandemic hit and derailed marketing budgets. Now they must also address CPRA, which passed

in November 2020 and amends and expands CCPA.

Marketers realize that managing these new regulations — on top of existing data privacy rules like HIPAA — requires the use of sophisticated tech solutions. Data privacy protection was the top outcome marketers are looking to drive with technology in 2021.

A powerful tool for ensuring privacy

CDPs are uniquely suited to meet marketers’ need for greater control over customer data. For example, by enabling the management of data flows based on geography, CDPs support compliance with data privacy rules
for different states and countries. Powerful encryption and data recovery capabilities secure sensitive information against breaches and cyberattacks. And these are only some of the ways CDPs help keep customer data safe.

It’s likely that marketers will rely even more heavily on CDPs for data privacy controls in the future. Marketers who have CDPs agree that data privacy is the most important area for the technology to address, narrowly edging out predictive insights and customer acquisition.

It’s likely that marketers will rely even more heavily on CDPs for data privacy controls in the future. Marketers who have CDPs agree that data privacy is the most important area for the technology to address, narrowly edging out predictive insights and customer acquisition.

AI is key to 2021 marketing strategies

The pandemic has made delivering great digital customer experiences
— and doing so efficiently, at low cost — more important than ever. To
keep up with the competition, marketers must predict customer behavior and take proactive action to drive the outcomes they want. And that means effectively deploying AI and machine learning to generate predictive insights. Fifty-nine percent of respondents say AI capabilities are extremely important for achieving their marketing priorities for 2021, and 99% say they’re at least somewhat important.

Closing the AI expertise gap

CDPs are the foundation of AI and machine learning capabilities because they help ensure the data that is collected is complete and accurate, which is critical for AI and machine learning to be effective. Marketers already understand this: Customer analytics and predictive insights is the second most important solution area they want CDPs to address. Many marketers are already seeing AI success.

A majority (62%) say their organizations are very effective at deploying AI for predictive marketing insights.

However, gathering the right data to feed AI and machine learning algorithms isn’t trivial. And while marketers are mostly confident about their ability to build the data foundations necessary to deploy AI, not all feel like they have the right expertise. Among respondents who say their organizations aren’t very effective at deploying AI for predictive marketing insights, the top reasons are lack of expertise among marketers (30%) and IT (29%). It’s likely building the data skills and capabilities necessary to support machine learning and AI will be a major focus for marketers in 2021.

Key takeaway

AI will be an important growth area in 2021, as many marketers are still learning the ropes. The right CDP will help you close the expertise gap both by ensuring you collect the right set of complete, unified customer data and by offering built-in predictive capabilities that are easy for non-data-scientists to use.

Recommendation

Without the right customer data, no algorithm can deliver results. Look for a CDP that will help you build a strong data foundation for AI and machine learning by collecting and orchestrating the right datasets for your business. Adopting a CDP with easy-to- use, marketer-friendly data and machine learning capabilities will help you make smarter marketing choices and drive overall success in 2021.

However, gathering the right data to feed AI and machine learning algorithms isn’t trivial. And while marketers are mostly confident about their ability to build the data foundations necessary to deploy AI, not all
feel like they have the right expertise. Among respondents who say their organizations aren’t very effective at deploying AI for predictive marketing insights, the top reasons are lack of expertise among marketers (30%) and IT (29%). It’s likely building the data skills and capabilities necessary to support machine learning and AI will be a major focus for marketers in 2021.

“Customer analytics and predictive insights is the second most important solution area [marketers] want CDPs to address.”

The elusive revenue connection

In 2020, CDPs became more integral to marketing operations and data teams, addressing more use cases, incorporating more data and linking
to more third-party tools across organizations. This has made it even more difficult to quantify CDP ROI, since impact is diffused across so many solution areas. It’s no surprise, for example, that organizations still struggle to quantify CDPs’ impact on revenue: Just 7% of organizations measure CDP ROI based on revenue, the same percentage as in the 2020 report.

In the 2020 report, respondents cited data quality as their top way to measure CDP ROI, which isn’t ideal. Data quality is important, but hard numbers about monetary impact are key for securing leadership buy-in. The 2021 data shows that marketers have made some progress tying CDPs to operational savings, which is now the No. 1 way to measure CDP ROI, up from No. 2 in 2020.

Time to value is a major differentiator

Perhaps due to the increasing sophistication of ROI measurement, or the difficulty of integrating CDPs with the martech stack, average time to value for CDPs has increased. In the 2020 report, more than half (53%) of companies saw ROI from their CDP in six months or less. But in the 2021 report, less than one-third (30%) of companies did so.

A majority (57%) of marketers expect to see ROI from martech solutions within six months or less. That means only some CDPs are meeting marketers’ expectations for time-to-value — the rest are lagging behind, possibly due to slow integrations.

The CDP of the future

CDPs are a relatively new technology, and marketers are still working out which use cases make the most sense for them. But in 2020, marketers made significant progress toward more effectively integrating CDPs into their marketing operations.

CDPs were central to solving the biggest challenges of 2020, including budget cuts, new data privacy legislation and a sudden shift to digital channels due to the COVID-19 pandemic. The prospect of third-party cookie loss in particular brought CDPs to the fore: A first-party data strategy anchored by a CDP used to be “nice to have” — in 2020, it became absolutely vital for marketing success.

In 2021 and beyond, CDPs will be increasingly foundational to the martech stack. They’ll adapt flexibly to new regulations, continue to underpin customer acquisition and retention strategies and enable powerful AI and machine learning capabilities. To set themselves up for success, marketers should look for CDPs that:

  • Are vendor-neutral: Faster, easier integration will speed time to value and increase overall ROI.
  • Offer predictive insights: User-friendly AI capabilities will empower marketers to deliver standout customer experiences.
  • Protect data privacy: Capabilities like data encryption and consent management keep organizations compliant with regulations like CPRA. After the challenges of 2020, now is the time for marketers to plan strategically for the future by investing in tech. Equipped with the right CDP, marketers can make 2021 a record-breaking year for their businesses.
  • Marketers struggle to fully leverage integrated customer data, which has driven hype around the opportunity of customer data platforms. Tempered expectations of the effective scope of customer data platform (CDP) use cases are pushing this market toward the Trough of Disillusionment on Gartner’s Hype Cycle for digital marketing and advertising.
  • ■Effective use cases for customer data platforms often depend on or overlap with capabilities in IT systems such as master data management, which contain customer data but are typically managed outside of marketing.
  • ■Although the diverse vendor ecosystem is composed of vendors with rapidly evolving capabilities, pure-play CDP vendors compete against those with legacies in either technical data management or marketing, such as multichannel marketing hubs. Vendors frequently add new features and capabilities, but buyers struggle with a single CDP label used by vendors to cover the entire spectrum of use cases when most only excel at a subset of these.
  • ■Most CDP vendors originated as solutions for B2C use cases, and only a handful of solutions support the account-level aggregations and ABM tactics required for facilitating B2B marketing orchestration

How to Make a CDP Work for Your Organization

Whether you’re choosing a CDP for the first time or switching to a new CDP, don’t rush the process. Take the “crawl, walk, run” approach when considering the right Customer Data Platform and plan for the long-term. You’ll want to ensure that you choose a CDP that your organization can grow into: a scalable CDP that supports a wide range of third-party integrations, real-time capabilities and strong data governance.

Take the “crawl, walk, run” approach when considering the right CDP and plan for the long-term. Click & Tweet!

Navigating the CDP landscape alone is an overwhelming process for an organization. We help you evaluate which CDP technology best aligns with your organization’s roadmap for improving the customer experience. Our Customer Data Platform (CDP) consultants work with clients to help break down data silos, ensure data quality and activate use-cases, all the while respecting increased concerns for customer privacy.

Recommendations

To best evaluate the CDP marketplace using data and analytics technology:

  • ■Identify whether the majority of your use cases are operational by solving for inefficiencies in data management or data delivery, or analytical, such as growing customer spend or reducing churn.
  • ■Consult with key stakeholders in your organization before deciding whether to deploy a CDP. Determine your brand’s willingness to source technology externally versus building and maintaining in-house and clearly document your needs for marketing orchestration and native execution.
  • ■Conduct an inventory of existing skills in order to evaluate the marketing team’s ability to collaborate with IT and other stakeholders for data science, customer modeling, data management and execution. Select marketing solutions that complement and integrate with other enterprise systems such as data warehouses, CRM tools, or personalization engines.
  • ■Evaluate the level of risk tolerance in your organization for emerging technologies by determining whether a CDP — or related technology system — is an ideal fit.

Strategic Planning Assumption

By 2023, 70% of independent CDP vendors will be acquired by larger marketing technology vendors or will diversify through M&A of their own to enter adjacent categories such as personalization, multichannel marketing, consent management, and/or MDM for customer data.