You know what they say – it’s impossible to be everything to everyone.
The same applies to a customer data platform – with so many solutions on the market, it can be difficult to navigate and choose the one that is right for your needs.
In these situations, it’s best to take a step back and ask yourself two important questions – who will use the CDP solution, and what for?
Once you solve that, you’ll have a clearer picture of what use cases the tool needs to answer – and which ones are maybe not as important for your business.
To help you make an informed decision, we’ll cover the most common customer data platform use cases:
But, for those who are new to the CDP landscape, let’s first cover the basics.
What is a Customer Data Platform (CDP)?
A customer data platform (CDP) is a solution that collects, unifies, and manages data from different sources to create a unified view of the customer. The platform gives you a deep understanding of your customers by providing information about their preferences, past behavior, and interactions with your company.
CDP’s primary purpose is two-fold:
First, it serves as your ‘single source of truth’ regarding customer data. The platform ensures everyone can access the same data in real-time, breaking down data silos between departments.
Second, the customer data platform uses this data to create a 360 view of your customer. The profile helps your teams personalize their interactions with the customer and make more informed decisions based on customer insights. In the long run, this leads to a better customer experience and long-term customer loyalty.
Be careful not to mistake a CDP for a CDC (Customer Data Cloud) solution since they both deal with customer data but in different ways.
How Does a Customer Data Platform (CDP) Work?
A customer data platform collects data from a wide range of sources. By including both first-party and third-party data, the platform gives you a complete view of the customer. First-party data comes directly from your channels, such as:
- website or digital commerce analytics
- mobile app usage
- newsletter subscriptions
- your CRM platform.
This data provides insights into your customer’s past interactions with the company, their behaviors, and preferences. Third-party data, on the other hand, comes from external sources such as social media platforms, data providers, etc. It enriches your customers’ profiles with demographic data or insights into their interests and needs.
Who Are the Main CDP Users?
Customer Data Platforms are mainly used by marketing, sales, and customer service departments. Their goal is to increase sales and customer loyalty by providing personalized customer experiences based on insights.
However, other teams, such as IT or analytics departments, can generate value for the company using a CDP. For example, they can use customer data platforms to manage customer data privacy preferences on a company level or optimize operations to lower costs.
When choosing the right CDP for your company, you first need to understand who will use it and the high-value use cases the platform needs to cover.
To help, we’ll outline some of the most common CDP use cases and illustrate them with concrete examples.
CDP Use Case #1: Customer Data Unification
In our experience working with clients, customer data unification is the most common use case for a customer data platform. This is due to companies saving data in various data silos, using mismatching practices for record-keeping, and without having a way to reconcile that data.
But what is customer data unification? Customer data unification includes combining customer data from different sources into a complete customer profile and making it available to the relevant teams.
The main goal of customer data unification is to create a comprehensive 360-view of your customer by combining the four main types of customer data:
- Demographic data: data about your customer’s gender, age, education level, marital status, etc.
- Behavioral data: information about their interactions with your brand, including past purchases, website, and social media activity.
- Psychographic data: your customer’s values, interests, attitudes, and other psychological characteristics.
- Geographic data: relevant geographic information that might affect your customer’s behaviors and preferences, such as city, state, etc.
A customer data platform (CDP) unifies data by using techniques like:
- Identity resolution: unifying all customer profiles coming from various sources with different identifiers.
- Data matching: storing all customer data and activities in a centralized data model and matching it to the unified profiles.
- Data enrichment: improving your unified customer profiles with new and previously unavailable data.
The resulting unified view of your customer is needed for personalization efforts, leading us to the second CDP use case.
CDP Use Case #2: Improved Personalization
In a 2018 Epsilon research, 80% of customers reported they are more likely to make a purchase if brands offer them a personalized experience. Five years and a COVID pandemic later, that number is even higher.
Creating a personalized experience for your customers increases the chance of developing long-term customer loyalty and, ultimately – higher sales.
A customer data platform can help you drive your personalization efforts in different ways across your customer journey. For example, let’s take something as simple as a website visit.
When customers land on your website, a CDP can pull their past purchases and interactions and personalize the homepage. This way, the customer will see products or services they are most likely interested in.
And let’s say this worked, and they made a purchase. The customer data platform can again use this information to offer complementary products. Or it may suggest an extended guarantee if the customer profile shows they value this type of security.
On the other hand, the CDP platform will also know what not to do – like promote this type of product to this specific customer for a set amount of time. Unless it’s something they could also buy as a present for someone else.
So, as you can see, a customer data platform is a perfect way to provide personalized experiences using customer data – and a key to building long-term customer loyalty.
CDP Use Case #3: Omnichannel Customer Experience
At a time when an average customer uses three to five channels to make a purchase, it’s easy to understand why it’s crucial to provide consistent experiences across all touchpoints.
By leveraging an omnichannel customer experience, you ensure that:
- Your customers can engage and make a purchase when and where convenient for them.
- There are no gaps in the customer journey; customers can pick up where they left off no matter the channel they use.
This convenience makes the overall customer experience more enjoyable, making the customer more likely to become loyal and recommend your business to others.
By storing all your customer data centrally and pushing them to different action platforms, a customer data platform makes it easier to provide truly omnichannel customer experiences. For example, your customer might use your social media channels to search for a product, purchase through your website, and then pick it up in-store.
The process is fully automated, and since the CDP also has access to your store stock levels, there is no chance of the item being out of stock when the customer is there to pick it up.
You can also empower your in-store teams to provide personalized suggestions to the customer by offering complementary products or services to the one they are picking up.
CDP Use Case #4: Data-Driven Marketing Efforts
As we mentioned before, marketing teams are among the primary users of CDPs and are often the main drivers pushing for its purchase – all for an excellent reason. Customer data platforms allow your marketing team to launch marketing campaigns that are more efficient and effective thanks to data-driven decisions.
Let’s look at two ways this can be done.
Segmentation is one of the key features of a CDP, offered by virtually all solutions on the market.
Dividing customers into cohorts based on demographics, preferences, and behaviors allows your marketing team to create more targeted marketing campaigns. This, in turn, increases both the return on investment and customer engagement.
Lookalike audiences are a natural extension of segments. They are groups of people similar to your company’s existing customers based on demographics or other factors.
By using common characteristics like age, gender, or interests, CDPs help your marketing teams find and target new customer groups who might be interested in your products or services.
CDP Use Case #5: Effective Loyalty Programs
Loyalty programs are a great way to incentivize your customers to make repeat purchases and form an emotional connection with your brand. Not a small thing considering that – according to Bain and Company – loyal customers spend 67% more than new ones.
A customer data platform is an excellent foundation for an effective loyalty program. By unifying your customer’s behaviors, preferences, and past behaviors, a CDP helps you design loyalty programs tailored to your customers.
For example, with a CDP, you can design a loyalty program with rewards and incentives that resonate the most with your most profitable customer segment.
Or, if you have leftover stock of a certain product, you can connect it to a loyalty program and reduce your warehouse costs.
Finally, a customer data platform also helps you measure the effectiveness of your loyalty programs. By tracking customer behavior and engagement over time, you can make data-driven decisions around design and optimization.
CDP Use Case #6: Data Privacy and Regulatory Compliance
With several high-profile data breaches dominating the headlines in the past couple of years, customers are more careful about the data they share and how companies deal with it.
On the other hand, after the whopping 746 million EUR fine Amazon got served due to a GDPR breach, companies are also paying attention.
A customer data platform can help you ensure customer data privacy and regulatory compliance in several ways.
By storing all customer data centrally, CDPs ensure it is stored safely and protected from unauthorized access. For this purpose, it offers security measures such as encryption, access controls, and monitoring.
Customer data platforms often include features that allow you to store data and manage consent in line with specific regulations – such as GDPR (General Data Protection Regulation) or CCPA (California Consumer Privacy Act).
The platform gives you the tools to receive and record customer consent for data collection and answer customer requests to access, delete, or modify their data.
Getting the Most out of Your Data
To summarize, a customer data platform is a versatile tool that can help you reach a wider audience, drive revenue, and even optimize internal processes – all while ensuring compliance with local and international data regulations.
However, before you set your sights on a particular solution or a provider, be sure to know who will use it and what are the most important use cases.
This will help you make an informed decision and save you a lot of headaches down the road.
