Ad Tech and Privacy

CDPs Can Deliver Bottom-Line Results — If Used as Intended

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As the global advertising industry focuses on first-party data, many are turning towards customer data platforms (CDPs) as the cornerstone of their data-driven marketing strategies. However, a mix of over-hyping from some vendors and unrealistic expectations from buyers has caused confusion over CDPs’ capabilities. How did this once-celebrated data tool’s reputation come to be tarnished, and what place does it have in the future of customer insights?

CDPs can be powerful data processing tools, but surveys find most businesses aren’t using them to their full potential: They’re not piping in data from all available online and offline sources, they’re not using them for their intended purposes of mapping customer journeys (only 60% of marketing teams are using them as such), or they’re not using them to drive core marketing functions.

At the same time, a CDP won’t necessarily replace as many tools in the business’ tech stack as some business leaders might hope. We need to understand a CDP’s real capabilities and set reasonable expectations for their overall utility.

What is a CDP, anyway?

According to the CDP Institute, a CDP is software that “creates a persistent, unified customer database” that other systems in the organization can access. Getting the definition straight is important — a lot of the frustration businesses feel around CDPs comes from either vendors misrepresenting their solutions or businesses using the solutions for purposes for which they weren’t intended. A true CDP captures customer information from multiple systems, links that information to follow the customer journey over time, and is interoperable with tools for business processes like analysis and tracking. 

Unfortunately, there seems to be a disconnect between a CDP’s purpose and marketing expectations. A recent Forrester survey of over 300 enterprise CDP users found only 10% felt their CDP met their needs. When future requirements were not accounted for, that figure dropped to 1%. Key failure points were tech support (damning for packaged software), reporting, and analytics-based insights — each of which were reported as challenges by around half of respondents. However, CDPs are serving marketing needs for existing customers as adoption rates demonstrate. Where they may be falling short is in media and advertising activation, which was always outside the platform’s intended scope. 

Is your CDP what it says it is?

Industry stakeholders have posited that some vendors have simply rebranded their tag management technology and web personalisation tools as CDPs. And not every company has data experts at hand who are able to properly vet vendors and recognise a wolf in sheep’s clothing.

IT and marketing teams using misrepresented CDPs see only software that doesn’t do what it promised to do. That damages the reputation of legitimate CDPs and the martech industry as a whole.

CDPs are a big but single piece of the data puzzle

A further issue with CDPs is they are being misrepresented as a solution to a challenge they are not designed to solve — even if the solutions are completely legitimate and meet the definition of a true CDP.

Third-party cookie deprecation has led to a re-evaluation of first-party data as companies try to claw back lost insights. Many have turned to CDPs, which are great at managing customer data and connecting various data a brand has on a particular customer from different sources within the company. For many, CDP capabilities enable better engagement with existing customers. But in general, CDPs cannot help with new customer acquisition or provide insights into prospect behavior when they are not directly engaged with the business. A full-funnel marketing strategy requires a holistic view of both customer and prospect data, which a CDP simply cannot provide on its own.

CDPs also aren’t sufficient to cover for the widespread skills shortage in data analytics. CDPs collect and sort data and present it cleanly, but valuable, actionable insights tend to be business-specific. That requires someone who can interpret, report, and mobilize data into something useful. There’s a need for customization, which many CDP providers can’t offer. To compound the challenge, 60% of CMOs plan to halve the size of their analytic departments by 2023 per Gartner research. 

Learn to drive your CDP to get the best mileage from it

Don’t pull the plug on your CDP yet — especially when a business needs all the strong data insights they can get to come out on top when the volume of third-party cookies are restricted. A CDP is a valuable, often essential, data tool, but it is only one piece of the puzzle. Using a CDP correctly begins with the business looking at the data it already has at hand. A CDP can’t clean up bad data, so identity resolution should be carried out first to correct, merge, and enrich customer data before it is fed into the CDP to sort.

Businesses should also ensure the CDP they purchase is a match for their needs. A CDP is not a marketing-only tool, so marketers should form cross-functional teams — including technologists — to articulate both the business use cases and ROI assumptions before they take the plunge. Poor outcomes from CDPs often have more to do with the business’ ability to implement it properly than with the capabilities of the technology itself, when applied to its core functions.

As their appropriate use cases become better understood and bad actors are eliminated thanks to programs such as RealCDP, CDPs should secure their rightful place in the marketing funnel.

Alex Theriault is General Manager for Spherical at Lotame.