Think your business is too small for a customer data platform (CDP)? 7 reasons you might be wrong
You’ve heard it before: The data you have about your customers is “digital gold.”
But as your marketing team adjusts to data privacy regulations, evaluates your marketing budget in light of inflation and rising CACs, and decides where to invest in the future, the main question you should be asking yourself is: Are we a data-driven organization? Or are we data-driven in name only?
At Citizen Watches, business expansion has coincided with a wealth of data collection over the last few years. “And it’s all good data that we’ve harvested, ” says Richard Cowell, VP of digital strategy and operations. “But being able to do something with that data has been quite difficult for us.”
They’re not alone. According to Klaviyo research, ecommerce marketers have plenty of data. But they’re still unable to execute the personalized omnichannel marketing tactics they deem important because the data isn’t clean (71%), it isn’t stored in a consistent format (57%), and it’s not easily accessible (53%).
Cowell puts it this way: “There’s no point in capturing it if you’re not going to do anything with it.” As long as it’s siloed, unorganized, and difficult to work with, the data you have about your customers is just sitting there. It’s straw. You still need to spin it into gold.
This is where a customer data platform (CDP) comes in.
Read on to learn 7 good reasons to use a CDP—and why businesses of all sizes need a CDP that simplifies their tech stack.
1. A good CDP maximizes the value of the data you collect
For years, Facebook, Twitter, and Instagram were the place to go to build your business. But 2021 saw a marked shift in this paradigm when Apple’s iOS 14.5 update built a walled garden around iOS users—and significantly reduced social media’s targeting and marketing attribution capabilities as a result.
When Google eliminates third-party cookie tracking in 2024, reaching consumers via paid and performance marketing will become even more of a challenge for marketers—and a strong foundation of zero- and first-party data will be more important than ever before.
Both kinds of data are crucial for gaining a holistic understanding of your customers in a way that replaces fleeting buyer interest with long-term customer loyalty. And while a CDP ingests data from anywhere, which inherently means it also collects third-party data, “it’s still focused primarily on zero- and first-party data,” says Anthony DelPizzo, lead product marketing manager, Klaviyo CDP.
Owned and paid marketing don’t need to be mutually exclusive.
That strong foundation then forms the basis for delivering personalized experiences not only through your own channels (more on this later), but also lookalike audiences and retargeting.
“Let’s say I just made a purchase at your business. You don’t want to retarget me, because you don’t want to spend ad dollars on someone who just converted,” DelPizzo explains. “With a CDP feeding you data that tells you I just purchased, you can exclude me from that ad campaign and improve your return on ad spend (ROAS).”
In other words, owned and paid marketing don’t need to be mutually exclusive. A CDP unlocks the full potential of all your zero- and first-party data, so you can strengthen every touchpoint throughout the customer journey—without invading consumers’ privacy.
2. A good CDP breaks down data silos
For many brands, the marketing technology stack is complex, redundant, and overly expensive—and that’s reflected in the customer experiences they can, and cannot, create.
Justin Ragsdale, VP of business development and corporate strategy at full-service digital agency IM Digital, says the biggest data-related challenges his clients face revolve around data transparency across departments.
“Within the organization, teams are collecting data from many different channels—from the website, from email, from contact centers,” he explains. “And each of these teams need that data in order to execute their function within the organization. But what we’re seeing is that each team has just a fragment of the customer journey within their purview.”
Marketers and tech teams that use separate point solutions for things like data storage, marketing activation, and data analysis are working in an unstable, inflexible technological environment that forces them to stitch together several solutions, increasing the complexity of their processes and making the customer journey less cohesive.
The result is a Frankenstack—a conglomeration of different technologies, whether built in-house or tacked on through acquisition, that are loosely tied together and create massive overhead for maintenance and usage. That may include:
- Enterprise resource planning (ERP) system
- Analytics platform
- Data management platform (DMP)
- Customer relationship management (CRM) system
- Ecommerce platform
- On-site personalization tools
- Marketing automation platform
- Reviews platform
- Loyalty platform
- POS system
This kind of stack is in serious “technical debt,” DelPizzo says. “From an engineering perspective, it’s been really hard for all these systems to integrate with each other”—meaning marketers can never be confident that all their data is connected, accurate, and up to date.
Through pre-built integrations, open APIs, webhooks, SDKs, and other sophisticated methods of data collection, a CDP “solves that pipeline issue,” DelPizzo says, “getting data from one place to another more effectively.”
In other words, a CDP is not just one more platform you’re tacking on to your tech stack. It figures out where there’s overlap between the data from all these different tools, and then combines, consolidates, and normalizes it in one place.
If a CDP is doing its job, it’s the piece of your tech stack that makes all the other pieces live up to their full potential.
3. A good CDP unifies your data into a single customer view
A big reason “getting data from one place to another more effectively” matters so much, DelPizzo says, is “getting a single view of your customer across all their interactions across your entire brand.”
“The challenge is uniting all of that data together so that each team member can see the entire customer journey, instead of just seeing a portion of the customer journey,” Ragsdale agrees. “We want to embrace the entire customer journey and be able to unite that data across the different touchpoints we’re providing for customers.”
Kunle Campbell, co-founder at Octillion Capital Partners, an acquisition platform company liberating commerce founders with hassle-free exits, calls the single customer view the “holy grail” for digital marketers and brand leaders.
“If personalization is the ‘nirvana’ for marketers in today’s omnichannel reality, then having as much congruent information as possible for each customer is paramount,” Campbell writes. “The single customer view should be your dashboard to beat all dashboards: a single dashboard that displays all the personal data for a given customer.”
How do people navigate your website? What actions do they take before they bounce or buy? Where are they in the funnel? Whether they’re shopping in store, they’re shopping online, they’re engaging with your loyalty program, they’re talking to your customer service team, or anything in between, DelPizzo explains, “a CDP pulls all that data together into one single view, painting a cohesive picture.”
“That’s super, super valuable,” DelPizzo adds. “With a unified, holistic view of your customer, you can speak to them more accurately and more effectively.”
4. A good CDP teaches you about your audience
With a single customer view, you suddenly have much greater visibility into each individual customer—which translates to “understanding your audiences really effectively,” DelPizzo explains.
Whether that means insights into how different demographics engage with your marketing across channels, their purchase history across categories, what’s making them convert, and even how they’re likely to behave in the future, “a CDP can be that bridge,” DelPizzo says.
For example, Ragsdale says, “if I understand not only what and where a customer is buying, but also intimate details of their conversations with a customer service agent, that data could be critical to understanding, ‘OK, should I be offering this customer an incentive? Should I be segmenting this customer differently?’”
“We really need to build that 360-degree customer view so that we can understand who our customers are and what they’re doing, and then deliver them what they need,” Ragsdale adds.
A CDP gives you the insights you need to understand what kind of outreach and communication works best for different slices of your audience—and that level of sophisticated segmentation is crucial for increasing customer engagement and reducing customer churn.
“If you think about these well-known companies like Amazon, Netflix—all these brands where you’re aware of how personalized your experiences are, out of that there’s been a lot of recognition that you need a software to understand all those different identifiers and sources and touchpoints you’re having with your customers,” points out Nick Kobayashi, group product manager at Klaviyo.
If you don’t have a CDP, “you’re probably not collecting that data, which means you’re not listening to your customers,” Kobayashi says. “A CDP fills that need, not only in terms of being able to collect and unify all that data, but also in terms of the analytics capabilities to understand those insights and enable you to build more persona-driven, insights-driven segments.”
5. A good CDP orchestrates (and delivers) omnichannel personalized marketing
Lately, something Kobayashi hears frequently from brands is that they want to become “more lifecycle-driven, instead of running ad-hoc campaigns and automations.”
“That’s where segmentation becomes really important,” Kobayashi explains. “You need the tools to identify where the trends and opportunities are, based on all your customer data.”
Otherwise, Kobayashi says, “you are most likely running very generic marketing or advertising campaigns, where you’re basically using a list instead of the kind of dynamic segmentation that would lead to personalization. They’re not very personalized or focused on someone’s actual interests.”
And that’s a mistake. Companies that excel at personalization in marketing generate 40% more revenue from related activities than average players, according to McKinsey & Company—and while 71% of consumers expect personalization from the brands they interact with, even more (76%) get frustrated when they don’t get it.
“For years, we’ve been preaching to our marketing teams, ‘You have to send the right message to the right person at the right time,’” Ragsdale points out. “What CDPs have changed is the way we look at managing that experience. So not only am I sending the right message to the right person at the right time, I’m also looking at the right channel, the right specific kind of content, and I might even be looking at the right price point for that particular customer.”
“We’re really taking it to the next level in terms of providing the best possible experience for our customers,” Ragsdale adds. “And that’s only possible with a CDP.”
Remember, too: “One of the biggest challenges brands face when it comes to monetizing their CDP is that they’re able to paint a clear picture of their customer, but they lack the ability to take action on the insights provided by the CDP,” Ragsdale explains.
A good CDP not only activates your data in real time, but also takes care of marketing automation activities for you, rather than sending data downstream to another piece of tech.
6. A good CDP boosts key marketing metrics
Long-term, a CDP elevates your marketing efforts, resulting in “incremental performance gains,” DelPizzo says.
That could mean improvements in customer lifetime value (CLTV) and revenue, as well as “retention because you’re using your first-party data to its fullest potential, and decreased acquisition costs because you’re being smarter with your acquisition marketing,” DelPizzo explains.
And smart marketing is a self-perpetuating cycle, because it reveals which channels and methods deserve more budget allocation in the future.
“Based on everything you’ve implemented,” Kobayashi says, “a CDP helps you see what’s working and what’s not working, and then optimize your marketing strategy moving forward.”
7. A good CDP improves operational efficiency—and saves you money
Because multiple teams, from lifecycle and performance to sales and customer service, can access the centralized information in a CDP, it’s not hard to see how all of the above translates to improvements in productivity and efficiency—both within teams and between them.
Historically, for example, when the Citizen Watches marketing team wanted to build a segment based on women who purchased a watch in the last 12 months, they had to reach out to a separate team. “That slows us down,” Cowell says. “Whenever we have to stop and involve another team, it delays the process by hours or even a day.”
“That’s not a situation we’d like to be in,” Cowell adds. “We’d like to be in a situation where we can just pull the data from one place and be able to trust the integrity of that data.”
Bubs Naturals, meanwhile, has “very few employees in house,” says co-founder TJ Ferrara. “Having them reach into too many different systems creates a lot of confusion. Consolidating platforms and creating some efficiencies internally would help us grow a little bit more.”
By reducing “time spent on maintaining integrations, changing integrations, resolving identities, and de-duping profiles,” DelPizzo says, a CDP frees up bandwidth to devote to strategy and crafting consistent, cohesive experiences—at scale.
Essentially, “you’re doing more with your data in fewer systems, so you’re going to save a lot more time,” DelPizzo says.
And money. In addition to making your attribution and reporting more accurate so that you’re confident you’re prioritizing the right stuff, when you implement a CDP, “you’re lowering your overall expenses from development while building more internal efficiency,” DelPizzo explains. “So it’s time saved, cost saved because of time, and reduction in overall operating costs.”
Ragsdale summarizes the potential time and cost savings of a CDP this way: Without one, “there’s the cost you’re paying for licenses on these different platforms. But then there’s also the cost of becoming an expert on different platforms, the cost of managing the integrations between the platforms, and the cost of manually extracting data and insights and plugging them into other platforms.”
“When you bring all those things together,” Ragsdale says—“the return on investment (ROI) from reducing those manual labor costs and reducing those technical licensing costs, juxtaposed with the added ROI from the ability to deploy these personalized campaigns and experiences for your customers”—the value of a CDP is “almost unquantifiable.”
Why all businesses need “a CDP that simplifies your tech stack”
Today, “brands are recognizing they need to own their tech stack themselves, instead of having an agency or a consulting firm manage it for them,” Kobayashi explains. “That means they’re learning how to manage customer data and drive personalization strategies on their own.”
And that’s where there’s been “a big gap” in the market, Kobayashi points out.
Although CDPs have been around since 2013 or so, “your expectations of what a CDP should do for you have probably evolved over time alongside your business, and now you’re looking for something more,” Kobayashi says. “Usually what that ‘more’ means is you want a CDP that simplifies your tech stack.”
Remember, that’s not every CDP. Traditional CDPs require an entire data engineering team to manage, and most of them focus on either data management or data activation or data analytics, but not all of the above.
“What we’re seeing is that the market for the traditional CDP is continuing to shrink,” says Tony Morelli, director of product design at Klaviyo. “A CDP that is simply offering to sync your data, store it, and normalize it is not enough.”
“You really need a silver bullet, a panacea—something that will be the remedy for everything for your business,” Morelli adds.
Sounds great. What does it look like in practice? Kobayashi sums it up this way: “fewer integrations between where your data lives, and fewer integrations between where your analytics, segmentation, marketing, and advertising happen.”
In other words, the right CDP isn’t just one more bill you’re paying to complicate your tech stack. It “consolidates as much as possible,” Kobayashi says.
“Generally, the greatest reward of a CDP—that it’s a part of your stack that is able to solve multiple needs and take over 60-80% of what you typically rely on other software to accomplish,” Kobayashi explains.
Or, as Cowell puts it, “it’s all about the less tools, the better.”
Want to go beyond CDP benefits? We cover everything you need to know to make sure you start from a place of value and end with loyal, lifelong customer relationships in this CDP marketing series. Check out:
- What is a CDP?
- CDP marketing use cases
- Questions to consider before selecting the right CDP for your business
- Best CDPs on the market
CDP benefits FAQs
Who uses a customer data platform?
CDPs were originally intended for marketers. But often, due to steep technical learning curves and custom development needs, they are co-owned by IT or engineering and development teams. CDPs also serve data privacy and governance purposes, which are often owned by IT, too. But since the ultimate goal of a CDP is to improve marketing, a CDP should be accessible and user-friendly enough that marketers can use and maintain it on their own, without relying on developers or data scientists.
What are the key functionalities of a CDP?
A CDP is a software that pulls all customer data together into a single view of the customer; resolves identities between data sources; and activates (or sends) data either natively or across other external systems for marketing, analysis, and other downstream business functions.
What are the CDP use cases for B2B?
The primary value a CDP provides to a B2B brand is account-based marketing, in which multiple individuals are associated with a single account. CDP use cases for B2B brands include B2B analytics, churn prediction, next-best-action recommendations, sentiment analysis, hyper-personalized omnichannel campaigns, and more.