Ecommerce industry

Customer data platforms (CDPs): the center of a modern enterprise ecommerce ecosystem

Emily Riedy, June 23rd 2022
Illustrating the advantages of aCustomer Data platform for ecommerce

The digital landscape is transforming. Is your tech stack?

An omnichannel experience improves acquisition, builds loyalty, and drives retention through personalized moments that make 1:many marketing feel 1:1.

But the omnichannel evolution has occurred faster than a lot of marketing technologies’ ability to keep pace.

If your tech stack isn’t humming—if it isn’t able to function as a united and singular entity—then your ability to deliver those experiences becomes constrained.

“Siloed customer data is a competitive disadvantage. It inhibits end-to-end customer experience management, journey orchestration, and privacy and compliance capabilities and ultimately represents a huge innovation debt to the business,” says Gerry Murray, research director, marketing and sales technology research practice at IDC.

“Providing customer data as an enterprise service requires a cohesive ecosystem of which CDPs are a foundational technology.”

In other words, a CDP can usher your business into the future of online commerce—and help you build the experiences your customers are looking for.

Table of contents

What is a CDP?

“CDP” stands for “customer data platform.” But beyond that, coming up with a definition is, quite frankly, tricky.

That’s because the term is loosely defined and means something slightly different depending on who you’re talking to.

Generally speaking, a CDP is a “packaged software that creates a persistent, unified customer database that is accessible to other systems,” according to the CDP Institute.

Let’s break down each of those components:

  • A packaged software: A CDP is a software that’s bought from a vendor or agency and controlled by business users, frequently in marketing. A data warehouse differs in that it’s usually built by a business’s internal IT department. We’ll review more differences between CDPs and data warehouses below.
  • Unified customer database: A CDP captures data from multiple systems (both internal and external) and attributes customer information to a unique profile, or single customer view. It stores this information so that a business can track customer behavior over time.
  • Accessible to other systems: A CDP is not a closed system. The data in a CDP is accessible to other platforms for analysis and/or to help manage customer interactions. Think of it as a data pipeline—different types of data can flow in and out. You can access the data through APIs, database queries, and file extracts.

Core features of a CDP

For the TL;DR version, a CDP needs to:

  • Pull all customer data together into a single customer view.
  • Resolve identities between sources.
  • Activate (or send) data either natively or across other external systems.

Because the definition of a CDP varies from business to business, the CDP Institute assembled a list of features all CDPs not only share, but must have in order to call themselves a CDP.

For a deeper dive into the technical ins and outs of a CDP, here are those core features, according to the CDP Institute’s vendor comparison:

  1. Accept all sources: The system can take in data from all sources (online and offline) and formats (structured, semi-structured, and unstructured).
  2. Retain all detail: A CDP can store any input data without losing details. One might physically reformat inputs when they’re loaded into the CDP, but you can reconstruct them if needed.
  3. Persistent data: A CDP can keep all ingested data for as long as a user specifies (subject to regulatory constraints).
  4. Unified profiles: The system can create unified customer profiles based on all data related to the same individual (subject to regulatory constraints).
  5. Manage PII: A CDP manages personally identifiable information (PII) such as name, address, email, and phone number in ways that comply with privacy and security regulations.
  6. External access: A CDP gives other systems access to any data in the customer profiles via API connections, webhooks, or database queries.
  7. Segment extracts: The system can select customer segments and send information with specified data elements to other systems.

Essentially, a CDP collects data from a variety of sources and then merges that information into a single customer view or profile. The CDP consolidates, and de-duplicates where necessary, customer information—without the need for an IT team to intervene and do it for you.

Marketers or other users of the CDP then use the unified customer profiles to build audience segments that can serve as the foundation of a personalized marketing strategy. The data in a CDP is compliant across all marketing channels and acts as a single source of truth for marketing teams trying to create a cohesive and targeted customer journey.

How is a CDP different from a CRM?

“CRM” stands for “customer relationship management.” These systems, according to Microsoft, help you manage and maintain customer relationships; track your sales leads, marketing, and sales pipeline; and deliver actionable data.

The main data objects in a CRM—account, lead, contact, and opportunity—are incredibly useful for businesses focused on business-to-business (B2B) models. By tracking the pipeline of potential sales, CRMs enable businesses to forecast future revenue. As a result, marketers are not usually the primary users of this kind of system—sales or customer service teams are.

The central data objects in a CDP, by contrast, are customer records. Unlike a CRM, a CDP can identify customers (and prospects) from information collected across multiple sources and create a single customer view from millions of data points.

Oftentimes, a CRM is used as an input and output channel for a CDP because the CDP can provide a more holistic data set to the CRM.

How is a CDP different from a data warehouse?

A data warehouse collects and stores data, mainly to support analytics, reporting, backup, and recovery. But a data warehouse doesn’t process its raw data to make it usable or actionable.

Unlike a CDP, you don’t use a data warehouse to drive customer engagement or interactions. There’s no identity resolution within a data warehouse, so you can’t identify customers across different channels or devices.

It’s also updated less frequently. Customer data platforms can ingest data in real time and can make that information available almost instantly through APIs or data queries, according to Oracle.

Benefits of a CDP for ecommerce

Imagine your own heart. There are pathways that take blood into it and others that pump now nutrient-rich blood back out, oxygenating all the cells that power your body.

A CDP is like your heart. Data flows into it, and what comes out is valuable and actionable customer insights.

It’s the center of your omnichannel tech stack that anchors everything together and enables you to build the experiences your customers want—so you can move your business forward.

As your single source of truth, a CDP provides a 360-degree view of your customers. You can see information about your audience from almost every touchpoint—depending on what information you’re feeding into your CDP.

It gathers information from emails, SMS, web, mobile, social media, loyalty programs, and in-store transactions—as well as existing data sitting in other internal systems, such as ERPs, CRMs, or DMPs (to name a few).

Once it collects those millions of data points, it stitches together a comprehensive view of your customers or prospects by merging and de-duplicating records. When you inspect your unified customer profiles, the data is clean, transparent, and compliantly collected.

Plus, you get the most up-to-date view of your customers, since the data you’re using to inform your marketing campaigns and automations is both real-time and historical (sometimes, based on the CDP you partner with).

The fun part comes when you get to do cool things with that data—like creating highly specific segments of your audience so that you can send messages or create experiences that are personalized to someone’s behaviors and interests.

For ecommerce brands, this is a huge deal. Why?

Inflation is on the rise, and customer acquisition costs are soaring to new heights

As teams evaluate their current budgets and decide where to invest in the future, the data they have about their customers is digital gold.

Through improved targeting—targeting that’s no longer available through paid ads because of recent data privacy regulations—more precise segmentation, and personalization marketing, a CDP helps you nurture the customers you already have and replace fleeting buyer interest with long-term customer loyalty.

Plus, consumers are feeling the squeeze too. More and more brands are vying for their attention than ever before. But the ones who grab their attention and hold on to it are the brands that can build the strongest connections through the expression of shared values and catered moments that feel 1:1—no matter the size of the business.

Multiple teams can also access the information in a CDP so your business can craft consistent messaging and cohesive experiences, at scale—think your lifecycle marketing team, performance team, or sales and CS teams.

Why brands are turning to CDPs

Large brands struggle to deliver personalized experiences at scale. With so much data available to marketers now, it’s difficult to understand how to precisely use that data in a way that benefits both the brand and its customers.

Why? Enterprise brands underutilize the full potential of their existing solution(s) and lack a strong customer data foundation, according to Gartner.

In fact, Gartner reports that 63% of digital marketing leaders still struggle with personalization. And 58% say they lack a strong customer data foundation.

But it’s not just the lack of data. For some, it’s arguably the proliferation of data. Problems can also arise when brands invest in solutions that are too complex for their internal teams to make sense of.

According to the same study by Gartner, 23% of digital marketing leaders say they buy a lot of solutions but just can’t use the features, and 21% say the complexity of their current marketing tech stack prevents them from using it to its full potential.

What does this mean for your business? Two things:

The customer stack is broken—and that’s reflected in the experiences you can, and cannot, create

Enterprise brands that use multiple point solutions create a technological environment that’s unstable and inflexible.

Marketers and tech teams have to stitch together several solutions, increasing the complexity of their processes and decreasing the likelihood of creating a cohesive customer journey.

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 a massive overhead for maintenance and usage.

Without a unified customer platform, with a CDP at the center, your ability to meet the demands of your customers and build the experiences they want will be lacking.

Current marketing technologies fall short of the demands of your business

Complex solutions and legacy technology are expensive and require extra work to see true ROI. They’re difficult for your internal teams to use and they require months of implementation to get up and running.

Often‌, these systems have limited data storage and computing capacity and are costly to maintain and customize.

Coupled with the pain of integrating point solutions that don’t connect into key components of your ecosystem, it’s no wonder marketing leaders are still saying they struggle with personalization at scale.

This plays out in the numbers. According to a Forrester study, only 10% of CDP owners today feel their CDP meets all their needs, and only 1% think their CDP meets their future needs.

Source: a 2022 Forrester study commissioned by Zeta Global

With limited integrations, basic data gathering, high latency, and a lack of real-time data, legacy systems with a hundred and one point solutions already aren’t cutting it––not now, and not in the future.

Looking ahead: a CDP should sit at the center of your tech stack

In legacy systems, data is siloed across tools and/or business units. For some, especially those not on developer or IT teams, it can be difficult to query data from multiple point solutions.

Maintaining this complicated tech stack usually requires an allocation of resources from a business’s developer team, which makes it difficult for self-serve use cases, or for marketing teams to use on their own—slowing down the time it takes for decisions to be made and implemented.

Some of these legacy systems may have some data, but not enough to engage their customers in a meaningful way because it’s difficult to integrate new third-party solutions into martech stacks that don’t have a centralized location to ingest, collect, and use customer data.

Here, once again, teams rely on developers to provide the extra support needed—funneling costs and resources away from other business priorities.

All of this means that choosing the right CDP for your business matters––a lot. Do you opt for plug and play? Or a system that’s built from the ground up?

For businesses growing quickly, a best-of both-worlds platform is ideal.

The only way forward: a unified customer platform that has a CDP

A CDP needs to be the beating heart of your tech stack. But not just any CDP.

Brands, and the brains behind them, must think bigger to meet the demands of the future beyond 2022.

In order to complete the DTC tech stack and unify your ecommerce infrastructure with your customer infrastructure, you need a unified customer platform that has a CDP powering its database layer.

That way you can unify, store, and query all from one customer database, build and automate personalized, omnichannel experiences, communicate with your customers at scale, and use your own data to drive revenue.

Join the waitlist for our standalone CDP today.

With a unified customer platform that has a CDP, like Klaviyo, you can optimize your current processes and use data-powered learning to open previously unforeseen or unimaginable avenues for growth.

And if we’re talking about the best of both worlds, Klaviyo provides access to over 230 ready-made integrations and the ability to build custom data integrations with flexible and open APIs.

You can blend pre-built with custom-made, in an all-in-one platform that can grow with the needs of your business—and ‌your customers.

Scalability and flexibility: the unified customer platform powered by a CDP

CDPs are powerful platforms that can help you make sense of your customer data and use it to inform a highly personalized marketing strategy.

For enterprise brands looking to double down on how they communicate with large audiences in a way that feels 1:1, a CDP is a necessary addition to your marketing technology stack—one that works in concert with a unified customer platform.

You’ll gain the flexibility you need to build an environment that is responsive to the needs of your business, and the scalability you need as your brand grows.

Learn more about Klaviyo One and schedule a demo today.

Emily Riedy
Emily Riedy
Content strategist
Emily Riedy is a content strategist at Klaviyo. She creates and optimizes content to help online businesses own their growth. Before joining Klaviyo, Emily worked at a digital marketing agency where she created content to help small business owners and marketers grow their online advertising presence. When she’s not writing, Emily enjoys making tacos, running, and sipping on orange wine.