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CDPs have been mis-sold and misused but remain a vital Customer Insight tool

by Chris Hogg, Global Head of Platform Sales at Lotame

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 vendors and unrealistic expectations from buyers has
caused confusion over its 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?

What defines a CDP and why do so many fall short?

A CDP is defined by the CDP Institute (more on them below) as “packaged software that
creates a persistent, unified customer database that is accessible to other systems.” It is
important that we define a CDP, as much of the frustration of the solution derives from CDPs
not meeting this definition by martech providers’ or being used for purposes beyond it.

To break down some of the key terms, “packaged software” means that CDPs are sold for
business consumption with the technical side taken care of by the developer, as opposed to
custom software, which is tailored for a specific, in-house use.

A “unified customer database” means that customer information is captured from multiple
systems and then linked together to follow the customer journey over time, while “accessible
to other systems” requires a CDP to be interoperable with other data systems, such as
analysis and tracking tools.

So how well are CDPs on the market meeting this definition? The short answer is: not very.
A recent survey of 313 enterprise CDP users by Forrester found that only 10% felt their CDP
met their needs, dropping to 1% if future requirements are accounted for. Key failure points
were tech support (damning for packaged software), reporting, and analytics-based insights,
each of which were reported as being challenges by around half of respondents.

As for why so many CDPs are failing to meet expectations, there are claims that martech
vendors have rebranded much of their tag-management software and web personalisation
tools as CDPs, despite them lacking core functionality. This self-certification makes it very
difficult for business users to differentiate legitimate CDPs from the pretenders, especially as
not every company has data experts at hand who are able to recognise a wolf in sheep’s
clothing.

For the IT and marketing teams using these CDPs, all they see is software that doesn’t work
as intended, which damages the reputation of legitimate CDPs and the martech industry as
a whole.

CDPs are only part of the answer to the industry’s biggest challenges

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

The deprecation of the cookie that has dominated headlines in our corner of the world 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 inputs 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 any insights into
prospect behaviour 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 powerful enough to plug the skills shortage in data analytics that is
currently frustrating businesses across the globe. CDPs collect and sort data and present
them cleanly, but valuable, actionable insights tend to be business-specific, which requires
someone who can interpret, report, and mobilise data into something useful. Built-in insights
aren’t going to do that.

CDPS are still relevant, if done correctly

CDPs get a lot of bad press, but marketers should not rush to unplug them. A CDP is a
valuable and 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.

Not every business type even benefits from the tools a CDP provides. For example,
expensive, high-consideration products and services — luxury cars, for example — might
see one or fewer interactions with a customer in a year, yet still be successful. A CDP would
not be able to assist with insights into the engagement and brand awareness that leads to
such rare but high-value purchases.

Finally, the CDP Institute has developed a list of criteria that CDPs must meet before they
receive accreditation from its RealCDP certification program, to combat the aforementioned
problem of self-certification that currently allows illegitimate CDPs to fly under the radar. To
receive certification, a CDP must:

  • ingest data from any source;
  • capture full detail of ingested data;
  • store ingested data indefinitely (subject to privacy constraints);
  • create unified profiles of identified individuals;
  • share data with any system that needs it;
  • respond in real time to new data and to profile requests.

As their appropriate use cases become better understood and bad actors are eliminated
thanks to programs such as RealCDP, CDPs will hopefully secure their place in the
marketing funnel and rebuild their reputation after years of misuse and mis-selling.

Opinion

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