What is a Customer Data Platform (CDP)?

What is a Customer Data Platform (CDP)?

A customer data platform (CDP) is software that combines data from all product and service touchpoints to create a single centralized customer database. Businesses can then segment that database to create more personalized marketing campaigns for their customers.

A CDP allows businesses to collect customer data from any channel, system, or information stream to build a unified, more complete customer profile. Businesses can then use these customer profiles to build more personalized campaigns. A CDP combines all that data in real time, giving you the insights necessary to build more personalized customer experiences. 

What is the purpose of a CDP?

Today’s customers have so many different ways to engage and do business with your brand. They can shop in-store or online, interact with your promotional SMS and email messages, browse your new products on social media, chat with a live agent about product details, or call your business for help with an order. Each action they take shares valuable information with your business around what they like, need, prefer, and want. 

That said, each of these interactions typically lives in a different system, which can lead to siloed or inaccurate data. In fact, very few companies have the complete view of their customer that’s needed to create seamless, personalized omnichannel experiences. Without a way to bring this data together and act on it, many businesses inadvertently create disjointed customer experiences that can lead to churn or lost conversions. 

That’s where a CDP can help. Here are three primary reasons businesses use a customer data platform.

1. Collect and consolidate customer data

CDPs collect and consolidate customer data from all of your channels: communications like email and SMS, customer service, advertising, marketing platforms, and more. CDPs then clean and combine this data into unified user profiles that update in real-time with the most up-to-date information on user intentions and behavior. This gives your business one accurate view of each customer that you can use to deliver targeted and personalized omnichannel experiences. 

2. Build more insightful customer analytics

Understanding customer behavior will help you make better marketing, product, and sales decisions. A customer data platform gives your business access to reliable customer data in real-time, so you don’t have to wait for your engineering or analytics teams to pull and analyze data. Your team can use your customer data right away to send the right message to the right person at the right time. 

3. To improve data protection and privacy

The General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and other data privacy laws, require that organizations respect their customers’ data and privacy. CDPs can automatically ensure your business remains compliant  when it comes to detecting and classifying personally identifiable information (PII), proactively blocking data according to your company’s privacy policy and requirements, and honoring user requests to delete or modify their information. 

How do CDPs work? 

Here’s a step-by-step guide diving into the mechanics of CDPs.

1. Collect data

Your CDP is a centralized hub for all your customer data. It collects user information from all of your different data sources and data streams. By unifying all disparate data and identifying each unique customer based on their whole engagement history, your business can create better customer resolutions.

How a CDP works: A customer clicks on your Instagram ad, browses your website, and adds an item to their cart before leaving without checking out. Your CDP collects all this information from your various sources so you can build more personalized customer experiences, like sending a real-time, contextual abandoned cart email or SMS that entices a customer to complete their purchase.

2. Consolidate data using identity resolution

From here, your CDP brings together all your data, creates customer profiles, and ultimately resolves those identities across devices. It links your known customers’ identity information (such as email addresses and phone numbers) with anonymous data shared before they became customers (including anonymous cookies and mobile device IDs). Cross-device identity resolution helps you understand the whole customer journey.

How a CDP works: Your CDP can identify a customer and update their profile in real-time based on information they share across channels and devices.

3. Build and segment audiences

With unified customer profiles, you can catalog all the data each customer shares with your business and track their entire journey. You can then use the information they share with you and their tracked behaviors to segment your users into audiences and deliver more personalized and timely communications at scale. 

How a CDP works: You can identify a user as having a high-intent to buy women's jeans and add them to a jean-lovers audience segment. Next, you send this audience one email every month to connect them with the latest denim options. 

4. Activate data on downstream engagement platforms

After your CDP creates unified customer profiles, it then activates that data, allowing your teams to personalize individual customer experiences in real time. Your business can send customer data to downstream engagement platforms like your email, SMS, push notifications, and ad solutions, so you can create more targeted, effective campaigns. 

Better yet, using a customer engagement platform (CEP) like Twilio Engage, your business can activate your customer data directly from the platform, without having to use your downstream tools. Not only can this save your team time, but it also allows you to build campaigns in real-time using the most up-to-date customer data. 

How a CDP works: With access to a user’s browsing history, you can automatically enroll them in an abandoned-cart email to try and win back their business. You can send the email an hour after they abandoned their purchase, all without manual intervention.

What are the benefits of CDPs?

Though the benefits of customer data platforms are numerous, here are our top three.

1. Better customer data organization and management 

What good is collecting user data if your business can’t use it? Customer data management is all about processing, acquiring, organizing, and using customer data. CDPs simplify the process by organizing your customer data in a way that makes it usable.

CDPs help consolidate data from all your user touch points using identity resolution to give you one holistic view of your customer. Pulling data from your call centers, payment processing systems, website analytics, and marketing systems allows you to create more accurate customer data that you can use in future marketing initiatives.

2. Better customer analytics and insights

Making decisions based on customer analytics involves understanding customer behavior throughout the customer journey. From here you can put your data to work to enhance your marketing, product development, and sales initiatives.

There are four main customer analytics components:

• Data collection

• Data sorting

• Data storage

• Data analysis

When a CDP combines these components, they create a formidable customer analytics platform. Customer analytics involves understanding customer behavior to help make better business decisions. Without a CDP, your data is likely unorganized and siloed, making it almost useless.

Attribution models created with customer analytics can help determine which aspects of your marketing campaigns are most effective with both new and existing customers. When using attribution models for customer analytics, we recommend multi-touch attribution.

Customer analytics can also help make your product more useful, reducing churn and increasing customer satisfaction.

3. Better customer data protection and privacy

The last few decades have seen a surge in data privacy protections that give consumers more say over how their data is collected and used. Yet, some consumers still don’t trust brands with their data. 

In fact, Twilio Segment’s The State of Personalization 2023 report found that just half of consumers trust brands to keep their personal data secure and use it responsibly. That said, using a CDP can actually help improve your data protection, privacy, and compliance. 

• Limiting data collection: CDPs can help you protect customer data by limiting the amount of data you’re collecting. The data governance strategy and data plan used alongside your CDP will help ensure that you’re only collecting data that is absolutely necessary for your marketing efforts.
• Ensuring GDPR compliance: GDPR legislation is multi-faceted and affects each company differently based on how they collect customer data. Once you understand your classification under GDPR, your CDP can help guide you through next steps to help you prepare and manage customer data. Most CDPs can also help you honor user requests to delete or suppress their data.
• Ensuring CCPA compliance: Like with GDPR, a CDP can help you manage consumer deletion requests at scale, streamline access requests, and set rules to proactively block, hash, or route customer data to comply with your company’s privacy requirements.

*This article should not be construed as legal advice. Please discuss with your counsel what you need to do to comply with the GDPR, CCPA, and other similar laws.

Why do CDPs matter?

Companies need easy-to-use data management solutions capable of transforming overwhelming amounts of data into actionable insights. That’s how they get to know their customers, and that’s why customer data platforms aren’t going anywhere.

Digital-first companies must possess intuitive, real-time customer data platforms to help them guide every customer interaction. 

When you have to know your customers and personalize their experiences, a CDP is an essential part of your operation. Harnessing the untapped potential of your customer data can help make the customer experience the foundation of your efforts. Simply put, customer data can help expand your reach and strengthen your business.