The Added Value of a CDP (Part 1)
A Deeper Analysis of the Benefits of a Customer Data Platform
By Peter Gergen, Solution Architect CX
A Customer Data Platform (CDP) offers companies a wide range of benefits when it comes to using and managing their customer information. A CDP gives companies extensive insights into customers’ behavior and into the preferences and needs of their target audience. In turn, this enables a personalized customer journey and custom-tailored marketing campaigns. The consolidation and centralized management of customer data from different sources improve data quality and integrity. In addition, a CDP enables the automation of marketing processes and supports real-time interaction with customers through a variety of channels, improving both marketing efficiency and customer satisfaction. Overall, a CDP optimizes marketing strategies, increases customer satisfaction, and helps to boost sales.
In the following, I’ll be taking a closer look at the decisive difference between the traditional, decentralized handling of customer information and managing this information in a customer data platform (CDP). A detailed examination of these aspects will reveal the many ways a CDP can add value through the effective use and management of customer information. I will split my assessment of these aspects into three posts, to facilitate a comprehensive examination. In this post, I will be taking a closer look at the benefits of centralized data storage in the CDP.
Central Data Store
Companies distribute their customer information between different systems and data silos. Customer information can be stored in CRM systems, support systems, marketing platforms, e-commerce platforms, data warehouses, and ERP systems. Each of these systems contains specific information about customer interactions, consumer behavior, marketing activities, click patterns, and more. This distribution of profile data, which is often due to organic growth, can result in a fragmented view of customers. Consolidating this data in a single profile is absolutely crucial to getting an end-to-end picture of the customer. A CDP provides this consolidation.
Collecting Customer Information from Different Data Silos
To create a comprehensive picture of the customer both identity information and activity data must be transferred from the different source systems to the Customer Data Platform (CDP). The possibilities for integrating this data depend on how open the CDP system is: the more open the system, the easier it is to connect to data silos from third parties and applications developed in-house. An open CDP enables seamless integration and access to a wide range of data sources, which in turn leads to a comprehensive, precise, detailed customer profile. The most important aspects:
- Openness of the system, which depends on the availability and comprehensive documentation of the interfaces, or APIs (advanced programming interfaces). These interfaces facilitate seamless data interchange between systems and guarantee smooth integration.
- The existence of connectors, or specialized data modules within the CDP that support dedicated connections to third-party systems, whether in-house or from outside suppliers. These connectors ensure that the CDP can communicate with a variety of external systems, to import and/or export data.
- The use of standards and standardized data protocols, such as JDBC, JSON, CSV, REST, HTTP, webhooks, and more, is also highly important. These standards guarantee uniform, interoperable communication between different systems and simplify data interchange.
- The extensibility of the system: An open CDP should support the integration of additional functions and docking of additional modules, to meet the specific requirements of a company. They will allow the system to adapt flexibly to new requirements and technologies.
In sum, these criteria are essential to guaranteeing the openness of a CDP and ensuring that it can interact seamlessly and effectively with other systems.
Standardization of Customer Information
When it comes to integrating data silos with a CDP, it is crucial to transfer the customer information into a standardized profile. The diversity of the systems means the customer information could have different designations and structures. Therefore, thorough data harmonization is essential for cleansing inconsistencies and creating a precise customer profile. In this process, contradictions need to be resolved and decisions made as to whether certain information should be adopted or discarded. The existence of duplicates can result in contradictory customer information, making assessment of data quality based on source of that data a valuable feature. It is also important to ensure that the customer information is uniform and standardized, so that all target systems can process the same content in the same form. Let’s illustrate this based on an example:
The attributes “First name”, “Last name”, “Phone number”, and “Email address” for a customer reach the CDP from four different data sources. The information could look like this:
- (CRM) Givenname: “John”, Surname: “Public”, Phone: “+49.822.214.171.124, Email: “firstname.lastname@example.org“
- (ERP) Last name: “Jonathan”, First name: “Public”, Phone: “0811223223223”, E-mail: “email@example.com“
- (Purchasing portal) Firstname: “John”, Surname: “Public”, Telephone: “0170 3412412312”, Email: “firstname.lastname@example.org“
- (Newsletter registration) first name: “Mickey”, surname: “Mouse”, email: “email@example.com“
During the transfer of customer information to a standardized profile, it is up to the CDP to determine which of the four profile information items – last name, first name, phone number, and email address – should be integrated and which information should also be adopted or discarded. The CDP uses rating criteria to determine the relevance of the data and automatically resolves any contradictions that arise. In this process, data sources are rated, duplicates are identified, and inconsistencies are resolved, all to create a precise, consistent customer profile. This process guarantees a high level of data quality and enables companies to generate comprehensive, reliable pictures of their customers.
Real-Time Data Updates
The customer information in the different silos is subject to constant change. Last names, phone numbers, and email addresses can all change over time. The transaction data that results from the data sources is especially important: Customers order goods, visit your website, make appointments at trade shows, submit complaints, and ask support for assistance.
This transaction data plays a decisive role in assessment on the CDP, to determine the customer’s current status or “pulse”. It makes it possible to determine whether the customer is satisfied with the products and services or if they are considering abandoning the company. What’s more, transaction data can provide indications as to whether the customer can be encouraged to generate more and more frequent business with the company or whether it is becoming increasingly difficult to motivate them. By analyzing this data, you can derive targeted measures to promote customer retention and increase sales.
The data silos are responsible for recording this information. The way this data is transferred to and processed on the CDP depends on how the CDP is connected to these systems. We differentiate here between real-time updates and offline updates. Ideally, data will be transferred to the CDP continuously in real time. There are situations, however, in which the data silos or the connection of these systems to the CDP do not support real-time transfer. In such cases, the data is collected locally and then transferred to the CDP as a bulk upload.
The ability to transfer customer information from the source systems to the CDP in near or real time depends on both the technical possibilities of the systems and the use cases. If a platinum-level frequent flier’s flight is delayed, for example, it is very important to notify them of alternative connecting flights immediately. The real-time factor is decisive here for enabling a fast reaction.
On the other end of this spectrum, when a monthly marketing newsletter is sent to trade show visitors, it doesn’t really matter whether or not the information that a customer visited the website in the last few hours and researched a specific product is transferred to the CDP in real time. In such cases, the data transfer can take place in regular intervals, since the marketing system does not need this information in near time or real time.
Therefore, the decision about the intervals in which customer information is sent to the CDP depends on both the technical factors and the specific requirements of the use cases. It is important to strike the right balance, both to meet the needs for real-time information in certain scenarios and to ensure the efficiency and scalability of the data interchange.
Summary and Outlook
To summarize: A customer data platform (CDP) consolidates customer information from a wide variety of systems and data silos in a single customer profile. To do this, it is important to consider an open CDP, to minimize the effort and expense needed to connect the data silos in a largely heterogeneous system landscape.
A customer data platform (CDP) unifies customer information from a wide range of data sources, harmonizes them, and generates a consolidated, comprehensive profile of every single customer. This data harmonization creates a precise customer profile that facilitates end-to-end understanding of that customer.
Real-time data updates play a decisive role in tracking the customer’s current status, as well as their buying and activity patterns. Information can be transferred to the CDP in real time or at regular intervals. It is important to find the right balance between real-time requirements and the efficiency of the data interchange.
In part two of my posts about the value added by a customer data platform (CDP) in the context of customer information, I will examine the customer-centric approach of the CDP in detail. I will answer questions about how a CDP can support improving the customer experience, how it can improve a personalized customer journey, and how robust data governance ensures compliance with the General Data Protection Regulation.
More about SAP CDP:
- The Added Value of a CDP (Part 1) – Central Data Store
- The Added Value of a CDP (Part 2) – Customer-Centric Focus
- The Added Value of a CDP (Part 3) – Data Analytics, Customer Segmentation, and Audience-Building
- Unleashing Customer Insights: SAP CDP for Insurance Companies
- Unleashing Customer Insights: SAP CDP for Retail