The software industry continues to evolve at a rapid pace but one thing has remained unchanged: every few years, a new category is created and when that happens, a whole lot of companies try to join the bandwagon and ride the wave.
In the past, this has happened with the CRM and email marketing categories with new players entering the market every so often. For a while now, the same has been happening with a variety of categories such as data integration, product analytics, and of course, customer data platform or CDP.
The funny thing about a hot new software category is that a lot of existing companies simply switch their messaging and positioning—without making substantial changes to their product—to be included in that category.
This is precisely what is happening with CDP right now—everybody wants a piece of this smokin’ hot pie.
A popular communication tool lists CDP as a platform component, a marketing automation tool includes CDP as a key feature, and a data integration tool is literally calling itself a CDP.
The only commonality here is that all these tools enable some form of data activation, and here’s how I define data activation:
“Data activation is the process of personalizing the customer experience using accurate data in the tools used to acquire, engage, and support customers.”
Use cases for taking action on data or activating data are diverse and plenty, some of which I’ve covered in the past. However, data activation is not synonymous with customer data platform—activating data is just one of the things a CDP does.
So what does a CDP do?
The misuse of the term CDP is frustrating for a lot of people as it makes everybody’s job harder. Salespeople are finding it difficult to figure out if their solution is what a prospect is looking for and prospects are more confused than ever before.
So it’s important to understand what a CDP is before delving into what it does.
The CDP Institute has laid down the following capabilities for a product to qualify as a real CDP:
- 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 profile requests.
Keeping the above in mind, a CDP enables companies to collect and store customer data from different sources, clean and unify that data, and then sync requisite data to downstream destinations.
Therefore, a CDP must comprise the following components or tools:
- Customer data infrastructure (CDI) to collect data from first-party sources
- Extract, Load, Transform (ELT) to ingest data from third-party data sources
- Identity resolution
- Visual audience builder (segmentation)
- Data storage
- Reverse ETL to sync processed data back to downstream tools
CDP = CDI + ELT + Identity Resolution + Data Storage + Visual Audience Builder (Segmentation) + Reverse ETL
A customer data platform gathers data from various sources, processes the data while storing a copy, and sends requisite data to specified destinations.
Sources are where data originates—websites and apps (first-party), and third-party tools and APIs. Destinations are downstream services where data is sent for storage, analysis, and activation.
Make sure you’re accurately capturing your data with The Amplitude Guide to Behavioral Data & Event Tracking.
Do you really need a CDP?
The short answer is “it depends”—on your needs, priorities, and available resources.
Growing companies that need to experiment with new channels and at the same time, want to empower their go-to-market (GTM) teams to move fast without relying on data or engineering teams, should definitely adopt a CDP if they also have the resources to implement and maintain one properly.
If you’re unsure of investing in a CDP, I’d recommend talking to your GTM teams to understand their data challenges and priorities.
Ask your marketing folks if they’re struggling to consolidate customer data from different sources and act upon that data efficiently.
Ask your data engineers if their lives will become easier if they don’t have to repeat the drill of manually syncing data downstream every time marketing or growth decides to adopt a new tool.
Many people at your company might not even know that a CDP can elegantly (or sometimes not so elegantly) solve many of their day-to-day challenges and rid them of their data woes.
Also, keep in mind that a data warehouse is not a replacement for a CDP. In fact, a data warehouse should be one of the first destinations where your CDP sends the data that it collects—storing a copy of your data in your own warehouse should be non-negotiable.
How to choose the right CDP?
That’s the million-dollar question, isn’t it?
So what’s common between a SaaS startup, an e-commerce brand, and a retail enterprise is that they all might need a CDP. But if you’ve ever bought a piece of software, you should know that no one product can or even should cater to the needs of companies of all sizes from diverse industries.
If you go down the rabbit hole and try to understand every little detail about a CDP, you will find that each CDP offers something that others do not—this is probably true of every software product out there.
Therefore, I’d like to offer some important considerations that should help choose a CDP that’s right for your business:
Are your first-party or primary data sources supported?
And what about third-party sources?
These are tools and APIs that your company uses for engagement, advertising, payments, in-app experiences, support, and feedback. If you need data from any of those sources to personalize the customer experience, you need to ensure that those sources are supported by your CDP.
Are there robust, well-documented integrations with third-party destinations where you need to sync data?
Even if the third-party tools in your repertoire are already supported by the CDPs you are evaluating, it is important to look at the depth of each integration to ensure that your specific requirements are met.
It’s rather common for different vendors to offer integrations of varying capabilities. For instance, if you use Amplitude for product analytics, sending data to Amplitude is easy as most CDPs support Amplitude as a data destination.
However, if you use Intercom for support and engagement and wish to sync raw event data along with user and account properties to build hyper-personalized campaigns, you must dig deeper into the capabilities of the integration offered by the CDPs you’re evaluating.
It’s not enough to just look at the integration directory when choosing a CDP; you need to double-check that the integration meets your needs and that it’s up-to-date—information that is rather hard to find.
What good is a customer data platform if it doesn’t enable teams to put all that delicious data to use?
A CDP should not only empower marketing and growth teams, but also benefit product, engineering, and data teams. For that to happen, data must be accurate, accessible, and easy to act upon.
One of the core promises of a CDP is out-of-the-box identity resolution. In other words, a CDP is capable of identifying customers as they interact with your brand across different touchpoints and building unified profiles of those customers.
As a result, user actions across different channels are consolidated, and GTM teams, using the visual audience-building capability, are able to segment users and customers based on the following:
- Events and transactions that take place inside your apps
- Interactions with your brand across third-party apps used for sales, engagement, advertising, and support
- Traits including user persona, preferences, and demographics
A good CDP makes it easy to discover, create, and sync dynamic audiences to third-party tools to personalize the customer experience across multiple channels.
More importantly, reliance on engineering and data teams is reduced, while GTM teams are able to own their workflows and move faster.
Everybody is happy and productive.
Security and governance
Security and compliance are crucial elements to address when evaluating a CDP. Besides adhering to security standards to handle and store data, CDP vendors must offer governance tools for you to comply with local privacy laws such as the GDPR and CCPA.
CDP vendors of every size and shape claim that security is of the highest priority and that all the requisite measures are in place. I’d recommend asking for customer references and if you’re satisfied with the logos, it’s okay to conclude your evaluation.
However, it is highly recommended that you fully understand the security standards and privacy practices of a customer data platform before making a final decision.
In terms of pricing, most CDPs charge based on the number of monthly tracked users (MTUs). Keep in mind that this number also includes anonymous visitors and is not limited to those who have an account with your app.
On the other hand, the Amplitude CDP doesn’t charge for data ingestion; instead, it only charges for event streaming and frequency of cohort syncs to third-party destinations. It offers a generous free tier that comes with 10M events exported and unlimited on-demand syncs, five scheduled syncs, and ten computations.
It’s good to keep in mind that at the end of the day, every CDP offers tailored plans, and the pricing can vary significantly as per the buyer’s needs and negotiation skills.
I really hope that this guide has helped you understand the value proposition of a true CDP—whether you need one or not is secondary.
That said, if you’re convinced that your organization needs a CDP, you can begin your evaluation with what Amplitude has to offer and receive a personalized consultation today.