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CDPs

Pros and Cons of a Customer Data Platform

In recent years, Customer Data Platforms (CDPs) have often been touted as the next big platform for marketing. While there’s certainly a lot of noise around the technology, is it really the best solution for unifying data and business intelligence?

Anthony Rotio

Anthony Rotio

Managing customer data is vital for digital marketing in every industry. Data-driven companies already know the importance of properly managing and implementing customer data.

In this article, we break down the pros and cons of CDPs and talk about the best way to activate your customer data.

What’s a Customer Data Platform (CDP)?

A customer data platform, or CDP, is intended to integrate, store, and label customer data from multiple sources. Marketing teams typically control these systems, which were initially designed for marketing use.

Essentially, CDPs centralize customer data from several channels. The tagged data helps marketing teams create a unified understanding of the customer.

Typical data points CDPs collect include:

  • Online-only order data and transactions
  • Abandoned carts
  • Returns
  • Online customer value
  • Behavioral data on web and mobile
  • Products/categories viewed
  • Pages visited per session
  • Average session duration
  • Profile data
  • Psychographic information about customers
  • Product data
  • Online pricing
  • Inventory levels

A CDP is Not…

On the surface, a CDP can sound like a CRM or another data management solution. Here’s a bit more about what a CDP is not:

  • It’s not a CRM. A CRM creates customer profiles but uses more limited data sources than a CDP. CRMs focus on identifiable personal data, but CDPs include anonymous data from mobile devices and cookies.
  • It’s not a delivery platform. CDPs do not interact directly with users on various channels as a delivery platform does. Web pages, email marketing software, etc are delivery platforms. In contrast, CDPs interact with delivery platforms to collect data.
  • It’s not a data warehouse. CDPs offer similar advantages to Data Warehouses, but they are not the same. Data warehouses are first-party solutions that your IT team will create and model in directly.

Top “Pros” of CDPs

CDPs help automate customer data, which provides several benefits to marketers and their enterprises. Some of the benefits of CDPs include:

Built for Marketers

CDPs were designed for marketers. They contain several additional features to help marketing teams understand customer behavior and leverage personal data. Their design for marketing campaigns makes them a better solution than CRM systems for many marketing teams to use.

Sync Data to Many Destinations

Leveraging your data on multiple channels can be a challenge. This would require adding each destination’s code – Facebook, Instagram, Google, YouTube, your CRM system, etc –  to your website, which is time-consuming. A CDP is able to collect customer data (properties and events) and send that to multiple destinations.

Reduce Data Bottlenecks

Getting all of your data in one place is critical for accessibility. Oftentimes, teams that need data cannot reach all of it because it’s siloed in different platforms. Marketers and data analysts often spend more time consolidating data than they do understanding or leveraging it to drive growth. A CDP may reduce these data bottlenecks.

Cons of CDPs

Despite the benefits, CDPs are not the future. They have plenty of limitations to consider before opting for this data management strategy.

The top cons of CDPs are:

Set Up and Integration

Getting your CDP up and running is not nearly as simple as it seems. Oftentimes, it takes organizations over 6 months to set up and integrate this customer data tool.

Why does it take so long?

Setting up the CDP requires your engineering team to integrate SDKs/JS snippets and create new releases of your products/services. Even for medium-sized organizations, this process can take several months.

Extensive Updates

Unfortunately, CDPs are rarely as automated as they can seem at first. Your organization must constantly monitor and update the code to make sure the data is accurate. This is a big headache for marketers and developers alike. Without monitoring, you can easily end up with hundreds of events and properties and wildly inaccurate data.

When searching for a data management solution, this situation is less than ideal. It’s time-consuming and interrupts marketing automation on several levels. The requirement to consistently update the CDP yourself is a major downfall to consider before adopting this strategy.

Standard Library Does Not Work for All Destinations

A big part of the draw of CDPs is that you can activate data to several destinations. This sounds great on the surface, but the truth is that not all destinations can read the standard library. This means that when you add new destinations, the developers often need to go back and adjust the code.

Once again, this consideration has a major impact on data management and marketing automation. It requires manual intervention that can really slow things down and pull resources from your team.

Limited Customer View

CDPs do unify data sources and help you create a single view of your customer. However, this view can be quite limited.

While the customer data platform collects data from multiple channels, it’s not able to collect all of the data about your customers. Overall, it’s far easier to integrate simple data into CDPs, not more complex data. Furthermore, each data source requires a separate integration to sync.

Less Powerful Segmentation

To best segment your customers, you need personally identifiable data. While CDPs provide access to a lot of anonymous user data, they don’t give as much access to personally identifiable information. While you can still use a CDP for personalization and segmentation, it’s not as powerful as it may initially seem.

Security Risks from Third-Party Providers

If you use a third-party CDP, you put your data at risk. You should always consider the risks associated with exposing your customer data to a third party. Doing so opens up the chances of a data breach or other ethical concerns.

It is possible to build and manage your own data pipelines. However, doing so requires significant resources from your team. Your IT team, developers, and data engineers are better off focusing on a data warehouse if they plan to craft a custom solution for your business.

Data Warehouses Are the Future

While CDPs offer some helpful benefits for business intelligence, they are not the future, nor the best data management solution. There’s a better way, and it’s called a data warehouse.

If your teams are going to spend the time to craft data infrastructure, then a data warehouse is the best way to go. They are first-party platforms where you can build your customer data model in.

When you use a data warehouse, your data never leaves your organization’s hands. You control who gets access and can ensure compliance.

Data warehouses offer the same benefits for marketing automation and business intelligence as CDPs, with even greater benefits. With a data warehouse, you can enjoy a greater measurement potential. View a rich customer profile and all of the key metrics you should target.

Track these key metrics and run statistical significance tests right in the warehouse with machine learning. Then, visualize the data using the tool of your choice. With a data warehouse, your team has greater flexibility and can examine real-time insights quicker.

Activate Your Data Warehouse with GrowthLoop

The data warehouse is the best direction for handling your data set. Activating your warehouse allows you to improve customer interactions, marketing automation, marketing sales, and more.

We’re so confident that the data warehouse should be your source of truth that we created an entire product to help you activate it- GrowthLoop Run our customer segmentation platform directly on any data warehouse. Activate your data to over 30 destinations including Google Ads, Instagram Ads, and Facebook Ads.

We’re here to help you leverage your single source of truth to improve your customer journey. Let us help you activate your data warehouse today. Get in touch with our team today.

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