Reverse ETL

What is reverse ETL?

Reverse ETL is the process in which organizations pull their existing customer data out of data warehouses and send it downstream for various uses, such as customer relationship management (CRM) campaigns or an analytics dashboard.

While it’s been around since 2018, reverse ETL didn’t start gaining traction until around 2021. Since then, reverse ETL has exploded due to companies’ need to use the data they’re storing to power their business processes. The growth has also been driven by a larger focus on first-party data and the need for a first-party data strategy within sales and marketing teams.

• What’s first-party data? Data collected directly from your customers, such as through a website form or product purchase.

What does ETL stand for?

The “ETL” of reverse ETL stands for “extract, transform, load,” which describes the steps that this tool follows. It extracts data from a source, transforms it for the end destination, and loads it into that destination or a warehouse.

Reverse ETL is a key part of the modern data stack. It helps organizations access the full breadth of their customer data, allowing them to remain or become competitive in today’s complex, highly personalized marketplace.

ETL vs. reverse ETL

You may have heard of traditional ETL. During this process, data is extracted and cleaned according to its destination system, such as an email marketing tool. The traditional ETL pipeline focuses on moving your data into warehouses for organization and storage purposes, while reverse ETL pipeline focuses on taking the cleaned data and moving it into a downstream system — such as your email marketing tool, so you can use it to create smarter, more personalized marketing campaigns.

Reverse ETL vs. CDP

A CDP — or customer data platform — stores and organizes customer data from multiple sources to create a unified customer profile or single source of truth. These sources can include marketing channel interactions, product usage, sales engagement, etc.

Unlike a traditional or packaged CDP, a reverse ETL tool doesn’t collect or store data. It’s a process that accesses your existing data (typically from a cloud data warehouse or data lake) and sends it downstream to other tools — including marketing channel destinations, customer service helpdesk tools, analytics dashboards, etc. 

Traditional CDPs can also sync data downstream, but that data is copied from the primary source and stored in the CDP. Also, CDPs tend to focus on marketing and sales destinations, while reverse ETL can be used to send data to a variety of business intelligence (BI) and analytics tools.

Because reverse ETL tools concentrate on syncing data to destinations, teams often use a separate data collection and integration tool (such as Fivetran or Snowplow) to gather customer data. Or, they may use a traditional CDP alongside a reverse ETL tool. 

Reverse ETL vs. composable CDP

The reverse ETL process is part of the composable CDP, which differs from a traditional or packaged CDP. A composable CDP sits on top of a cloud data warehouse and activates data to different destinations, such as a CRM, search ads, or social media channels. That data activation — taking audiences from the cloud data warehouse and syncing them with destinations — is the reverse ETL process.

One key difference between a reverse ETL tool and a composable CDP is accessibility for marketing teams. Reverse ETL platforms are typically geared toward IT, data, and other technical teams, requiring SQL to pull and activate audience data. A composable CDP, however, is built for marketers, meaning that it’s a low- or no-code solution that helps marketing teams activate audience data from the cloud data warehouse to various channels.

Composable CDPs can also include journey-building tools, allowing marketers to create custom journeys for each audience segment. Sometimes, these tools may also have journey automations that allow marketers to set always-on acquisition, cross-sell, or winback campaigns — all pulling data from the single source of truth in the cloud data warehouse.

Large enterprise companies can benefit from a composable CDP solution because they get access to the reverse ETL functionality but have a user-friendly interface that provides more value for the broader organization.

How does reverse ETL work?

The main components of the reverse ETL process are:

• Data sources. These are the systems that store your data, such as your company’s data cloud or warehouse (like Google BigQuery or Snowflake).

• Integration. This is how your data sources communicate with your target systems, so they can share data in a way that makes sense for the destination.

• Target (or destination) systems. These systems receive the data and use it to complete business team tasks or forecasting, such as CRMs or analytics tools.

Steps of reverse ETL platform

There are five key steps of reverse ETL:

1. Extract. During this step, you query your company database to extract the data you need.
2. Transform. Because the format of your database data may not match the format of the destination system, the reverse ETL may need to transform the data for use in the destination system. The reverse ETL uses data mapping, so this works seamlessly.
3. Load. The reverse ETL helps load the data into the destination system. Depending on your setup, you may use manual loading, API integration, batch processing, or some other method.
4. Activate. After the data is loaded into the destination system, such as a CRM or finance tool, the teams access the system to perform desired actions.
5. Monitor. You’ll need to monitor your reverse ETL tool continually. Depending on which tool you choose, you may be able to set up notifications or flags in case of certain errors or system problems — such as incorrectly setting up data conversion or mapping.
   

Do I need a reverse ETL tool?

With a larger need for personalized messaging and the phasing out of third-party cookies, first-party customer data is becoming more important for businesses. To drive revenue, you need to activate that data in your central data warehouse — a reverse ETL tool can help with this.

Benefits of reverse ETL

Reverse ETL helps companies ensure that their data stays consistent and up-to-date across all their systems. Using a reverse ETL tool also ensures that your data doesn’t become siloed, since data is shared across operational systems and teams within your company. 

It can also help a company understand the end-to-end customer experience and how their touchpoints impact one another. For example, reverse ETL can help your business determine how your social advertising impacts your brick-and-mortar conversion rate.

Use cases for reverse ETL

A reverse ETL tool pulls your data out of your warehouses and translates it into a usable format for teams across your company. With reverse ETL, you can realize:

• More personalized marketing campaigns and customer journeys
• More complete and real-time customer view for customer success teams and sales teams
• Improved product integration

Here are some use cases for using reverse ETL to sync data from one location to another:

• Your finance team can create a customized payment plan for your B2B customers and send automated follow-up emails using an invoice and accounting software.
• Your customer service team can prioritize customer requests marked “VIP” in your systems.
• Your marketing team can create highly targeted audiences based on data in your cloud data warehouse and activate those segments across a variety of advertising platforms, CRMs, email tools, etc.
• Your accounting team determines that a high volume of customers with past-due accounts also have unresolved customer service problems. They can engage the right teams within your company to get problems resolved and bring accounts up-to-date.
• Your product team gets access to a list of high-value clients and engages them to enjoy early access to your latest product offering.

What’s the relationship between reverse ETL and data activation?

You may be familiar with the term “data activation.” It’s a long-standing marketing term that refers to when you unlock the power of your data and use it to power company processes.

Reverse ETL can supercharge data activation. That’s because implementing a reverse ETL tool can help more of your business systems communicate with each other and, thus, “activate” more useful data for downstream processes.

What should my team consider before implementing reverse ETL?

Before you commit to a reverse ETL solution, here are some questions to consider:

• How much data do I have?
• What are the sources of my data?
• What does my existing data stack look like?
• Is the data clean/organized
• Is there a process for personal identifiable information (PII) and sensitive data?
• What will my data needs look like in one to five years?

Data volume

According to the World Economic Forum, 463 exabytes of data will be generated by 2025. (To give you an idea of just how much that is, each exabyte is 1,000,000,000,000,000,000 bytes of data.) As your company continues to create more and more data over the years, it’s important to consider your long-term data volume. What’s more, reverse ETL pricing is often based on data volume.

Data integrity

Integrating data between your systems can be complex. You’ll need to ensure that you’ve considered all aspects of your data integrity, including:

• Compatibility between the source system (such as your data cloud) and the destination system (such as a CRM)
• Data formatting across your different systems
• How to handle data inconsistencies in a scalable way

Data privacy

You’ll need to be sure you handle your customers’ data responsibly. And if you’re in certain industries that handle highly sensitive data — such as financial services or healthcare — you’ll need to protect that data. Be sure that you always follow state and federal laws around data protection.

Purchasing a reverse ETL tool vs. building reverse ETL

A reverse ETL tool is an investment — but it can save you time and trouble down the road.

Building your own reverse ETL tool from scratch can be very time-consuming. Your developers would need to map out all the conversions from data sources to data destinations. It would take an experienced developer about two weeks to map each data source. Consider how many platforms you’ll want to link together using reverse ETL, and the time and cost investment quickly adds up. And that’s just to build the tool — not to maintain it.

You also have to consider the time that your developer is spending on the reverse ETL tool that they’re not spending on other tasks — tasks that may be critical to your business’s day-to-day operations. 

Several existing tools can fit seamlessly into marketing and other business processes your company already has in place. That’s less time your developers are spending on integrating reverse ETL.

Reverse ETL tools available today

There are plenty of reverse ETL companies out there, but here a few of the most popular reverse ETL tools:

• GrowthLoop*
• Census
• Hightouch
• Grouparoo
• Twilio Segment

*GrowthLoop is a composable CDP built for marketers that uses the reverse ETL process to send data from the cloud data warehouse downstream to various channels.