CDPs, or customer data platforms, are the latest venture capital darling. Unfortunately, they’re not going to help marketers connect more meaningfully with consumers. Andy Hunn, Chief Operating Officer, Resonate tell us why
The newest acronym taking our industry by storm is CDP. And unfortunately, this one isn’t going to help marketers connect more meaningfully with consumers either.
CDPs, or customer data platforms, are the latest venture capital darling. Their big promise, the one that sounds so sweet on paper, is a single view of customers across multiple devices, largely built around a brand’s first-party data. New players are coming out of the woodwork, and existing acronym players are rebranding as CDPs as fast as their marketing teams can revamp their web copy.
For marketers who are seeing the “CDPs Are Our Industry Savior” headlines and struggling to understand where they fit within the current industry acronym soup, let’s have a history lesson.
The Evolution of the Acronyms
CRM. Customer relationship management (CRM) systems represented the first major investment wave focused on better knowing and understanding customers. CRMs represented a huge step forward in customer data management. However, these systems typically connected only to a company’s direct marketing and transactional data.
TMS. Then there was the tag management system (TMS). Tag management systems took a step forward by enabling marketers to easily deploy tags on their websites. Some tags were for measuring things like performance, and other tags were for anonymously identifying a user across the digital web. In short, observed tag audiences represent first-party data sets of anonymous groups of people that engaged with a brand, and could hopefully be re-engaged — with targeted advertising, for example. Google decimated this market with a free offering, forcing a transition among the companies in this space. This gave way too…
DMP. Being able to target groups of people who engaged with a company directly was nice, but marketers also wanted to be able to combine those first-party groups with third-party data that is known about those individuals. Enter the data management platforms (DMPs), which were created to meld two main sources of data for marketing purposes: CRM data of known customers and observed tag audiences who visit a brand’s website or interact with its messaging in some way (just like the TMS before them). DMPs anonymize CRM data into digital IDs that can be used to reach those customers online and enable marketers to advertise to other observed segments defined in the DMP as well. That’s it. DMPs were built to deliver ads to anonymous IDs that are relevant to a brand. DMPs didn’t care about anything happening offline because that’s not why they were built. They were built to retarget online ads to customers and people who visit a company’s website. Which also left marketers wanting. So now…
CDP. Here come the CDPs. They say they’re different because they unify the CRM customer data (the PII — such as name, address, email — of the customer) with the anonymous digital ID world. And they observe first-party (i.e., the brand’s own) customer transactions in both the digital and offline worlds. That’s nice. But a game changer? No.
When you strip all the nonsensical nuances away from these companies — the CRMs, the TMSs, the DMPs, the CDPs — they’re all one simple thing at their cores: identity companies. Yes, they leverage different IDs, but at the end of the day, they are simply IDs that represent a person and their devices. Now, is scaled identity useful to marketers? Absolutely. But let’s be honest: It’s all just plumbing. Plumbing is a necessary evil, but it is only a means to an end — identifying a customer — and it shouldn’t be sold as anything more than that.
Where All the Acronyms Fail
CDP is just the next acronym for LMD: Letting Marketers Down. Despite all the grandiose claims that have been made about how these acronyms will change a marketer’s world, they all fundamentally fail on three key fronts:
Identity isn’t everything. Knowing the identity of a person is not the same as knowing that person. Yes, it’s useful to be able to identify a consumer consistently and across their various devices. You can retarget ads to them until they die or buy your product. But the core questions marketers today want to understand are, “Why is this person interacting with me? What is it about my brand, my product, my offer, or anything else that caused them to engage?” The fact that a browser-based cookie and mobile phone ID are connected does not answer those pressing questions.
Brands don’t have a complete understanding of their customers. The various acronymed solutions assume that a brand has a perfect understanding of who its customers are, and if it could just tie that understanding to identity, all problems would be solved. But based on 10 years of speaking with CMOs, I can tell you that they don’t have a perfect understanding of their customers. Far from it. And slapping a CDP into place doesn’t solve that problem. Sure, brands have some CRM data on their customers — PII, demographic attributes. Hell, maybe they’ve even unified that information with past product purchase history. That’s great. But the reality is that marketers have used and exhausted the value within this data. They’ve squeezed every drop of blood from that stone. They’re yearning for real, substantive additions to their understandings of their customers.
Behaviors without motivations teach us nothing. Marketers have been asked to do the impossible. They are asked to look at observed actions and touchpoints and to derive meaning about the person behind those actions. Someone clicks on an ad. Or browses the watches section of a website and then browses the jewelry section. Look, just like identity, knowing these actions is better than nothing. But marketers want to know why people are taking those actions, why they’re traversing the website at all, why they’re engaging with the brand. These are not the kind of questions the acronym soup answers.
To complicate things further, a marketer’s need for understanding goes beyond their existing customers. Marketers also need to understand the motivations and values that are driving the prospective customers who are showing up every day on their websites. Furthermore, they need to deeply understand their competitors’ customers in order to best identify their most fertile conquesting ground.
None of the acronyms get marketers any closer to this understanding. This is why DMPs are languishing in the Trough of Disillusionment right now and why CDPs will eventually suffer the same fate.
To date, our industry has been focused on building tools that capitalize on the infinite observability and targetability of people online. It’s driven immense gains in efficiency and ROI for performance marketing. But that’s no longer enough.
Our industry’s legacy approach doesn’t solve the most essential challenge that marketers face: understanding the person behind the unified device identities, and why that person is engaging. The good news is that the tools now exist to develop this deep customer understanding — above the level of individual marketing execution channels and above the level of the plumbing. Our vast access to consumer data and data science can now be used to make marketers smarter.
Once marketers have a deeper understanding of consumer motivations, all these acronyms and the plumbing they represent can be put to good use by delivering on a marketing strategy that is informed by a richer understanding of the “why” behind the consumer. But until then, the CDP is just three more letters in the same acronym soup.
Read Forrester’s Future of Marketing Insights report to learn about how Innovative CMOs are building strategies to understand the “why” behind the consumer.