The source of truth CDP or CRM

If you’re about to put all your customer activities into customer relationship management (CRM) system to get your single source of truth, let us lead with a cautionary tale.
December 8, 2021
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If you’re about to put all your customer activities into customer relationship management (CRM) system to get your single source of truth, let us lead with a cautionary tale.

While many companies have a CRM system (e.g. Salesforce Sales Cloud, Microsoft Dynamics etc.) in place, not many have a customer data platform (CDP). For some, they’ve spent months, maybe years, pushing customer data into a CRM system in the hopes to create a single source of truth for customer interactions.

But here’s the catch …

Structured data from a CDP can be delivered to other MarTech systems (i.e marketing automation tools) to enable more personalised customer experiences and a more targeted marketing strategy.

They hoped to be able to feed that data instantly to downstream systems and improve the collaboration between marketing, customer service, and other functions. Only to find out they can’t activate against that data.

The point of the story is this: Relying on a CRM to do a CDP’s job comes with compromises, namely three:

  • Cost: likely this will increase your CRM contract cost greatly since pricing models don’t allow for efficient storage of a large number of customer interactions.
  • Speed: CRMs aren’t set up to provide quick access to large volumes of data. Likely you will severely slow down your CRM, and you won’t have the ability to act upon the information quickly and easily since CRMs aren’t built with integrations in mind like a CDP is.
  • Data ingestion: CRM data models are typically less flexible than CDPs, and therefore some data may not be possible to ingest.

Our intention is to help you avoid all the large compromises that come from relying on your CRM software to do the things it wasn’t really built to do.

We’ll help you understand how a CDP works in your business, if your business is ready for a CDP, and what it would look like to truly get your single source of truth for customer interactions.

To save you a lot of time and heartache, we’ll cover:

  • What is a customer data platform (CDP)?
  • Key differences between a CDP and CRM
  • Wait, do I need a CRM at all then?
  • 6 questions to guide you: is your business ready for a CDP?
What is a Customer Data Platform (CDP)?

A customer data platform (CDP) is a data management system that helps you consolidate customer interactions from multiple data sources and channels in order to build a single, unified view around an individual customer.

Structured data from a CDP can be delivered to other MarTech systems (i.e marketing automation tools) to enable more personalised customer experiences and a more targeted marketing strategy.

A customer data platform generally performs four main functions by understanding your customers’ engagement and behaviour:

  • Data collection: the ability to ingest a vast array of customer data — from online activities (such as website and app use) to offline (in-store visits, tradeshow attendance, and so forth).
  • Identity stitching and management: the ability to know that Person A who is anonymously browsing your site is the same as Person B who logged into your app on their phone. Overall, this gives the ability to consolidate user activities into a unified customer profile.
  • Audience management: the ability to split users into marketing segments — for example, loyal customers vs casual website browsers.
  • Orchestration and event streaming: the ability to take those segments and push them downstream to a customer-facing “engagement layer”, whether that is your email marketing tool, your website, Google Ads, and just about everything else. Many of these integrations are built-in, so you won’t need any development resources to build it out.

The key here is that a CDP is able to process and organise vast amounts of customer activities, for both known and unknown users. These customer activities and destinations can be anywhere that your customers interact with your brand: your website, your app, your Google Ads — basically any part of your customer journey.

Say a new customer visits 30 different pages on your website, a CDP tracks and logs this customer’s behaviour. That individual customer might then change from a cold to a hot lead.

A CDP can build this user profile primarily through first-party data. This data gathered from any of these customer interactions with your brand can help your business create a single view of the customer.

To use an analogy — you can think of a CDP as a sort of traffic cop who checks and organises cars:

  1. Traffic comes in (via customer activities).
  2. The CDP (traffic cop) checks the credentials of that traffic to ensure it is compliant, and attributes it to an existing person if one exists.
  3. The traffic is then sorted into logical lanes (audience segmentation — for example, loyal customers).
  4. Those lanes of traffic then go to destinations for activation (eg. Your email system, Facebook, Google).

Now if we take that analogy and put it into an eCommerce context:

Imagine a typical “high involvement” purchase like a cruise. You are very unlikely to simply go straight to the website and purchase from a display ad.

Instead, you would:

  1. Browse the website, get some information, and maybe subscribe to their email list.
  2. A few days might pass while you confer with your partner and the time you can take off work.
  3. You may then come back to the site and call their contact centre.
  4. After that chat, you might wait a few more days to think, and then finally book.

In travel, this can take place over several months. A CDP would log all of those customer touchpoints and ensure that your marketing changes as the customer’s needs change.

Key differences between a CDP & CRM

While both can theoretically activate across the organisation, the biggest difference between a Customer Relationship Management system (CRM) and a Customer Data Platform (CDP) is this:

  • A CDP is the source of truth for marketing relationships.
  • A CRM is the source of truth for sales relationships.

At its heart, a customer relationship management system (CRM) is focused on customer interactions with sales. On the business-to-consumer (B2C) side, it tracks purchases and the products that were involved. On the business-to-business (B2B) side, it tracks account ownership, opportunities, and things like contracts.

While a CRM system does track customer data, it’s generally relatively static information such as names, emails, and addresses — rather than activities and calculated preferences.

A CDP, on the other hand, is architected from the ground up to ingest large volumes of data around customer interactions which are much more granular than core profile data or purchases — for example, website browsing, video plays, and so on. This means a CDP is better positioned to support an organisations overall customer data needs.

Why can’t I use my CRM to do a CDP’s job?

A CRM will struggle in a couple of key areas here:

  • Sheer volume of data: When you start to ingest real-time customer data, such as website hits, that’s where a CRM starts to struggle. With its traditional database structure, there’s just no logical architecture to record potentially thousands of interactions per customer. Even the important notes you enter as part of the context of a sales call are hard to automate — it’s all manually driven.
  • Channel orchestration in real-time: Even if you can record these interactions and make sense of them in your CRM, how will you get it to your marketing tools for action? CDPs generally have hundreds of integrations built-in, to almost any tool imaginable. Without these built-in connectors, your internal development team will spend large amounts of time maintaining complex API connections to Facebook, Google, your website, and any other tool you decide to use in the future.
But the biggest caveat of all is this: a CRM can only track interactions for known people. Which means you are leaving a large amount of opportunity on the table.

For example, it’s not uncommon for fewer than 10% of visitors on your website to be linked to a known person — but what about the other 90%? A CRM has nowhere to store this information, which means your marketing team can never act upon these segments.

Whereas a CDP is focused on first-party data (i.e transactional history, website activity, and demographics) that is collated from multiple data sources. This helps you create a detailed view of your customers, so you can engage with them with the right message at the right time.

So, do I need a CRM at all then if I have a CDP?

Sometimes. A CRM is fantastic for managing a sales force (pardon the pun) and routing leads to sales. But if you are a purely B2C business, with a solid data strategy in place via a CDP, then it is possible that you might not need a CRM as well. But before you make the leap, make sure that your front-line sales and service staff can get the same unified view of the customer they get in your CRM.

But, CDPs are still not the answer for every business. Here’s why.

So, do I need a CDP?

Not necessarily. A CDP is costly, and you will only see a positive return on investment if you have a certain volume of customers, and you are able to activate upon the data in new ways.

As in, you might be able to make a connection to Facebook or Google Ads and therefore suppress customers from advertising when they’ve just purchased.

Ask yourself the following questions:

  • Where does my customer data live right now?
  • Where do I define my audiences? Is all the relevant data available in that place?
  • Does my business need those audiences to be informed by close to real-time data? Or will manual lists suffice for now?
  • How much time does my business spend with manual processes to act upon data (eg. A manual list export to send an email, or to load into Facebook Custom Audiences for targeting?)
  • Does my business spend most of its marketing dollars on the “unknown” universe — and therefore is the opportunity on the “known” side lower?

There’s no point spending hundreds of thousands of dollars annually just for a real-time pipe to Facebook Audiences, for example. Although the manual alternatives to this is tedious (CSV download from your CRM, and upload to Facebook), it’s entirely possible that the ROI for a CDP just may not be there.

But if you have many disparate sources of data points being generated via many different sources, which needs to be organised and sent to downstream channels, then there is a better case for a CDP to unify all that data.

If you’ve figured out you do need one, how do you know if your business is actually ready?

6 questions to guide you: is your business is ready for a CDP?

CDPs can be costly and you might not see a positive return on it. So how do you know you’re in the position to see value from the other side? These parameters are a good start to make sure your business is ready for a CDP.

  1. Do you have organisational buy-in — is your company committed to really owning the customer experience? If not, then you will likely fail, since you will struggle to obtain data from other parts of the organisation.
  2. Do you operate in a business which has a high volume of customers? This can depend on the industry, but 100,000 customers could be a good starting point. Conversely, if you are in the B2B world and only have an addressable audience of a few thousand customers, a CDP is unlikely to justify the investment.
  3. Do you have a high digital media spend and a high number of touchpoints? The gains of CDPs are often based upon suppressing or activating digital audiences, so if you only spend money on TV advertising, you are unlikely to see benefits.
  4. Do you have a lot of trouble building out a cohesive customer experience? A CDP will help to centralise decision-making, and therefore give a more consistent and cohesive customer experience.
  5. Are you struggling to align data to an individual persona across all systems? If so, you would likely find efficiency benefits by automating this via a CDP.
  6. Are you a business that holds large amounts of sensitive personal data? With upcoming changes to Australian privacy legislation, investing in a CDP will force good conversations around data governance, ultimately getting ahead of the game with this key issue.

If you’ve answered yes to some or all of the above questions, then it would be worth investigating customer data platforms.

CDPs go hand-in-hand with sizeable digital ambitions

If there is one thing you should take away from all of this: A CDP should be firmly on the radar for enterprise businesses. One way or another, you’ve got to present a consistent experience to your customers.

The Lumery bridges the MarTech void and helps companies like yours build capability across people, processes, data, and technology every single day. We’re vendor agnostic, so we will tell it to you straight. Talk to us today about how we can help you deliver best-in-class customer experiences — whether that includes a CDP or not!

Learn more about The Lumery, chat to the team today.

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Written by
  • Phil Wild
  • Solution Consulting Lead
The source of truth CDP or CRM
If you’re about to put all your customer activities into customer relationship management (CRM) system to get your single source of truth, let us lead with a cautionary tale.