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Introduction: The Customer Experience Gap

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Over the last decade, brands with above average customer satisfaction have returned over 4x the value to shareholders versus their CSAT laggard counterparts. That’s why modern brands must compete on customer experience. Putting the customer at the center of everything you do is no longer a consideration, but a requirement.

Business leaders in marketing, sales, customer service or other custom- er-centric roles must deliver on the CX imperative—deploying authentic experiences that set your brand apart from competitors. Naturally, some challenges stand in the way:

Navigating Shifting Customer Behaviors

Consumer behavior is shifting faster than ever. Over the past few years, it was because of disruptive technology. Now, the global pandemic has likely permanently shifted customers to be more digital in their spending habits and a volatile economy makes consumers more careful about spending their dollars. Creating great experiences in a dynamic environment is about understanding your customers’ needs and then taking data-driven action to help and inspire them.

Adopting New Business Models

Shifting customer behavior is also leading to rapidly changing business models. If you’re in media, for instance, ad revenue is on the wane and your top concern is now growing the paid subscriber base. If you’re in financial services, you should be getting closer to the end consumer, which means you are working with new customer data and channels. Even consumer packaged goods (CPG) companies, long selling exclusively through wholesales channels, are adding direct to consumer sales.

Empowering New Ways of Working

While transforming to become more customer centric, CX professionals are also challenged to do more with less. To succeed, you need to reduce friction from your processes and eliminate system inefficiencies.

Delivering CX Success with a CDP

According to Gartner, businesses that create the right type of experiences—authentic, helpful and tailored to the individual—achieve a 20% lift in business impact*. The customer data platform (CDP) is a centralized smart hub designed to align your people and processes around the single goal of creating better customer experiences—all while driving new efficiencies into your organization and your business.

*Source: Gartner’s 2018 State of Personalization Report

CDP Fundamentals

What a CDP Is, and What it Isn’t

A customer data platform (CDP) is a prebuilt technology used by marketers and customer experience professionals to understand their organization’s customers and scale personalized experiences across marketing, sales, and service channels. It does this by:

A customer data platform (CDP) is a prebuilt technology used by marketers and customer experience professionals to understand their organization’s customers and scale personalized experiences across marketing, sales, and service channels. It does this by:

  • Collecting customer identities and real-time interaction data from all first- and third-party data sources (through prebuilt data connectors)
  • Stitching identities and removing duplicates to form a single, persistent history for each customer
  • Empowering teams, via a user-friendly interface, to generate a single source of customer intelligence by analyzing each customer, segmenting audiences, and predicting next-best-actions to foster customer relationships and drive purchases
  • Activating orchestrated experiences across all marketing, customer experience, and commerce channels, including test design and measurement

Because of their generic name, CDPs sometimes are confused with other technologies. Here are some of the common systems that are not a CDP:

  • Data management platform (DMP) — designed to plan and manage paid digital advertising conducted on 3rd party websites (e.g. espn.com) to anonymized individuals
  • Tag/SDK management tool — designed for IT organizations to create data from digital events, such as a click on a website, and transmit data to other systems
  • Personalization engine — designed to personalize a single user experience in a single channel — for example your website
  • Master data management platform (MDM) — designed for IT organizations within large, multichannel enterprises to resolve duplicate customer records into a single golden record
  • Multichannel marketing hub (MMH) — designed to manage and deliver marketing campaigns within email, social, text, and push channels (also known as marketing clouds)
  • Customer relationship management tool (CRM) — designed as a sales and service tool for logging direct interactions with customers (e.g. customer complaint, price quote on a product, customer questions).

Learn more about how your CDP and CRM work together →

  • Data lake — designed for IT organizations to store any type of enterprise data (e.g. financial, product, store, service, transaction, HR, customer, marketing) to support enterprise analytics and data science. Data is accessible only via programming languages (e.g., SQL, Python, R, Java)

Defining Customer Data

Below are the types of customer data often managed by a customer data platform (CDP):

  • PII data — Personally identifiable information such as name, address, phone, email, etc. used to identify and contact a customer, not for analytics or segmentation. PII is critical to unifying disparate data about customers for a single view.
  • Digital engagement data — Data reflecting the campaigns a customer received, the engagement within them, and other interaction data across marketing, advertising, sales, and support channels. This data is key to personalizing customer journeys to maximize engagement, LTV, satisfaction and more.
  • Transaction info — Examples include products purchased, channels transacted through, purchase prices, and discounts used. This data is required for measuring the overall success of campaigns and CX initiatives.
  • Demographic or firmographic info — Examples include dwelling type, estimated income, company type, company industry, and number of employees. This data is valuable for first-order targeting and segmentation, upon which additional, more granular targeting attributes will be layered.
  • CSAT data — Examples include satisfaction scores from surveys and interactions with customer support associates. This data is critical to measuring the overall success of CX efforts, and for personalizing customer journeys (e.g. cross-sell vs. retention journeys).
  • Offline data — Examples of this include in-store transactions and customer service interactions. This data bridges the offline and online profile and gives the full picture of your customer across functions including sales, servicing and marketing.

Learn more about best practices for managing customer data →

Where a CDP Fits in Your Tech Stack

CDPs are designed to modernize and transform your martech stack, a collection of loosely integrated technologies, into a CX stack—where everything you do through technology is aligned and orchestrated around the customer.

CDP in Martech Stack

The CDP sits at the center of your stack, acting as the intelligent command center that orchestrates customer journeys and personalized experiences.

“With ActionIQ, we were able to marry the usability of a typical campaign management solution with infrastructure grade architecture and scalability. Meaning, they know how to make a useful product for marketers, and build tech you can actually integrate into a modern infrastructure.”

Nick Rockwell, SVP Engineering at Fastly, Former CTO of The New York Times

In more technical terms, CDPs often sit in the middle of the existing stack, acting as the intelligent command center that receives information from siloed systems (e.g. data warehouses, MDM, loyalty, marketing cloud, website, POS, etc.) and orchestrates customer journeys across downstream, customer-facing systems that deliver the final experiences to the customer (e.g. CRM, call center, POS, website, ESP, DSP, direct mail, apps, etc.).

For the benefit of the organization, CDPs enable a best-of-breed stack by being agnostic, seamlessly connecting to any source of customer data and orchestrating across every execution channel. This gives organizations the freedom and flexibility to plug-and-play innovative, best-in-class point solutions (such as a premier ESP or an innovative DSP) in place of expensive — and often outdated — marketing cloud suites that boldly claim to be solutions for everything.

Is a CDP Right For Your Organization?

Before choosing a CDP as your customer data management solution, seek the answers to these key questions—so you can determine if a CDP is right for you and your organization.

Who Needs a CDP

“Personalization is impossible if marketers don’t have the means to understand the needs of customers on an ongoing basis. Setting up a centralized customer data platform (CDP) to unify paid and owned data from across channels is essential to these efforts.”
- McKinsey

Companies that derive great benefit from a CDP often have these common characteristics:

Organizational Profile

  • Large B2C enterprises managing customer relationships across channels, platforms and teams
  • B2B or B2B2C organizations with significant scale that have outgrown the data and orchestration capabilities of their CRM system

Pain Points

  • Incomplete customer understanding across channels and teams
  • Inability to orchestrate connected experiences across brand touchpoints
  • Inability for business teams to quickly test, deploy and measure CX tactics
  • Low customer lifetime value and high customer acquisition cost

Many enterprises matching the criteria above have struggled to manage customer experiences using walled-garden marketing clouds, which lack the independent data layer and flexible integrations offered by many CDPs. Meanwhile, enterprises that looked to tag management technologies to connect disparate data sources are finding these systems are limited in their ability to ingest non-digital data at enterprise scale and make that data available for CX teams to orchestrate experiences across channels.

Customer data platforms consolidate data silos, create a 360-degree customer view, and democratize access to customer data for purposes of personalizing interactions across marketing, sales, and service channels. Ultimately, a CDP gives marketers and customer experience professionals the ability to provide real-time personalization to customers by consolidating data silos and creating authentic customer interactions.

10 Common Use Cases of a CDP

CDPs support use cases across every customer touchpoint, from acquisition to servicing and retention. Some of the top use cases that are a great fit for your CDP include:

  1. Preventing churn — Detecting at-risk customers and delivering automated messages across customers’ preferred channels to prevent churn
  2. Nurturing high-value customers – Identifying high LTV and predicted high LTV customers and delivering automated, personalized communications
  3. Optimizing prospecting — Identifying premier prospects via lookalike models and targeting them via channels like direct mail, digital advertising, or social
  4. Enabling real-time personalization — Eliminating one-size-fits-all campaigns and replacing them with a 1:1 marketing campaign that leverages an analytic perspective to include customers’ preferred products or preferred content
  5. Paid media suppression — Suppressing targets in advertising channels who are already customers of the brand
  6. Modeling propensities — Using customers’ propensities to target only those with a high likelihood of conversion for each type of content (while also minimizing discounts to those who don’t need them in order to convert)
  7. Increasing organizational agility — Increasing productivity and time-to-market by enabling marketers to design tests, measure performance, and iterate campaign setups, all without having to wait for technical assistance.
  8. Optimizing channel selection – Identifying customer propensities for channels and send times and automating delivery of outreach based on preferences
  9. Cross-selling offers – Identifying audiences likely to convert on offers based on demographics, behavior, affinity modeling, and then launching omnichannel communications
  10. Containing servicing costs – Identifying customer behaviors likely to generate contact center calls and launching proactive communications to offer alternate servicing options.

Measuring CDP ROI

  1. Incremental revenue gains through personalized communications
    — By linking data from different channels and customer touchpoints, organizations can improve the personalization and effectiveness of customer communications, driving over $5 million in incremental revenue annually
  2. Increased return on ad spend with better targeting — By providing a single view of each customer, and allowing brands to granularly target customers based on a range of specific attributes, marketers can drive more efficient paid advertising spend resulting in over $6 million annual lift in ROAS
  3. Efficiency gains for business and analyst teams — By enabling self-service for business users through an intuitive user experience, ad hoc queries are reduced, as is the time consuming back-and-forth between business and IT, resulting in over $1 million in time savings for business people, analysts and IT
  4. Reduced costs — With business users more empowered, dependency on external agencies and third-party contractors is reduced. Legacy systems may also be sunsetted, resulting in a net reduction in management and maintenance of over $600,000
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“There have been phenomenal increases to customer experiences and retention because of ActionIQ.”
Senior Manager, Marketing Operations

How Do You Evaluate a CDP?

After you’ve decided to move forward with a CDP initiative, here are some of the key considerations for making sure you choose the right CDP.

Choosing Your Evaluation Criteria

As an enterprise, it’s important to distinguish between CDP solutions that are enterprise grade, versus those designed for smaller and less complex organizations. Enterprise CDPs must cater to a distinct set of requirements, most notably around grander customer scale, increased data flexibility, greater technology interoperation, and more stringent data security. Read on to understand the key requirements in each category.

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Scalability

  • Ingest and analyze data on tens of millions of customers so your CDP scales as your business grows (and doesn’t need to be replaced)
  • Integrate and unify a wide breadth of disparate, complex data from a range of systems so you create the most relevant experiences based on a 360o view of the customer
  • Compute large volumes of data, in real-time, while supporting unlimited number of users in the platform at any given time, so every business user can interact with customer data, build audiences on the fly, and test, learn & iterate with agility

Flexibility

  • Ingest data in any format, from any source, at any scale so there’s no need for a costly and protracted data modeling exercise every time you want to add data to your CDP
  • Resolve identities using machine learning and custom business constraints so you have more accurate identities that match your definition of the customer
  • Eliminate dependency on technical resources by using a business UI to define new attributes and insights, so you achieve faster time to market for every new experience

Learn more about capabilities of a scalable and flexible CDP →

Connectivity

  • Connect with any system across sales, service, marketing and more, so you can rapidly bring online your current and future channels, deploying seamless experiences across all of them
  • Support a best-of-breed hub and spoke tech stack strategy so you can make the most of existing tech investments, sunset legacy systems, and are free to choose best fit solutions for tackling future use cases

See some examples of CDP connectivity →

Security

  • Documentation validating enterprise grade security and privacy standards so you can easily extend your existing best practices to the CDP
  • Full compliance with GDPR, CCPA, and SOC 2 Type 2 certifications to confidently safeguard customer trust in your brand

Learn more about CDP security →

Prioritizing Critical Capabilities

Once you have evaluated the key requirements of your CDP solution, you can begin to prioritize the capabilities that will be critical for the success of your organization’s initiative. No one solution will excel in every capability, so prioritizing the ones that are most important to your organization will be critical in making the right vendor selection.

  • Customer 360: Bringing together and matching granular customer behavior across online and offline channels, creating a single customer view.
  • Customer Intelligence: Making customer insights rapidly and readily available to everyone who needs them—especially business users—and augmenting human intelligence with AI.
  • Customer Experience: Giving the ability to orchestrate, test and measure experiences across all customer touchpoints.
  • Self-service Access: Providing business teams access to valuable customer data and removing dependencies on IT.

Learn more about must-have CDP capabilities →

Making Sense of the CDP Vendor Landscape

The CDP vendor landscape has exploded, with 100+ vendors claiming to offer CDPs. In reality, there are very few CDPs that are purpose-built to unify, analyze, and activate customer data in a modern and agile way. As a result, it can be difficult to make sense of the landscape of solutions.

The easiest way to classify a CDP is to examine their clients, use cases, and documented value they’ve driven inside an organization that looks like you. Vendors with roots as a legacy marketing technology that previously served a different purpose are typically retrofitting their offerings to meet some requirements of a CDP. Of the five types of CDPs on the market today, four are retrofitted solutions, but only one is designed purposely from the ground up.

  1. Purpose-built CDPs offer a data-first approach and act as your marketing stack’s “smart hub” for centralizing data, democratizing access for analytics, and automating intelligent personalization processes.
  2. Retrofit CDPs are adaptations of ten-plus-year-old architectures that previously served as:
  • Tag/SDK management platforms — originally designed to pass in-the-moment digital event data from one system to another.
  • Identity management platforms — designed as tools for helping IT resolve multiple representations of the same customer into a single “golden record.”
  • Personalization engines — built to personalize and optimize marketing messages and content in the web or mobile channel.
  • Marketing clouds — a portfolio of point solutions assembled through acquisitions to execute marketing content in channels like email, text, advertising and social media.

As you evaluate solutions, be mindful of the degree to which each of these technologies can satisfy the critical requirements your business must meet in order to succeed—and which gaps you may need to fill in with IT projects, additional tech, and manual labor.

For a deep dive on the CDP market, how to identify retrofit CDPs, and how to stack up the different offerings and vendors, be sure to read the CDP Market Guide.

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How Do You Deploy a CDP?

Setting and Measuring the Right Outcomes

Success can’t be subjective. To establish and maintain credibility, you need to define your success metrics, how you’ll measure them, and how you’ll communicate them throughout the organization.
Measurement should include an overarching KPI as the “North Star” for the entire organization to focus on. Many options, such as retention rate, NPS score, and revenue per customer, exist depending on the type of business the company is in.

However, it’s also important to establish a link between function-specific KPIs (email engagement, frequency of visits to the store, time on site, etc.) that are leading indicators and help every member of the organization to understand how their specific efforts contribute to the customer experience.

How to Prepare Your Organization for a CDP

CDPs serve as the technical foundation for helping your company put the customer at the center of everything you do. But technology alone isn’t enough. To succeed, your people, processes and culture must come along for the ride as well.

But before you propose changes to the organization, it’s important to first assess how mature your org is today in terms of customer centricity. In this respect, there are three basic levels of marketing maturity:

  1. Channel-centric. At channel-centric organizations, business teams and technologies are distributed by channel, and metrics for success tend to be limited by channels.
  2. Journey-centric. These organizations can create connected experiences across all channels, but only within a single stage of the customer lifecycle, for example customer on-boarding. At these organizations, teams tend to be distributed by journey, even if supporting technology is centralized and consolidated.
  3. Customer-centric. These organizations are able to deliver personalized, contextual experiences to individual customers across all channels and all lifecycle stages. At these organizations, both teams and technologies are centralized and shared across the full custom- er experience.

Ultimately, your goal is to move toward a customer-centric org structure. While it may be tempting at first to take an all-or-nothing approach to organizational change—like embarking on a radical group-wide reorg— the most successful organizations take a measured approach. They tend to focus on first gaining quick wins within the existing structure, to build momentum, and letting early success motivate the org to progress through the phases of customer centricity over time.

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How to Identify and Mitigate Common Risks

CDPs serve as the technical foundation for helping your company put the customer at the center of everything you do. But technology alone isn’t enough. To succeed, your people, processes and culture must come along for the ride as well.

How Long It Takes to Implement a CDP

While CDPs are foundational technologies in your CX tech stack, they should not take an enormous effort to implement. Instead, you should be live and deploying use cases in your CDP within 8 to 12 weeks.

If a CDP vendor suggests it should take longer, they likely do not have the flexible system architecture that streamlines implementation. By contrast, leading vendors take an agile implementation approach via a load-first, define-later architecture, wherein data is ingested in its original source format—saving the need to involve IT resources for data transformation before ingestion—and then modified later by a data analyst through the UI when it’s needed for use.

Preparing for the (Un)expected

When it comes to running your CDP initiative, you’ll need to look forward a little bit into the future as well. Most digital transformation projects fail due to “unexpected” roadblocks—which is why a successful CDP implementation requires you to prepare for the unexpected. Acknowledging this and preparing for likely challenges is critical to the success of your project in the short and long term.

Here are some of the risks to be prepared for during your CDP implementation, and mitigation strategies to see you through:

  • Risk: Weak data foundation
    Mitigation Strategy: Work backwards from your high priority use cases to identify critical data sets, then focus your CDP efforts on the minimal amount of data needed to deploy
  • Risk: Maintaining current processes
    Mitigation Strategy: Don’t constrain yourself to re-engineering current processes, but take a holistic approach to auditing and optimizing all processes that impact customer use cases
  • Risk: Lack of skilled staff
    Mitigation Strategy: Organizations consistently underestimate support needs, so budget in support from partners to validate talent requirements prior to hiring. CDP vendors should also bring significant support expertise to guide you through the process, especially if they have experience in your industry or vertical.
  • Risk: Lack of training
    Mitigation Strategy: Prioritize CDP support and services when evaluating vendors and ask for references from existing clients who look like you
  • Risk: Lack of vision
    Mitigation Strategy: Plan for your use cases to increase in scope and complexity over time, so focus on the foundational capabilities that give you the most flexibility to adapt your data, teams, and processes in the future

While some of the risks may seem a bit daunting, they are easily mitigated with a little planning—and the upside of a successful CDP implementation makes it well worth the effort.

Future-proofing Your CX Stack

Beyond your near and mid-term use cases for your CDP, it’s impossible to plan with certainty what new learnings and strategies will need to be supported in the future. So it’s important your CDP has future-proof capabilities, especially in the following areas:

  1. New data. Organizations bring new customer-facing systems online all the time. And every new system represents a new data feed. Be certain your CDP vendor offers a growing library of prebuilt integrations, as well as robust tools and methodologies for rapidly integrating with other systems.
  2. New channels. Today your customers may engage with you via store, website, Google and Facebook. But tomorrow you may add a mobile app, text messaging and new social media partners. Make sure your CDP supports easily bringing online new channels, and can serve as the central hub for orchestrating experiences across all of them.
  3. Evolving business models. As your business needs evolve, you’ll want to look at your customers in new ways. Ensure your CDP that makes it easy to build new attributes and metrics, and use them to analyze and activate new customer experiences.

Ensuring Success After Your CDP Deployment

How to drive adoption across the organization

The key to adoption of your CDP is a robust change management plan. The foundations for change management begin when you’re first con- sidering a CDP, and carry on well after the initial implementation. Key components of maintaining organizational momentum:

  1. Executive sponsorship. The foundation of your initiative begins with identifying the core goals and use cases that will make a difference for your organization, and getting executive-level alignment, spon- sorship, and commitment around them.
  2. Cross-functional alignment. You must methodically identify all stakeholders, across all relevant functions, and get input from all of them. A CDP project is often the first time these groups have gotten together to talk about data-driven customer experiences—so there’s a lot to cover!
  3. Governance and accountability. You must document your plan with clear jobs to be done, ownership, accountability, ongoing project governance and reporting structures—this task force will drive transformation over the long haul.

Within this framework, you’ll lay out a long-term roadmap for your trans- formation initiative. But you also need quick wins and quick progress along the way to build and maintain momentum.

How to scale your CDP across the organization

The design and architecture of your CDP should make it easy to incrementally expand and scale, delivering incremental new ROI in lockstep.

Phase 1: Getting to Value Quickly

Initially, you’ll implement around your key core use cases, setting up integrations for data ingestion & outbound activation, and then getting your teams ready to get value from the system. The goal of this phase is to get to value quickly and use early success to justify further scaling the CDP initiative.

Phase 2 and Beyond: Growing Value

Next, you’ll target new use cases, a few at a time, to help further grow the value delivered by the CDP. You may onboard new teams, a new brand, or bring online a new geographic region. You might migrate to the CDP use cases still being handled by legacy martech so the older systems can be decommissioned–so maintenance costs go down and users no longer need to “swivel chair” between applications.

The progressive success of your CDP will help accelerate your organization’s transformation to becoming a more customer-centric structure over time, and position you to move the needle on even higher value KPIs.

You Just Learned a Lot About CDPs. What's Next?

Leading brands like The Hartford, The New York Times, Pandora Media and more transformed their businesses and created lasting competitive advantage with the help of a CDP. Each of their journeys began with a conversation with an ActionIQ expert—exploring the opportunities a CDP could help them seize. We’d love to help you start your journey.

Contact ActionIQ now for your consultation with a CDP expert→

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