Customer Data Platform (CDP) Development Guide

Alexandra Rostovtseva

3 years ago

Table of Contents

Virtually every company that sells goods or services deals with lots of clients on a daily basis. Sometimes the influx of customers can be intimidating and hard to handle. No wonder, the spectrum of issues that customers can encounter could be incredibly wide ranging.

These days companies have websites, mobile applications, social media, advertising tools leading to their online stores and actual physical retail store locations. And let’s not forget about internal solutions for collecting, analyzing and storing all the data about customers.

However, quantity doesn’t always mean quality. According to the statistics, 20% of all database records used by companies contain contact data with data quality issues. Also almost 50% of new data collected by businesses has one or more critical errors.

So with so many customer touchpoints and so many accuracy mistakes, is this possible for a company to be sure that all customer data is not lost and is processed effectively in the end? The answer is yes, but only if a company has a data-first Customer Data Platforms (CDPs) that does the job.

So in this post, we are going to discuss customer data platforms, the main types of these solutions, for what purpose it is developed and what processes it helps automate. We will also share our own experience and explain how to develop your own CDP, how much to invest in it and what features to include. Can’t wait to discover all those things? Then let’s get started!

What is a Customer Data Platform?

To begin with, let’s define what is a CDP. Basically, it is a digital tool that is able to collect data from different customer touch points, organize it in one centralized place, structure and analyze it in real-time. CDP can also be used by other software to help the company with marketing campaigns, sales deals, and creation of one unified customer base that is easy to access and manage.

In other words, a customer data platform helps to unite the efforts of your marketing, sales and client service teams to form a customer-based approach. This improves overall customer service and experience and encourages client loyalty that is very important for a company and its stable growing income.

Good to know

Data and its right use can be a powerful tool for a business. Check out our blog post dedicated to Big Data and all of the possible ways that it can improve your customer service and experience, and even predict all customers needs.

By now you may be wondering what kind of information CDP solution can collect and work with. Basically, there are 4 key data types that a customer data platform is able to process effectively. They are the following:

Identification information

All the data related to a certain client such as their name, age, location, profession, contact information and social media, information related to client ID and account numbers, etc.

Quantitative information

This information is often referred to as behavioral data because it shows the company how a customer has engaged with it by performing certain actions like transactions, email communications, activity on a website or in a mobile application. Also the company can track dates when the communication or query started.

Qualitative information

Thanks to qualitative data a company gets a chance to understand what drives a customer to choose their goods or services. Thanks to qualitative data it is possible to discover customer motivation, what helped them find your company, what their real expectations and opinions are, what their preferences include.

Descriptive data

This type of data helps to extend the initially received identification information to understand the clients needs better. Different companies may need different descriptive data. Let’s take a real estate agency, to understand the client’s requirements it is important to get information about the client’s family, profession, hobby, etc. In other words, the agents need to collect more personal information to offer the best place to buy that will fit the client’s lifestyle.

One frequently asked question that we always face when we provide development information is “Are CRM and CDP the same since they both collect client-related data?” The answer is no, in fact data collection is the only thing that they have in common. To help you understand all the differences CDP and custom CRM have, we have prepared the following infographics.

Main types of Customer Data Platforms

Now when you know what CDP is and how it differs from a common CRM, it is time to proceed to the main types of this software. In general, all CDPs can be divided into four big groups depending on their purpose and the tasks they accomplish. Let’s take a closer look at each of the types and find out what they offer.

Digital data movers

the main task of these CDPs is to pipe the data from one company source or tool to another without retaining it or providing any high quality insights on single customers. In other words such customer data platforms do not have a constant database and do not offer views of a single customer. Such CDPs are good when the company aims to connect many data sets into one holistic set. The data is always moving in real-time.

Digital data processors

like the previous type of CDP this one helps to move the data from one place to another, but it also offers data processing and analysis tools. Thanks to this type of CDP companies can improve data visibility and get valuable insights generated based on the collected data piles. So basically the solution not only stores the data in one place, it takes all necessary actions that help businesses personalize customer experience on their websites or in applications.

Multifunctional CDP

this type of CDP does what other two types mentioned above plus it offers marketing automation functionality and lets you create the right marketing strategy and execute it right from inside the tool. It is obvious that such CDPs have certain additional instruments inside them. For example, it can be a tool that has many email templates that can be used for company email marketing. So first you collect the data from all tools, then analyze it, then create a further plan/strategy and start taking actions right in CDP.

SaaS CDP

these CDPs are often used by enterprises because of their wide variety of options and ability to create a centralized advanced database that provides single customer insights. On top of that such SDPs are highly customizable, scalable and powered by the latest technologies like Machine Learning or Artificial Intelligence able to provide deeper customer-related insights and perform more thorough analysis. Thanks to SaaS CDP enterprises can improve customer engagement drastically.

It is also worth mentioning that in recent years, cloud-based CDPs have become more popular among companies. Cloud migration itself offers numerous benefits. If you are wondering what they are, then take a look at our article covering this topic.

What businesses need customer data management software?

As we’ve already mentioned, CDP can be a real game-changer for businesses able to minimize errors related to customer data entry, processing and analysis. Not only can it help you improve customer service, but also CDP is capable of changing the whole marketing strategy of a company.

So now you may be wondering, what companies apart from e-commerce ones may need customer data platforms. Well, we’d say almost every company that works with numerous clients. CDPs are necessary for:

Real estate agencies,
Retail companies,
Marketing and digital agencies,
Huge enterprises,
Manufacturers of goods (especially custom ones),
Travel and booking companies,
Construction businesses,
Restaurants and cafes,
Companies responsible for delivery,
Franchises,
Gyms and sport halls,
Renting companies, and many more.

So as you can see, customer data platforms are suitable for different business models. But how would you know if it is needed for your particular company? It is quite easy, all you need to do is ask yourself a couple of questions:

How is the customer data managed now? If your data from different departments (sales, marketing, purchasing, etc) is stored in silos and often lacks some crucial customer information, then CDP is for you.
How is the data used by current systems? CDP is necessary when your company experiences issues with data transfer between systems and when there is no unified standard of data storing and processing.
What is the quality of collected data? You need to find out whether you have any cases of major data duplication, significant human mistakes or even data loss. If you have any of those issues, then you need a CDP to improve data collection and encourage effective data usage for marketing purposes.
Is my company CDP ready? To identify this you need to analyze whether you have a clear picture of your customer journey and enough clarity on possible use cases. Also you need to review your current systems such as CRM, ERP or else to find out possible integration opportunities.
What KPIs do you expect to improve? Before implementing CDP you should clearly define what indexes you would like to measure and what you’d like to achieve. Perhaps you want to decrease time spent on data searching and processing, or maybe your goal is to decrease customer data redundancy.
What is the ROI of investing in CDP? Speaking about businesses, we cannot neglect such an important factor as ROI. One of the latest papers reveals that 90% of enterprises will implement a CDP by 2022. But why are they so eager to do this? Basically because thanks to CDP they can achieve 9.1x YoY growth in customer satisfaction, 2.9x YoY growth in overall company revenue, and 4.5x annual increase in employee engagement. Quite impressive, right?

Major advantages of CDP software

Considering implementation of the new software like CDP, business owners often take into account the most important decision making point – the real value and benefits that software will bring to a company. So when it comes to CDP, what can it offer? IS it really such a great investment? Let’s take a closer look at all CDP benefits to get a bigger picture and to be totally objective.

Improved work efficiency

CDP can not only help you centralize all customer data and reduce mistakes, it also can help you save many hours you used to spend on integration work. Plus all data collected by CDP will be easily moved to all other systems which will eliminate information duplication issues once and for all. So your employees will save their time and spend it on creative tasks rather than on double-checking data in all systems.

Better customer experience

These days customers use so many digital tools and don’t purchase goods in physical stores. So by implementing CDP you get a chance to explore the behavior of your customers, their preferences and dislikes. That information can be used further to improve your marketing campaigns and to drive comprehensive customer experience. This in turn can encourage customer loyalty.

More flexibility

Thanks to CDPs, businesses can not only implement the latest technologies and adapt to constantly changing customer behavior and needs, they also get a chance to connect all systems and extract customer information easily to use it whenever needed.

Comprehensive customer view

Since CDP collects information from various sources, channels and devices, the company can get a more clear understanding of its common customer. Also thanks to CDP it is much easier to make client data accessible to any company system and then use it for better planning or else. It is also possible to perform better customer segmentation, personalization and scoring.

Strengthen relations with business partners

The insights formulated after review of all information analyzed by CDP can be used to establish better relationships with your business partners. You can exchange those insights, reshape your strategies or start a new collaboration able to attract more potential customers.

Real-time decision making

The main advantage of CDP is that you can achieve any customer data anytime and take necessary actions in real time. This turns personalized communication and marketing to a whole new level. If your CDP has additional marketing tools (powered by AI or ML), then you can even perform predictive scoring and launch email marketing campaigns to target so-called “hot clients”.

Apart from these major benefits, CDP offers the following pros:

If you still doubt whether CDP is a must-have for your company, then we suggest that you watch the video below. There you will find an explanation of what makes customer data platform software so irreplaceable and what differs it from other business tools.

How to develop your own custom CDP solutin

The development of your own customer data platform requires dedication and a highly experienced team, because you are going to invest not only your money but also your precious time. And everything should turn out the best possible way. So first of all, find the right development partner with an extensive domain expertise. You will need the following specialists to complete your CDP development and release:

Business Analyst;
Scrum Master,
Designer;
Front-end developers;
Back-end developers;
System Administrator;
Quality Assurance specialist.

Make sure that the team you are hiring has experience in building customer data platforms and their integration with other systems such as CRMs and ERPs. Check out company portfolio, real clients reviews and ask as many questions as you need to discover all details of further cooperation.

Once you’ve settled with your team, the preparation and development will get started. The development of CDP will include several key stages that are the following:

Requirements gathering and analysis of ready-made solutions;
Specifications writing and formulation of your project vision;
Design and wireframes;
Development and integration of all services;
Quality assurance and various checks;
Deployment and release.

Also it is a good practice to release a demo version of CDP or as we call it an MVP to test how this solution fits into your working processes and what can be improved to make it even more effective.

Speaking about the development cost, you should know that a feature-rich customer data platform may cost you $75,000 – $100,000. The average development time is 4-6 months. After everything is finished you receive a set and ready solution that you can start using to your advantage at once. Although the price tag seems hefty, custom CDP is worth every penny and it will pay itself off earlier than you think.

As to the MVP, it will cost you less and will be delivered faster than the full version of the solution. The MVP can be easily improved with time and transformed into a more powerful solution. So it might be a good decision to invest in MVP first.

Top 7 must-have features of Customer Data Platform

While considering CDP development, many companies face the question “What features to add to make the solution the most useful?”. We’d like to emphasize that the feature set for different businesses can vary. But of course there are some options that every company can make use of. Here are some of them:

Data integration

The main purpose of every CDP is ingestion, aggregation, and storage of the data. But to make the most of all that data a CDP should be able to collect it from multiple sources including offline ones and work with it in real time.

Building of customer identity

Advanced CDPs can build holistic customer profiles based on the collected data. Thoe profiles help companies form a single customer view and then perform behavioral targeting on company’s online sources.

Profiles unification

This option can help merge all data related to one customer into one single customer profile and avoid duplication of information. CDPs can analyze information from various devices and business tools, match received data with third parties’ and then end up merging all information into a single record related to a certain customer.

In-depth data analysis

Thanks to that feature you will be able to automate the analysis of your current customer base, find out most customers’ preferences, and discover your loyal customers. This can help you improve your customer loyalty in the future by introducing a special loyalty system, bonus program or else.

Customer journey analysis

CDP can help you identify which of the channels you use are the most profitable. Having that information at your disposal, you will be able to work on your customer engagement and weak channels. As a result, you can improve them and start generating more revenue by converting channel visitors into customers.

Audience segmentation

Since customer data platforms let you divide certain attributes related to customers, you can group active customers with the same ones and create a specific marketing campaign to target them. The customers with the same attributes most likely have the same preferences, values or goal that helps to make marketing more personalized (even if it covers the whole group instead of a single customer).

Tracking of anonymous users

All CDPs can easily collect and store data related to anonymous visitors of your website or other selling channels through cookies. What that information can possibly help you with? Well, it shows the pre-purchase behavior of your potential customers and helps you track their customer journey.

Custom development vs ready-made solutions

By now you may be asking yourself one simple question “Why should I put in so much effort and build my own CDP when the market is full of ready solutions?” So to dispel all doubts and help you make the right decision, let’s discuss in brief why it is better to build your own solution than use a ready-made one.

The first and most important factor to consider is the actual cost. All ready-made customer data platforms don’t come cheap. Let’s take the Segment that asks for a payment in the amount of $1,200 to $200,000 per year. Seems not so cheap, right? But there is one more provider that asks for even more – Lytics will charge you $60,000 to $300,000 per year. Among other high quality CDP providers you can see Emarsys, Exponea, and even a high-tech AI powered platform called Optimove. They all offer a great set of features in different packages and promise to boost your business. And that promise is quite real, but remember – it will cost you some significant amount of money too.

And the cost is not the only factor that can influence your decision. The second factor would be customization opportunities. With ready-made solutions they are quite limited. You just get what you paid for and try to fit it into your business model. But what if there are not enough options? Or what if you do not need some of them and would prefer others?

You will have to accept ready-made CDP as it is and try to adapt to it. While the custom solution will be fully adapted to you and your business needs. And that is what makes it many times better. Plus, you are paying for its development once and get access to it forever free-of-charge unless it requires maintenance or upgrading. Custom solutions are long lasting and scalable, they are malleable and can grow and improve together with your business. And that is exactly what every company needs.

Our experience in building custom CDP

We cannot emphasize enough how important it is to find the right development partner when you start the digital transformation of your business. To build a custom CDP is not an easy task. So it is better to delegate it to a team with extensive experience like Altamira.

We have worked with many companies of different sizes and business models. And by building CDPs for them we’ve honed our skills and resolved numerous challenges that are not an obstacle for us now. Dedication, industry knowledge, and many years of development practice help us deliver high quality CDPs at a great price/quality ratio.

One of the recent projects we’ve completed and would like to share with you was Private Equity Info – a solid database with firm information from different sectors for a target audience of professionals like investment bankers. Thanks to this solution people can access the information about thousands of private equity firms, check contact information, acquisition criteria, portfolios and many more. Check out how Private Equity looks and works here:

So if you are interested in developing CDP of a kind or maybe even something more complex, don’t hesitate and get in touch with us. We will guide you through all processes, help you with the specifications and other technical documentation, project development and testing, and also the integration of a new CDP into your working environment.

FAQ

? Should you buy or build a Customer Data Platform?

Although there are so many ready-made CDP solutions on the market, you should not be too tempted to use them. First of all, they may lack flexibility and customization and you will need to adjust your business processes to it (and it should not be this way). Second of all, custom software is more reliable and long-lasting, you can modernize it with time, expand the feature set, remove unnecessary options or else. So it is definitely better to build your own CDP than invest in paid ready-made solutions.

? What is the main purpose of CDP software?

The main purpose of any CDP solution is to connect all tools used by a company to collect all necessary client data and manage data flows, preserving a high level of information security. Also thanks to CDP software the data can be properly structured, segmented and used across other crucial platforms and channels of a company.

? How long does it take to build a CDP from scratch?

In general it takes 4-6 months to build and release a brand new CDP solution. However, the overall development time can vary depending on the overall solution complexity, desired feature set and third-party integrations. The more complicated the solution is, the longer it takes to develop it.

To wrap it up

Whatever line of business you are in, you likely face stiff competition. And sometimes the struggle is tough, especially when you are trying to prop up customer satisfaction and loyalty rates. These days companies should be very attentive to their customers, know their tastes and preferences, anticipate their needs and fulfill them, and it is possible only when you have a holistic client base.

It is no longer enough to have a reliable CRM to handle customer information, you need something more sophisticated and smart. Companies need customer data platforms that are capable of collecting, analyzing and storing the information in one centralized database. And what’s more important is that information will not just stay “untouched”, it will be actively used for your own benefit.

The customer data should not be a burden that complicates the job for your employees, on the contrary, it should become your biggest helper and weapon. Thanks to custom CDP solutions every business can boost its productivity, income and encourage high levels of client trust. And what more is there to ask for?