What is a Customer Data Platform? CDPs Explained | RudderStack

By neub9
3 Min Read

“Today’s consumer’s expectations for a personalized, end-to-end customer experience are high. For businesses that can deliver this level of experience, the rewards are significant. According to McKinsey, companies that effectively use personalization in their customer experience drive 40% more revenue compared to those who struggle with data utilization. Achieving personalization, however, is a complex task. It involves the sophisticated use of data across multiple business units and systems. To address this, a single customer view – or customer 360 – is necessary.

A Customer 360 is a centralized view of all relevant data points from every customer, serving as a single source of truth for every team and tool. It provides rich, up-to-date information about every customer, allowing businesses to create the personalized experiences customers expect and build strong relationships at scale. The Customer Data Platform (CDP) was designed to help companies establish this single customer view and has evolved significantly since its formal inception in 2010. Modern CDP approaches, particularly warehouse native strategies, have been gaining popularity.

To help readers get a better understanding of CDPs, this article discusses what a Customer Data Platform is, its functions, and how to choose one. A CDP is a specialized software platform designed to collect customer data, build unified customer profiles, and use those profiles to add value across the business. It encompasses three key functions: data collection, data unification, and data activation. By centralizing and organizing data from various sources, CDPs create complete customer profiles and enable companies to deliver personalized and consistent customer experiences across all touchpoints.

The context in which CDPs were developed is essential to fully appreciate their purpose. Collecting and managing customer data poses significant challenges as it is derived from multiple sources and often scattered across different systems and SaaS platforms. This results in data silos and a fragmented landscape where different teams and tools operate on different sources of truth, hinders personalization, and creates inconsistent customer experiences. However, implementing a customer 360 has been proven to increase operational efficiency, customer satisfaction, and profitability, giving companies a competitive edge.

The development of CDPs as SaaS tools was initially for the marketing use case, but these legacy platforms had challenges with data accessibility outside of marketing. However, advancements around cloud data warehouses have led to more flexible data stores and innovative approaches to CDPs, such as the warehouse native approach, enabling companies to effectively build a CDP on top of their own data warehouse. By understanding what a CDP does and how it solves each stage of the data activation lifecycle, businesses can harness the full potential of their customer data and drive better business outcomes.”

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