Marketers have long understood the high value of customer data. But many have struggled to bring several disparate sets of data together into a single source of truth. In this episode of Connected & Ready, Gemma is joined by David Raab, founder and CEO of the Customer Data Platform (CDP) Institute. They discuss the acceleration of digital transformation and what that means for CDP, the benefits of centralizing customer data, the opportunities it presents, and what the future of the platform might look like. Learn how Dynamics 365 Customer Insights can empower your sales, marketing, and service teams to personalize customer engagement with an intuitive, flexible, and unified Customer Data Platform. Request a live demo today. https://aka.ms/AA9tofr
Host Gemma Milne is joined by David Raab of the Customer Data Platform Institute for a conversation about the rise of the CDP, the ways it’s changing—and being changed by—the marketplace, and why current trends make it more urgent than ever.
About David M. Raab
David is the founder and CEO of the Customer Data Platform Institute, which educates marketers and technologists about customer data management. In 2013, he was the first to name the Customer Data Platform category. The author of hundreds of articles on marketing technology, David regularly speaks and teaches at events around the world.
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Gemma [00:00:08] Hello and welcome. You're listening to Connected and Ready an ongoing conversation about innovation, resilience, and our capacity to succeed. Brought to you by Microsoft. I'm Gemma Milne. I'm a technology journalist and author. And I'm going to be exploring trends around how companies are adapting to a disrupted world and preparing for tomorrow. We're going to speak to the innovators who are bringing products, operations, and people together in new ways.
[00:00:33] Customer data platforms have become one of the fastest growing pieces of a company's marketing stack. So in today's episode, I'm chatting to David Raab, founder and CEO of the Customer Data Platform Institute, to discuss the rise of the CDP, how the marketplace is growing and how the current climate has accelerated as well as increased the urgency for CDPs.
[00:00:55] David, thank you so much for joining us on the show. I wonder if you could start by giving us a little bit of an introduction to yourself and to your company.
David [00:01:02] Sure. So I'm David Raab, founder and CEO of the Customer Data Platform Institute. The CDP Institute is a vender neutral organization that helps marketers and others make a better job of using their customer data. We were established really at a time when CDP category was just kind of taking off in several of the vendors in the space came to us and said, "Well, what can we do to help people?" My personal background is on the marketing technology consultant for many, many years. I actually named the CDP category back in 2013, which is kind of how I got to run the CDP Institute.
Gemma [00:01:40] And for those who are listening who might not be familiar with the term, at high level what is customer data platform or CDP is we're going to be referring to in this episode. And what does it do?
David [00:01:51] OK. So customer data platform is defined by the CDP Institute as a software that builds a unified, persistent customer database that's accessible to other systems. So what that means in slightly plainer English is that the CDP takes the data from all your sources and puts it in one place and makes it usable.
[00:02:12] And that's a big problem because a lot of companies have a lot of data that spread in all kinds of different places. And you really want to have that all usable so you can get a complete picture of your customer and engage with them as if you actually knew who they were across all channels and all that good stuff. And then the packaged software of that is just what it says. It's actually something that you can buy and install as opposed to the way customer databases were built before 2013, which is as custom projects. We've got your IT department or an outside vendor, and they spend years and billions of dollars and you get something that might or might not be what you want.
Gemma [00:02:47] Yes. So, that, of course, was back in 2013 when, as you say, you named the category, which is really exciting. But, of course, today, do you think the CDPs are being used differently than they were in the past sort of five, 10 years ago? And if so, how?
David [00:03:00] Well, of course, there weren't any 10 years ago. So I don't know that makes that a yes or no.
[00:03:05] And even five years ago, when we first saw them, they were usually attached to an application. So the early CDPs, a lot of them were predictive modeling systems that need a database to do the predictive modeling. So the developers, said “I guess I got to build a database, too, as part of my software.” Then what happened over the years was that slowly it became apparent that the database was actually more valuable than the application because there's lots of predictive modeling software out there and there weren't that many systems that built databases. So this focus of the vendors and of the industry of the institute shifted a bit away from the application, more on the core database. And that's why that definition today, as you see, just says well anything can attach to it. So you don't need an application to be a CDP.
Gemma [00:03:48] Do you think it's changed even in the last sort of six months in this kind of new age we're living in where marketing has shifted a little bit? Has there been an urgency shift?
David [00:03:57] Well, I guess everything has changed in the past six months.
[00:04:00] What's changed with CDPs is that companies have accelerated the digital transformation that everybody was kind of engaged in and sort of lackadaisical fashion. Now with Covid they suddenly had to make changes very quickly and really became way more digital the way more quickly. A lot of people who are selling to the public couldn't sell in retail stores anymore, so they had to go online. So all those things make your customer data way more important. And part of it is, again, about unifying that data to get the complete view. But also part of it is just having something that works, period, because you didn't have the luxury of developing these things slowly over time the way we used to. So with Covid that you really just had to have something you can plug in and get decent customer data even if you were just in one channel. So that in itself changed the priority of the CDP, even if it didn't really change the functionality. The functionality is still the same.
Gemma [00:04:54] So going back to this idea of the main benefit of the CDP and the main reason organizations are looking to CDPs, I wonder if you could actually just maybe give us an example. And what does it really allow for a company and to do that it couldn't do before?
David [00:05:08] Well, the core use case of the CDP is when you have to bring to the gathered data from multiple systems and use them. That's really the thing that most people cannot do without a CDP. There are a lot of other benefits as well. But when you really come down to asking yourself, "Why would I buy a CDP?" I would buy anything because it gives me a capability I don't have if I don't buy it. So I can only do personalization, say, in my web channel without a CDP, I have a personalization engine. But if I want that personalization to include data that came in from my retail stores and terrestrial retail, well, my e-commerce system, our web personalization system, doesn't know about that data.
[00:05:47] So that's where the CDP comes in. So there's a couple of classic CDP use cases, the ones that everybody talks about. One is retargeting.
[00:05:54] So I want to update my retargeting lists with website behavior, I want to – somebody went to the web site, they looked at the famous red pair of shoes. We put them on a retargeting list, but now they went out and bought those shoes. Well, I have to tell the retargeting system quickly that, hey, they bought those shoes.
[00:06:12] Stop pestering them about the shoes. Well, that's getting the data from either the e-commerce system or the retail in-store retail system over into the retargeting systems. That's that trans-system kind of application that’s were the CDP comes in making that connection. Another classic CDP use case is my call center wants to know what people saw on my website. So when they call up with a question that I can actually see what just happened. So, again, moving the data from the web system or the e-commerce system in that case to the call center system. So that’s the kinds of things that are really hard, almost impossible to do without a CDP, that a CDP makes fairly easy. So they're kind of core use cases.
Gemma [00:06:49] It sounds like you're not just connecting different data sets, but you're also, I guess, connecting sometimes disparate parts of an organization and allowing them to kind of work together on one particular use case or one particular customer. What would you say are the biggest opportunities on a departmentally level, such as customer service, sales, marketing, when it comes to this cross-organization connection?
David [00:07:12] Well, again, it's exactly that. And actually, customer service is a big part of the CDP. Where they again, for their own purposes, a lot of the customer success systems would build that unified database because the customer success managers wanted to know how people are using the system or whatever product it is they're selling. That data is going to be spread out. So the customer success guys, again, had to go out and do that. And then after they started to do it for a while sort of realized, hey, you know, it makes us a CDP. So that's cool. You know, certainly in sales, again, sales people traditionally have their CRM system in the CRM is very good at recording what a salesperson puts into it with the CRM system doesn't know what's going on the web site. So you need a CDP or some other system to connect those two and the CRM systems in particular aren't really designed to store that data. So even if you had easy access to, say, the browser history or the web behaviors of someone, there's no place to put that into CRM. So very typical architecture is that your CRM opens up a window looking into the data that's been collected in the CDP. I mean, literally a window on the screen so they can see that complete customer history, which is not stored in the CRM, which as a practical matter, you really couldn't put in the CRM. But the CDP gathers it without breaking a sweat because that's what CDPs do.
Ad [00:08:30] Dynamics 365 Customer Insights helps businesses unify data for a clear, actionable view of their customers. With unified customer profiles, marketing, sales, and service teams have the insights they need to personalize engagement at every touchpoint. Request a live demo of Dynamics 365 Customer Insights today. Follow the link in the episode description.
Gemma [00:08:57] So in the past six months, we've seen that, you know, unified customer data has become even more important than already was. What is it that's really changed really recently that's crying out for more demands and urgency in this space?
David [00:09:10] Well, it's really changed, of course, with Covid is that people are home and they're shopping at home more.
[00:09:16] And if you're a retailer, in particular who was primarily serving people in stores now, you had to find a way to reach those people online. Most retailers, I think, already had some online presence. But now you have to add new capabilities like buy online and pick up in the store, right? Or giving more precise access or more convenient access to what the inventory was locally. So people knew what could be bought or if you're going into delivery, having new systems, integrating with some of the delivery systems, you might not have had a need to integrate with any more. A lot of new technical capabilities that companies have had to deploy to specifically respond to this more online world that we found ourselves in. And much of that involves customer data. Much of this involves convenience. If you really look at when people do surveys about use of customer data and you ask consumers what they want and if they're willing to share their data with you, they usually will say, yeah, I'm willing to share my data with you if you give me a better experience.
[00:10:20] And marketers being marketers think, oh, they want more ads. They want more personalized ads.
[00:10:25] And if you look at the service like, no, actually, it's the last thing, literally the last thing always at the bottom of the list is, yes, send me more personalized ads.
[00:10:32] They don't want more ads of any kind personalized. What they want is a more, they want a better experience. They want their returns processed to be easy. They want their buying process to be easier. They want to be able to see what they've already purchased from you. They want you to make recommendations to some extent based on their behaviors. Even that's kind of dicey. So there's a lot of things that they want you to do to give them a better experience that become more important due to Covid that the CDP makes possible because it makes that customer data more accessible.
Gemma [00:11:00] Do you find that these platforms kind of are able to prompt new ideas or new ways of doing marketing and customer service that perhaps just simply weren't possible and therefore not even felt of before?
David [00:11:13] You know, I would say that most of them were thought of and people couldn't do them. And so they're like super frustrated So, again, that call center example, which is one of the classic CDP use case. "Yeah, you know, I really want my call center guys to see what they did on the web, and I just can't do it and this and bother me for years that I can't do it. Wait, are you telling me a CDP can solve that problem? You know, where do I sign? I'll take two."
[00:11:36] So it's more that there are these needs that people recognized that they couldn't solve, that this CDP promises to solve and actually does solve even better. It's OK to promise it. It's even better to actually do it.
Gemma [00:11:48] Let's talk about privacy, because, of course, with many organizations shifting to more digital processes and solutions, there is always the issue of privacy. What does privacy look like with the CDP? You know, are there any risks?
David [00:12:00] Well, often the CDP is more of a solution to the privacy problem than the risk creation. You know, we'll be honest, pulling all the data in one place creates certainly a new target for your bad guys who want to violate privacy.
[00:12:13] But the work you need to do to meet most of the privacy regulations usually involves finding where all your customer data is and all your different systems, pulling it all into one place. So somebody makes a access request. You can say, "OK, here's all the data we have about you."
[00:12:27] So those are exactly the things that the CDP does. So the CDP implementation process is very similar to the privacy implementation process. So there's actually a lot of good synergy and CDPs are sold, particularly in Europe, where, as you know, the GDPR is a little more advanced than in the US as one of the ways that you help comply with these regulations. You know, the other thing the CDP can do is the CDP can govern the access to the data. So you can put rules in the CDP that say only certain people are allowed to do certain kinds of queries for certain kinds of purposes. That's kind of a cutting edge, a frontier for the CDP guys, because that's not necessarily something that was part of the core design of the CDP. But it's doable. You have all the data. If you're controlling the access, you have the place and the flow where you could put those controls in. So we’re beginning to see more and more CDPs get deeper and deeper into capturing that data and doing that sort of policy enforcement.
Gemma [00:13:26] Let's talk a little bit about the future. I mean, I mentioned earlier on about this idea of CDPs perhaps being able to inspire some creativity and new ideas about customer engagement or marketing in different ways. Thinking about the role and the evolution of CDPs,
[00:13:42] Why do you think they're so foundational to the future of the way we do customer engagement?
David [00:13:47] They're foundational because you really do need that unified customer view because your customers think you already have it. And they're wondrous in a sense that only customers can have it. "Why can't you do this? Amazon can do it. Surely you could do it as well." Whereas anybody on the other side of that fence knows just how hard that really is to make it happen. But we still need to do it. The customers expect us to do it. It lets us do things that make more money because we give more appropriate treatments to the customer and we can actually give fewer inappropriate treatments, which is arguably at least as important because they really don't like inappropriate treatment. So it does allow us to do a better job as marketers. And there's an increasing issue among consumers about trust.
[00:14:32] They want to know that you're handling their data properly and they want to know what you're doing with it. And the surveys that we see are very specific on this point. They really want you to tell them how you’re using their data and they really want to be able to say, no, don't use my data for that.
Gemma [00:14:48] You mentioned a CDP allows for more appropriate treatment of a customer. Can you talk a little bit more about what that means?
David [00:14:55] Coming back to the same things here about the appropriate treatment from the customer's perspective is the treatment that gives them a better experience.
[00:15:04] And a lot of it, again, is about speed and cost savings and convenience, those kinds of things. Personalized advertising. Yeah, sort of, kind of. The reality is, of course, all those other things are also personalized advertising. They don’t feel like advertising. They feel like service. So it's almost a definitional thing about just doing a really good job as a marketer. And then it doesn't feel like you're being marketed to it feels like you're being helped. And that's what everybody wants.
Gemma [00:15:35] So if people listening haven't already been convinced already by the benefits of a CDP, let's look at it from the other side. What would businesses miss out on if they overlook the importance of a CDP?
David [00:15:47] Well, it will for sure, because you're going to be dealing with people with fragmented data. So every system has its own data. So the CRM system knows what they said to the sales guy or the call center gal. The web site system knows what they did on the web site. The e-commerce system knows what they did in e-commerce. And you can certainly make decisions based on that limited view of the information that you have in any one of those systems.
[00:16:11] But there could be some important information that one system has that would change your decision in the other system if you knew about it. So that's what you're missing out on. You're missing out on that additional information that lets you treat the customer appropriately, or more appropriately, because you have more complete information and consistently because it could be, it’s in fact very likely that I buy different things on the web than I do in the store, even from the same retailer. So either of those individual systems won't know that, whereas the CDP will have the data from both places and have a more complete view. So when I walk into the retail store, you might give them a coupon, says, "Hey, you know that thing you look at online the other day, we have it in stock now, you sure you don't want to just drop it into your cart?" You can't do that if you don't know what they look at online.
Gemma [00:16:54] What advantage does the CDP have that's cloud native, as opposed to built on premises?
David [00:17:00] Well, some people really want the CDP on premises. A lot of big telcos and financial services companies, either for security reasons, even though that's more a matter of comfort than it is actual security, because the clouds are at least as secure as most companies' on-premises systems, but also because there's sometimes a lot of data to be moved and you don't want to move all that off premises just for the cost and the volumes involved. So sometimes in a couple of industries, those industries in particular, you do want to keep it on-premises. But otherwise, you know, having cloud is more scalable, more flexible. You know, you can respond to peaks in demand much more easily in the cloud, very elastic. It's almost always lower costs than actually doing things on prem. So there's a lot of good reasons to do stuff in the cloud. And most of the CPD cloud native and if they do want it on premises, it'll be like we'll give you a private cloud. You know, it's kind of sort of on premises, but it's not like really on premises, on my server that's under my desk that I can kick in.
[00:18:01] If somebody hits it with a backhoe, then I go down. You know, private clouds don't usually have that.
Gemma [00:18:09] So let's look to the future. Will the importance of CDPs remain? Do you think it can be replaced? Are they going to fade away? Technology ebbs and flows like that, right?
David [00:18:18] Well, there will be a box in everybody's enterprise diagram or at least their architecture diagram that says unify customer data and it'll probably say CDP on it.
[00:18:30] I think that we can be reasonably certain that people recognize the need for that separate, unified customer database and are probably going to call the CDP. Now, who you buy that from? Is it an enterprise vendor, specialist vendor, or is it built into your commerce platform or some of your other operational systems? You know that we don't know the answer. In fact, would just be all the above. Different people do it different ways. So a lot of things will change in how it gets delivered. But we've at least established the need for that functionality someplace in your stack and for that architecture.
[00:19:05] Now, when technology changes and everything can be done in memory, you know, maybe you won't need some data, pulled all together in one place. But as far out as we can see, we still think it's gonna be a separate data store.
Gemma [00:19:17] What do you think then is coming next in terms of capability of CDPs or integration of new technologies to kind of enhance what a CDP can offer? Looking a little bit further into the future, what do you see?
David [00:19:29] Well, what we see is that the CDP vendors, once they figure out how to build the database, they have to continue to expand the product.
[00:19:37] You ca expand the product by making it better at data management faster, more scalable. But a lot of them are moving into analytics. So a lot of integrated predictive analytics, machine learning, or AI type stuff.
[00:19:49] A lot of them even further into personalization, some message selection. So there's almost two dimensions of expansion in future development in the industry.
[00:19:59] The one, as I say, is do more and more for the marketer.
[00:20:02] So don't just build the database, but do the analytics and then do the predictive and then do the outbound campaigns and enter the real time campaign.
[00:20:08] So develop on that axis of the market as one more and more powerful tool, which maybe lets them get rid of some other tools. The other dimension, as I say, is to move deeper into the data management world. That happens, particularly if you want the CDP to service people outside of marketing, in which case you focus on more generic capability. So this customer success, people can do it, the salespeople, the operations people, and the accounting people, and the risk people, and the privacy people. All these other people who also have use for unified customer data who might not originally thought it was going to be in the CDP, thought, oh, it’ll be in our data lake, it’ll be in our data warehouse.
[00:20:45] But now just go "Oh wow. CDP does this thing and it does some really good things that make my life easier." So data scientists have data warehouses to every big company as a data warehouse, I mean, a data lake. But there's a lot of work and taking that kind of raw data in the data lake and making it usable. Data scientists spend a ton of time. Well, the CDP does that data prep. Just part of what CDPs are built to do is to make that data usable. So it saves the data departments a ton of work and once they kind of realize that, they’re like all for it.
Gemma [00:21:17] So final question. We always like to ask for a little bit of and advice from our guests. For organizations looking to adopt a CDP, what would you say to them? Where should they begin? What should they be looking out for?
David [00:21:28] Well, it always comes down to use cases. That's the biggest mistake that people make, is they don't really sit down and think, well, what am I going to use this thing for? And then you have to go through an entire process about, "Well, OK. What's stopping me from doing it? What stopped me from doing that today? And is it unified customer data? Because it's not always unified customer data that is the roadblock. Sometimes my delivery systems can't handle it. Sometimes one organization can't handle and can't get the cooperation across departments." So there are a lot of reasons something might not be possible. But you have to drill into the use case, say, "OK, this is why I want to – these are all the things that have to happen to make me do it. Which of those are roadblocks? If it's a CDP roadblock or it's a data unification roadblock then I want to look at my CDP and then I want to make sure I get a CDP that actually solves that particular problem." Because CDPs are hugely varied and they are good at different things.
[00:22:19] You know, they all meet the core capability or they wouldn't be a CDP, but some are better even at the core stuff than others. So you really have to understand a fair amount of specificity. What is it that I want my CDP to do and then go out and make sure you find a system that does it. That's, you know, don't worry about cost more about the ease of use. Those are things that come and go. But if the system doesn't do what you need to do, it doesn't matter how cheap it is, doesn't matter, how easy to use it is.
Gemma [00:22:46] Amazing. David, thank you so much for your candid answers, for taking us on a whirlwind tour of the CDP market and CDP capability. I would be very confused if anyone listening was not totally convinced they should day go and get a CDP if they don't already have one. So thank you so much for joining us on the show.
David [00:23:01] My pleasure. Glad to be here.
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Gemma [00:23:06] That's it for this week. Thank you so much for tuning in. You can find out more about David's work and indeed some of the broader themes we discussed today in the show notes. If you enjoyed the episode, please do take a few moments to rate and review the podcast. It really helps other people discover the show. Don't forget to subscribe and tune in next time to continue our conversation about innovation, resilience, and our capacity to succeed.
Ad [00:23:37] Learn how Dynamics 365 Customer Insights can empower your sales, marketing, and service teams to personalize customer engagement with an intuitive, flexible, and unified Customer Data Platform. Request a live demo today by following the link in the episode description.