Customer data platforms (CDPs) and data management platforms (DMPs) are regularly confused. The mix-up stems from the fact that marketers use both CDPs and DMPs to collect data and to create audiences.
A customer data platform allows you to collect data from relevant touchpoints where customers interact with your business. A CDP will organize this data and relay it to your other martech tools. Armed with such data, you can better target your audience with messages honed in line with your brand communication strategy.
On the other hand, a data management platform is most effective at collecting and organizing large anonymized third-party data sets and building your audience. DMPs purchase their data from data vendors, or from aggregating and anonymizing its users if they have large enough databases.
The Right Data Platform for You
It depends on the data you use, how long you’ll retain it for, and the role customer identities play in your business.
Let’s investigate the differences further.
The first difference to consider when deciding which platform you should use is the data CDPs and DMPs use.
Today, CDPs and DMPs both use different data. CDPs mostly use first-party data plus some second-party data, while DMPs primarily use third-party data plus some second-party data.
Did I mention that it gets confusing? Let’s break it down.
First-party data is of the highest quality and collected by companies when someone interacts with the business. It’s thought the safest and most valuable data for delivering customer insights.
Second-party data is simply first-party collected by another company and shared or sold to a partner in a data exchange during, say, a joint content-creation endeavor. The downside is that you cannot verify this data has been collected ethically.
Finally, third-party data is collected by a data-collection company for purchase by other businesses. For example, when Google tracks someone’s web history and assigns them to specific advertising buckets. This data is the least reliable in terms of both accuracy and the ethics of its collection.
CDPs and DMPs also differ in their respective length of time of data retention. CDPs keep data indefinitely while giving users set time limits on how long their data is held. CDPs retain data for longer to collect more relevant and accurate profiles.
DMPs store data for shorter timescales. Companies can tailor their advertising to relevant customer trends or target customers who have shown interest in similar products or services. Such anonymized data, however, can soon become obsolete once circumstances change.
CDPs rely on consumer consent to use personal data, not programmatic media buying. On the other hand, given their function to manage audiences for online advertising, DMPs rely on third-party cookies for their data. DMPs collect these cookies from websites signed in to its service or acquire them from third-party data which it purchases.
The downside is that if third-party cookies are blocked, it compromises the effectiveness of the DMP to track customer data.
Both data platforms use customer identities, also known as Personally Identifiable Information (PII), to track user details gleaned from specific interactions.
Since they rely on identifying their audience, CDPs collect as much information as possible. So they collect PII, like names, addresses, previous transactions, and social media interaction data, and use it to create their audiences.
Yet imagine a hypothetical contact center business that has kept up with the latest call center trends and relies on analytics to make business decisions. Such communication solutions provide opportunities to improve the customer experience while posing new questions about ethical data collection and storage.
Likewise, it’s obligatory for CDPs to ensure they protect privacy by offering opt-in and collection preferences.
DMPs, on the other hand, collect the data of anonymous users and do not use customer identities (PII) in the same way, making it harder to guarantee DMP data has been collected ethically.
Let’s explore the differences in how each platform is used.
The fundamental difference between each platform is that CDPs help businesses manage the data insights of existing customers while DMPs primarily cover unknown prospects.
If you’re looking to build a complete understanding of your customers, a CDP is an ideal platform. CDPs monitor all website activity and capture customer engagement each time a potential customer visits your site.
So they allow companies to manage a wealth of first-party data and personal information about their users. Everything from transactional, social, and behavioral data to data on their historical purchases.
Such personal identifiers can deliver the kind of personalization that customers now expect. A CDP can tie together all the disparate interactions the customer has had with your website, build a user profile, and target them in marketing campaigns.
In contrast, DMPs are most effective in digital advertising when businesses use DMPs from companies like Facebook to create audiences they want to reach on those platforms.
DMPs use anonymized aggregate data about recent user activity to target group generic experiences. A company will use a larger platform’s DMP to build an audience via specific criteria they can then segment and target with ads.
Leading DMPs are investing in AI to add value to these capabilities. For example, DMPs are innovating to optimize their targeting of “look-alike” matches between their customer and non-customer profiles.
Indeed AI is not only delivering new technologies that enable businesses to improve the frontline customer experience such as voice analytics. It’s shaking up the whole automated ad stack too, by providing a suite of incremental efficiencies in granular audience segmentation and more.
Both platforms can be useful. Yet despite their overlapping functions, they are fundamentally different.
Overall, CDPs ethically collect all data, retain detail, store data indefinitely, build unified profiles, and share the data with an external marketing tool in the advertising ecosystem. So if you plan to create personalized marketing campaigns based on your own data, use a CDP.
On the other hand, DMPs are best at informing marketing campaigns that rely on audiences unfamiliar to you. They also offer solutions for companies with large numbers of customers and a hefty media spend.
As companies seek platforms to handle the wide variety of data they look to put to different uses, both DMPs and CDPs will have a part to play as the industry disrupts and adapts. Teams and their budgets will pick the solutions which work best.