Analyst Chat

Analyst Chat #137: What Is CDP and What Benefit Does It Add to Consumer-Centric Identity Ecosystems?

Customer Data Platforms (CDP) are a fairly new addition to the pool of consumer identity centric management solutions. KuppingerCole Fellow Analyst Roland Bühler joins Matthias for the first time and he explains the full picture of consumer identity and detail what differentiates CDPs from other solutions, such as DMP, CRM or Marketing Automation Solutions.

Here are the links to the documents that Matthias and Roland are talking about: Customer Data PlatformsMachine Customers - The Impact of Customer Bots on Customer Journeys

Welcome to the KuppingerCole Analyst Chat. I'm your host. My name is Matthias Reinwarth, I'm Lead Advisor and Senior Analyst with KuppingerCole Analysts. My guest today for the first time is Roland Bühler. He's a Fellow Analyst with KuppingerCole Analysts, and he's hailing from Hamburg. Hi, Roland. Good to see you.

Hi Matthias.

Great to have you. And we are talking about a topic that you are focusing on. I know that you are mainly focusing on everything consumer identity. And you've just recently published a Leadership Compass about the topic of CDPs, of consumer data platforms or customer data platforms. First of all, we know of CIAM, of consumer identity and access management. What is a CDP? What differs here from a CIAM system, from a CRM system or a DMP platform in general?

Yeah. Let's have a look at the definition of a CDP. First of all, the term customer data platform or CDP stands for a software, or a collection of software that creates databases that enable the centralized management of customer data. So there are a couple of challenges that organizations are actually facing. And one of them is that the customers are expecting a seamless customer journey across various analog and digital touchpoints. And this comprises highly individual marketing messages, recommendations and the right information at the right point in time. The second challenge is that you just gather data silos for most organizations, it's really a challenge to create a 360 degree customer profiles, build customer segments or manage customer journeys based on a complete customer related set of information. Customer data platforms can help in such cases to break down data silos, aggregate information, and create complete customer profiles and segments as a base for integrated omni-channel customer experience across all touchpoints, let's say by connecting first party solutions, but also third party solutions and based on a best of breed technology stack for instance.

And you also mentioned a couple of other kinds of systems that there might be an overlap. Let's say we have a look at DMP, CRM systems and furthermore, they are it's a marketing automation solutions. Let's briefly distinguish those types of systems. So DMP, Data Management Platform is mainly a software that is more generic. It's used to collect or manage all kinds of data, not specifically related to customers, product data or financial information, whatever. So the aim is the same, to avoid data silos, but it's more generic than a CDP. Probably all of us know or even use CRMs, Customer Relationship Management Systems, a software that manages customer data also from different communication channels such as phone, email, live chat or social media. But the aim of the CRM system is mainly to support sales by managing sales funnels or helping to develop quality leads. A CDP system gives us a more complete view of the customer beyond the sales cycle, even for instance, where you identity resolution in case anonymous users of a website. Last but not least, marketing automation, also a buzzword often used, actually presents a software, collection of tools that helps to manage and automate orchestration of customer journeys across multiple touchpoints. Many CDP solutions include features that might be part of marketing solutions as well, so there's definitely an overlap, if you have a look at journey builders that enable users to build customer journeys based on particular decisions, based on A/B testing, that could be part of both, either CDP or marketing automation solution. That's also something we've figured out in our report that many capabilities from marketing automation solutions could be part of a CDP as well.

Right. And that makes perfect sense with also what how I have a notion of these systems interacting with each other. When I'm asked as an advisor by customers of KuppingerCole who are trying to implement a CIAM solution, when they ask, How large is such a profile, how many attributes are stored within the CIEM system? I usually try to recommend, to say, Keep it as lean as possible because everything else is usually handled in different platforms. I know CIAM systems come with the same promise, progressive profiling and getting to deeper insight. And they can do that. But when we get to a bigger picture, I guess an organization should look at the CDP for doing the work that you just described. Am I right?

You're right. And as you said, there are various systems that gather information, that store information. And IAM or CIAM is a good example, here, of course, we have kind of a profile of a customer, a consumer, a user, but it might not represent a complete picture. And that's exactly the idea of a CDP. An IAM system just it might be a perfect data source for a CDP system, among others, such as CRM, such as for instance a chat bot and the idea of a CDP to collect that information in one place, to have really a 360 degree view of that particular customer or consumer.

Right. You've mentioned this consolidating, this collecting capability of CDP. And when you created that leadership complex, what other capabilities that you think are key for CDP and how did you evaluate them then afterwards?

Yeah, we had a look at the various topics that we considered as key aspects for a CDP. First of all, we had a look at the connectors. As we have seen already now in our discussion, it's key to gather information from various systems and also to give back the information, for instance, when it comes to customer activation, in order to use information attributes stored in a CDP, for instance, for email marketing, for recommendations and so on. So here it's crucial that it's really a flex approach in terms of the connectors. And here, many solutions offer, let's say, plug-and-play solutions that even enable a marketeer without any technical skills to connect for instance, an email marketing tool with a CDP solution or easily retrieve information from a CRM system just with a couple of clicks. Furthermore, also, of course, flexible solutions for technical guys are important if it comes to individualization. So we had to look at both the plug-and-play connectors and let's say the more technical side of the connectors. Furthermore, identity solution is a key topic when it comes to CDPs. Often in a very early stage of a customer journey I don't know the user, I just know there is a person visiting my website. I can track that behavior based on a cookie or based on another technology. And my aim is already at that stage to create the customer profile, which might be based on an anonymous user. But I want to have an identity resolution possibility in order to see that is a person visiting my website, that is the same person coming back two days later and at a certain point that particular person might register for an account or place an order, and then it's key to assign that information to the right customer profile in order to have the complete picture. So identity resolution is also a key topic that we evaluated in our Leadership Compass.

Furthermore, segmentation, building customer segments is highly important based on the variety of profiles. Those solutions have capabilities to segment the customers, to group them in order to address them with appropriate marketing measures, marketing messages. For instance, you have a particular segment of customers that live in a certain area, who have a certain income, that have a certain gender. And based on that information, you can address highly individual recommendations, marketing messages, marketing content to that particular segment. Furthermore, most solutions offer a really easy to use 360 degree customer profile, where can explore your customer, your consumer based on various attributes, from various perspectives. That is a topic we evaluated. And furthermore also customer activation was an important topic either based on interfaces is based and connectors to, for instance, marketing automation solutions, but also based on internal capabilities. As I mentioned earlier, many solutions offer customer journey orchestration tools where I can clearly define when do I want to trigger the customer with an email? When do I want to send a follow up? When do I want to maybe give a discount? But this can be done with such tools, either based on interfaces or based on internal capabilities. Automation is a quite broad aspect when it comes to CDPs and in many cases automation is based on machine learning capabilities, for instance, automatically detect and identify customer segments, automatically and react to a particular customer behavior. And that is something where we have really seen some great innovations that some vendors included in their CDP solutions. Analytics and reporting, of course, that's key in order to just see what's going on and see how you can improve your customer journeys step by step. And last but not least this is also a key KuppingerCole topic, privacy and compliance because only when we have a solution that is in accordance with current privacy regulations and legislations, we can build trust, and probably trust is the best marketing we can offer.

Great. Thanks. That was a great overview of the key capabilities of such a CDP. When an organization is looking into deploying such as CDP, when they think that this can really add value to managing their individual customer groups' journeys, what are key aspects to consider? For example, I think that some kind of standard functionalities, think of retail organizations providing online shops, that is something where they can anticipate what will be required. But if you are in an industry that is not that common, how can they adapt the solution to their individual requirements? So what are the key considerations when choosing such a tool?

We have seen that there are really different flavors of CDPs, and each of the CDP has a particular route, has a particular focus, has a particular strategy and how they might help customers. Some solutions are more B2C oriented, others are more on the B2B side. Some are really embedded in a great ecosystem. Some rather focus on a best of breed approach by having a great set of connectors in order to really connect to an existing marketing technology stack. And always when implementing a new system, I recommend to start with a business case, just evaluate whether the CDP implementation could be an option to meet a strategic aim because a CDP is not an end in itself. Especially, when it comes to CDPs, it's important to involve all stakeholders that are relevant to making the project a success because it's much more than marketing. Of course at the first glance it's somewhere located in the marketing and sales area, but it's much more project that affects the whole company because the data might be retrieved from various sources around the company. For instance, when it comes to service management, there might be a relevant data source, but service management might be also an important stakeholder when retrieving data from such a CDP. So involve everyone but use requirements engineering methods to create user stories to understand the business requirements and not to go ahead with a too technical approach, that can come later and also important from my point of view as we have many stakeholders, don't create a monolithic approach. It's okay to specify as much as possible at a certain point in time because you don't know more. If some future requirements are not totally clear yet, specify that as much as possible, but ensure that you choose a flexible solution in order to meet your future aims because you cannot know them. It's an agile topic. When you use the CDP, you will get further information. You will have new insights that will have an impact on your marketing measures and your marketing strategies. And so it's a continuous improvement process, and that's something you really need to consider because you don't know yet what will happen in two years. And most of the solutions are really that flexible. But first of all, go ahead with the solution that fits most, that is scalable, that is flexible. These are generic recommendations that might be relevant for each and every consideration for CDP.

Great. Thank you. Since we are talking about a Leadership Compass which compares market segments, vendors, product services, of course, we want to know about names. So how many vendors / service providers did you consider and what are some typical names that you came across maybe that end up in the upper right corner of the of the evaluation? Just to give an overview and not to highlight specific ones, but to lay the ground which companies are there.

Yeah. So we have actually 13 vendors with 13 solutions in our Leadership Compass and they all have a different background. On one hand, we have large and established vendors such as Microsoft, Salesforce, Adobe or SAP. They offer CDP solutions as a part of an extensive ecosystem, they have their solutions in place for many, many years, and here, most of them are quite new to the CDP market, but their solutions are very closely embedded or directly connected to other solutions, but also open to be combined with other third party solutions of course. On the other hand, we have some vendors that are really focused on the CDP market, some of them founded a couple of years ago and some of them are even single product vendors. So in that case, for instance, we have Optimove, Bloomreach, mParticle or NGDATA. They are smaller than, let's say, the Microsofts in that area, but they are really focused on the CDP sector, and as I mentioned earlier, there's no right or wrong. There could be a smaller but focused vendor that could be the right solution, but it could be also a choice to stick to one of the larger vendors because you already use some solutions of that particular vendor where you have a direct connectivity to existing solutions.

Great. So if I understand you correctly, this is an evolving market. We have the key large players on the one hand, we have new companies entering that field. How do you anticipate is the CDP market developing? How will it evolve? Will there be more change? Is it still in a process of maturing?

Yeah, definitely. The market is quite new. Although such solutions are developed for a couple of years already, the term CDP is still relatively new and it's interesting to see where the vendors come from, as I mentioned earlier, some really come from the marketing automation sector, from the media sector, and they just had a logical next step to develop a CDP solution and make their offering more complete. On the other hand, we also had some vendors that were startups a couple of years ago and then really started to create a great CDP solution. And from that point of view, we have really a quite heterogeneous situation in terms of the vendors, and we see that we have some very focused vendors that actually start to add more and more capabilities to their solution, maybe also in order to extend the solution that was focused really on the customer data and extend that solution with marketing automation capabilities. So, to go bigger. Others, they came from CRM, they came from media solutions and they just have seen, okay, we need another piece of software to include CDP capabilities in our technology stack, in our offering. So there are different ways, different ways that the vendors develop and even, let's say some new vendors appearing on the market that were not focused on marketing and sales topics in the past, but they just have come from the data point of view. We have strong data analytics capabilities and we use that capabilities for specifically the customer data market. So I assume that many vendors will still develop, although many of them have a strong offering right now already, but we will also see new vendors in the market in the near future.

You've mentioned the extension of the capabilities of the individual solutions and you've mentioned earlier the use of machine learning of AI being added to the portfolio of these products. Of course, we see that aspect of AI being added to technical solutions in various areas. What are other future trends that you expect to happen and that our audience also should consider watching in the future when having read your Leadership Compass?

Yeah. So as you mentioned, machine learning is definitely one of the key topics. Many vendors have it. Some, or almost all plan to have it in the near future if they don't have it yet. And actually, of course, machine learning is not an end in itself, and it might help to better understand your customer behavior and to continuously improve, let's say, the customer journey, the customer experience. What I see actually is that technical things become easy to use. So many vendors already have dashboards, configurators so that even a marketeer without any technical skills can create machine learning models in a very easy way. And I guess what we see here is that many vendors try to make technical topics such as machine learning usable by non technical users. Furthermore, the roots of CDP was in many cases in the B2C market. Actually we see that many solutions already are engaged in B2B scenarios as well. Others still aim to get there because we actually see that the requirements for a B2B customer journey, customer experience is developing and also users expect the same experience as they have it in B2C scenarios already. So here the solutions developed to focus on customer profiles for companies and also further capabilities to refocus on the B2B market. Many it already, some still develop here. And last but not least, if you look a little bit in the future, and we created a Leadership Brief related to that topic a couple of weeks ago: Machine customers. In a couple of years, we will have more and more non-human consumers or customers. For example a car that orders fuel or electricity by itself or this example, a printer that automatically reorders an ink cartridge. But we will also have a more complex machine customer solutions or scenarios where we don't have a human any more at the other side. And that's also some thing a company or organization must consider when preparing customer journeys, gathering customer data, because there might be a computer at the other end.

Excellent. This is really interesting. And I think if there are any questions, I just try to highlight that, if there are any questions from the audience regarding the topics that you just mentioned, and I'm really looking forward to questions towards non-human customers. Please, if you are watching this on YouTube, add your questions in the comment section. If you're listening or watching this episode with your podcatcher on your mobile device or whatever, please use the email address that's in the in the episode notes and let us know your questions, your feedback, your comments, so that Roland and I can come back to you with our opinion and we gather your opinion. You've mentioned the Leadership Brief and the Leadership Compass are already published, so the audience can just head over to the KuppingerCole Website and download them there.

Happy reading!

Great to hear that. And while you're there, I have to mention that, and I really want to mention that, we are heading towards the Cybersecurity Leadership Summit as well, which will take place in November in Berlin, just a quick mention. Today, we were on the application side, on the consumer side, on the business side, but we are also focusing on doing business correctly. So cybersecurity is highly important to enable business and this is something that we are currently planning for. So it will take place on November 8th to November 10th in Berlin and we will have great speakers like CISOs and security experts from large European and international companies. So let's meet there and talk about cybersecurity as a key component. And you've mentioned compliance and security and governance as one key part there as well. Roland, thank you very much for having you in this episode today. Really a pleasure to having you. And I would really like to see you again for a future episode. Roland, thank you very much for being my guest today.

Was a pleasure. Talk to you soon, Matthias, and thanks a lot.

Thank you. Bye bye.

Bye bye.

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