Businesses are constantly innovating in their attempts to deliver a better customer experience, and at the heart of this journey is the desire to understand the customer better.
“Customer data platforms and master data management solutions both enable “360-degree” customer insights but are optimized for different uses. Data and analytics leaders must evaluate the expected use cases and desired business outcomes of both” (1)
CDP, the customer data platform, is the new tool in the box that seems to promise the coveted personalization across the customer’s touchpoints. It aggregates interaction data from many different sources to deliver a 360° customer profile. This used to be the prerogative of the Customer MDM solution. Does that mean CDPs are replacing solutions for customer master data management?
No. Despite the similarities in the marketing language associated with both tools, the differences are significant enough for companies considering which to go with to take a look under the hood; and they may come to the conclusion that the choice is not an “either-or” but often an “as-well-as”.
Gartner compares the two breeds of customer data solutions this way:
"CDPs are marketing-managed tools designed for the creation, segmentation and activation of customer profiles. They are experiencing rapid growth and marketed as solutions to deliver C360 insights. Almost three-quarters (72%) of the respondents to another 2019 Gartner survey said they had fully deployed or were in the process of deploying a CDP. These platforms have less governance functionality than MDM solutions and tend to focus on delivering a complete view through the amalgamation of data generated by digital customer interactions.
MDM solutions are more mature technology that also enable C360 insights by creating and managing a central, persisted system or index of record for master customer records. They enable governance and management of the core data that uniquely identifies one customer as distinct from another. They are built to support enterprisewide sources and applications of customer data."(2)
“Organizations that fail to understand their use cases, desired business outcomes and customer data governance requirements have difficulty choosing between CDPs and MDM solutions, because of overlapping capabilities.”(3)
Master Data Management (MDM) applications are the best tools currently in the market to consolidate, persist, manage and govern customer data. Multidomain MDMs can manage data from multiple domains (product, customer, supplier, store location, etc.) with a single installation and, by connecting that data, provide insights into not just individual domains, but the interaction amongst those domains and in the process deliver a true and operational 360° view of the customer.
For comparison, customer data platform (CDP) applications are a fairly new entrant in this market. Gartner defines CDPs as “marketing-managed tools designed for the creation, segmentation and activation of customer profiles.” CDP applications specialize in collecting large amounts of customer data from a variety of sources and feed them into existing marketing technology (martech).
A CDP is an enabler of your marketing campaigns, providing a unified view of the customer and their touchpoints that you can then feed into a marketing automation tool. Marketing organizations are being lured by the new shiny object in the market, but can CDPs replace MDM applications?
Use CDP to map the customer journey. Use MDM to create a unified customer view.
A few critical areas that marketers should pay attention to as they consider CDPs are as follows:
“Winning was easy, young man. Governing’s harder.” (Lin-Manuel Miranda, Hamilton)
What a CDP does really well is gather a lot of data from a lot of sources and correlate it. But without systems in place to control how this data is added to the system, rules to determine what to do with the inevitable bad data, and specific conditions that tell the system how all of this data should be modified, the data is useless. Data is always dirty – governance helps you fix and maintain that data by ensuring that overall data quality remains strong. Governance should be at the heart of any data management system that proffers to give you reliable analytics.
2. A golden record of information
“Send in your seconds, see if they can set the record straight.” (Lin-Manuel Miranda, Hamilton)
CDPs are a marketing-specific tool. They pull information from and send information to other marketing applications. But they are not yet capable of integrations beyond that. In contrast, MDM solutions stand capable of creating and maintaining a single source of truth, or golden record, and eventually integrating with a wide variety of other powerful enterprise applications like ERPs to ensure that all systems have the same version of the data. This relatively static golden record is more reliable as a source of customer information not just for marketing campaigns but for other analytical purposes, even as a source of information for CDPs.
3. Complexity of customer data
“The problem is I got a lot of brains but no polish.” (Lin-Manuel Miranda, Hamilton)
Customer data without context is a case of quantity over quality. If the goal is to understand your customers to communicate with them better, it helps to have a proper understanding of how your customers interact with each other and how they interact with other parts of your business. For instance, if you know which of your B2C customers are related to each other, which of your B2B customers might also be suppliers to your business or which of your B2B customers are owned by other B2B customers, that’s information that provides context and operational intelligence. This kind of hierarchical management of customer data cannot be done by CDPs the way it can be done by MDMs.
4. Cross-domain relationships
“What are the odds the gods would put us all in one spot?” (Lin-Manuel Miranda, Hamilton)
In fact, looking beyond customer data, the entirety of your enterprise data is complex with all the domains interacting with each other. Your stores receive products from different warehouses, your warehouses store products from various product lines and most importantly, your customers buy different products. While a CDP can give you a good perspective on the segmentations of your customer data in isolation, only a multidomain MDM system can store all the domains in one location. With a view of the cross-domain relationships available via an MDM, your ability to look at multiple factors that interrelate to affect your business. For instance, this dimensional view could allow you to learn about the relationships between the customer and the products they have purchased, products that can be sold to a customer or a segment, or the types of stores a customer visits so you can plan in-store promotions and with better targeting.
CDPs are for customer data to run marketing campaigns. MDM provides a holistic view.
Ultimately, the decision to go with a CDP should be driven with an eye on the desired outcome. If the goal is to merely look at customer data and their touchpoints in isolation to run marketing programs, CDPs will suffice.
MDM platforms are more technologically mature and natively designed with data quality as a bedrock principal, and the more important output from an MDM is the context you can derive from your data. When you need a holistic view of the entire business and perform deeper analysis on the interaction of all domains of your data, MDM is your answer.
Mapping the customer journey AND having a unified view of the customer
Simply put, this recently named category seeks to define the marketer’s biggest challenge with all the systems used today by most companies: a unified view of the customer. A CDP differs from customer relationship databases, data management platforms or most marketing platforms because it was designed specifically as a central location for customer data — profiles, personal identifiers, website visits, mobile app sessions, email responses, chat transcripts, audio recordings of customer service interactions, social media comments, purchase orders and so on — and was intended specifically for marketers. The key is: intended for marketers, who are not data technologists or tech data gurus, and who do not rely upon customer data for other business processes.
For CDP the key object is customer journey, which is records of each event of interacting with customer/user via web site/mobile app/advertising/ and so on.
Based on this customer journey, CDP provides a number of analytical capabilities to explore customer behavior, optimize communication with the customer and for segmentation.
For MDM – the customer card as a number of attributes which were set up by the customer itself or operators – the key goal is to define one unique customer record across the entire IT landscape.
Partners in better customer experiences
It seems fair to conclude that MDM and CDP are not so much competitors as they are partners with different capabilities working towards the same goal: better customer experiences. MDM may not be able to account for the large amounts of unstructured data that is making up the digital footprints of consumers, such as social media engagements or emails. On the other hand, MDM can ensure the identity of the customer, including all relevant attributes, which enables the CDP to make sense of the large quantities of real-time data.
(1), (2), (3) - Gartner, ‘Choose Between Customer Data Platforms and MDM Solutions for 360-Degree Customer Insights’, Malcolm Hawker, Simon Walker, Sally Parker, January 30, 2020