Let’s face it, it has never been an easy task for marketers to enable 1:1 customer-centric marketing. Customers are more frequently switching between laptops, tablets, phones, and stores, and expecting businesses to know who they are, what they need, and which offer is right to serve them at the right time and channel.

And now with third-party cookies fading away, effective targeting has become even harder. However, with hands-on experience on customer data platforms (CDPs) in the past year, I am regaining confidence that marketers might have found a way to face the ever-growing challenges in the industry.

You may have heard the buzz word “CDP” over the last few years. Since the concept of CDPs emerged in the industry, technology providers are racing to the market and marketers are drawn to them in hope that CDPs are a catch-all solution that can resolve their data management and customer experience challenges.

However, from our daily interaction with our clients, we learned many people are still not clear about what a CDP really is, let alone how to unleash a CDP’s full potential to drive business value. Ambiguous definitions and confusing terminologies are flying around, so let’s take a step back and look into the essential components of CDPs:

What is a CDP?

First of all, even though CDPs on the market are very different from each other, every CDP should have three key capabilities:

• Identity Resolution to enable a single customer level view
• Audience Management for flexible advanced segment creation
• Cross-channel Activations that activate profiles and segments at scale, across channels

Now that we briefly went through key CDP functionalities, in the next section we will dive deeper into each of the capabilities to understand why CDP is important and how it helps to realize 1:1 omni-channel experience.

Key Capabilities: Why is a CDP important?

As illustrated below, the value of a CDP is shown through highlighted capabilities in yellow. The magic happens after data integration and before audience activation. Key capabilities include:

1. Identity Resolution

CDP collects both online and offline data sources, with some examples as shown in the above graph, and provides persistent data storage. It then leverages identity resolution to set up a holistic view of each individual customer across channels and devices. This functionality is fundamental to enable connected experience as it stiches together PII identities and first-party cookies and device IDs to generate a real-time customer profile. Without the unified real-time profile, audience management, e.g., cross-channel activations would be impossible.

2. Audience Management

Audience management is one of the core capabilities CDPs offer. Leveraging the unified profile, a CDP provides flexible business rule-based, or even AI-based audience creation (see advanced analytics for more details) with frequency and recency application. Some CDPs even provide calculation capabilities in audience creation. Audiences are then used to activate across touchpoints and channels.

3. Journey Orchestration (optional capability)

Some CDPs provide journey orchestration capability so that marketers can easily develop customer journey experience and realize cross-channel orchestration to serve each audience with the right offering at right time and place (channel). Be aware that CDP providers usually use “journey orchestration” as a selling point, but not all of them have this capability.

4. Advanced Analytics (optional capability)

Some CDPs are embedded with data science environment for propensity model development and user behavior prediction. Marketers can use machine learning and artificial intelligence to enrich customer profiles and empower decisioning.

5. Activate audiences across channels

After data is cooked by the CDP “magic”, real business value will be delivered when the CDP activates audience in real-time cross channels such as email, site personalization, app, and paid media.

6. Real-Life Application: CDP Drives Customer Experience Change

It is proven that a CDP can drive marketing ROI, but the value could only be shown if marketers have a clear understanding to how the CDP fits into an organization’s current tech stack and is adopted with a thoughtful approach.

We recently supported a global B2B technology company to overcome the obstacles of CDP implementation to fully realize the true value of a CDP.

Before Merkle’s engagement, our client had the CDP implemented for years while only using it as a site personalization tool. We helped transform the strategy from campaign-focused optimization to audience-first digital experience through enhancement in audience development, campaign activation, and identity strategy especially preparing for the “cookieless” future.

Now that CDP is defined and its key capabilities explained, you should have more clarity on what a CDP is and how CDP can help you utilize your data assets.

Want to learn more about CDPs? Check out our new guide, A Collection of CDP Fails: 5 Stories to Learn From for actionable case studies to help you get started with the right CDP for your organization and see fast ROI.