Customer Data Platform (CDP) vs. Data Management Platform (DMP) | Twilio

Customer Data Platforms vs. Data Management Platforms: A Definitive Guide

Modern brands share a relationship with their customers vastly different from the ones that traditional organizations did. If one were to outline each interaction (both physical and digital) between a brand and its customers, we’d find an extensive map with multiple touch points. With these numerous contact points comes the dilemma of delivering a seamless transition between different channels and a consistent, unified messaging throughout. Though brands have been relying on Data Management Platforms (DMPs) for achieving this goal, the emergence of Customer Data Platforms (CDPs) has presented a compelling alternative to marketers. By the looks of it, the two may seem similar but they hold major differences. However, one cannot necessarily replace the other.

This guide will help you understand each of these platforms and the value they deliver.

What are Customer Data Platforms?

Say, you have been given a 500-piece puzzle which you easily solve. To your surprise, you’re told that it is simply part of a bigger puzzle and you’re given 200 pieces more as a result. You carefully finish that as well though it is relatively time-consuming. But, before you could take a deep sigh of relief, you’re asked to expand the puzzle further with 500 more pieces!

Well, let’s see how a Customer Data Platform (CDP) fits into this puzzle analogy. Consider each piece of the puzzle to be a data point about an individual customer and your “understanding” of this person keeps expanding in varying degrees (with every new puzzle piece). Now, the final puzzle will represent the unified profile for that customer and the board/area on which you’re building the puzzle will depict the CDP database.

In technical terms, a Customer Data Platform or CDP is a marketing system or software that creates a unified and steady customer database accessible to other systems. The purpose of a CDP is to gather all customer data and to stitch them in order to create unified customer profiles that can be used for marketing campaigns and customer service initiatives.

What are Data Management Platforms?

The Data Management Platform (DMP) market size is expected to have a net worth of whopping $3 billion by the year 2023 with a Compound Annual Growth Rate (CAGR) of 15% between the years 2017-2023. Let’s take a slightly different approach to understand the platform with such impressive prospects. Consider the example of a dealer or merchant whose employees wear blindfolds and earplugs full-time. As a result, they are unable to see or hear their customers. All they do throughout the day is punctually stock the shelves with products and take care of the register. There’s no contact whatsoever with the customers. In fact, they don’t even know who they are! Hence, naturally they are clueless regarding their customers’ preferences and likes/dislikes. And after a “good” day’s work, when they sit down to tally the register, all they can figure out is the number of goods sold and at what cost. They have no clue of who bought what and why (was it for self-use or maybe as a gift?). And the worst part is not oblivion but indifference – the dealer doesn’t know and he couldn’t care less. This is exactly what a marketer or business professional that does not use a Data Management Platform (DMP) looks like.

A DMP is more or less like a data warehouse – it is a system or software that gathers, analyzes, stores, and delivers useful customer information to marketers, web publishers, and businesses. The data managed by DMPs is used to generate audience segments which are in turn used to target specific users in online marketing campaigns.

Aren’t they the same?

Well, they do sound the same and a superficial understanding can even give one the impression that they indeed are the same but nothing could be further from the truth. CDPs and DMPs differ on several grounds:

• Personally identifiable Information (PII)
  Perhaps, the greatest difference between CDPs and DMPs can be established in terms of their use of customer identities or Personally Identifiable Information (PII). In marketing terms, a PII is a combination of data points used to identify a specific customer. Since CDPs function in a manner that the more data you collect about a specific customer, the more relevant experience you can provide to them; it relies on PII to operate. Whereas, DMPs process data that is anonymous and this makes it more difficult to determine whether or not the data was sourced ethically.
• Data Sources
  Another drastic difference between the two platforms can be found in terms of the data used by each. CDPs primarily use first-party data (data collected by your company) and a little of second-party data (first-party data collected and sold to you by a non-competitive partner company). DMPs, on the other hand primarily make use of third-party data (first-party data collected by a data collection company and made available for purchase) and a little of second-party data as well.
• Use Cases
  CDPs and DMPs also differ in terms of their use cases. Where, on one hand, Customer Data Platforms are used in gathering customer data in its organic form, powering different marketing systems, cross-device data coordination, and leveraging Artificial Intelligence (AI) for channel marketing. The use cases for DMPs include optimizing acquisition, prospecting and modelling, audience suppression, cross-channel segmentation, and remarketing.
• Data Retention
  Another important difference between the two platforms lies in how long each stores customer data. CDPs store customer data for long time periods. Smart CDPs even allow you to set the time limit for which the data must be retained. This is especially useful in cases where, say, a furniture dealer wants to give a discount of 20%to his most valuable customers (CDP database for the previous year can help determine the high-value customers). DMPs are completely the opposite. They function best when data is retained for shorter periods (like 90 days). This is especially useful in cases where an advertiser is seeking to target travel aficionados (there’s no point in targeting people who were interested in travelling five years ago but aren’t right now).
• Scope of Reach
  Since CDPs mainly have access to the data of your existing customer base, they cannot help you to create lookalike audience segments to target potential customers in external databases. DMPs, on the other hand, can help you in extending your target group by creating lookalike audience segments.

Do they have anything in Common?

Well, yes! Now that we’ve looked into the differences between CDPs and DMPs, let’s take a look at the several similarities:

• Both CDPs and DMPs function by leveraging existing customer data.
• Creation of a Single Customer View (SCV) or a 360-degree view of the customer is the aim of both CDPs and DMPs. By creating a single view of the customer, the platforms aim at helping businesses understand their customers better.
• The data gathered via both platforms is used for Audience Activation. Meaning, the data is used for powerfully engaging with high-value audience segments and for delivering personalized and relevant user experiences.
• Both platforms render the following functionalities – reporting, analysis, and optimization.

CDP or DMP: Which one should you choose?

Since CDPs help in engaging and improving relations with existing customers, marketing departments of individual companies will find them the most profitable to manage customer data and to generate personalized messages via different marketing channels.

DMPs are your best bet if you need to manage and process large sets of audience data and wish to extend your target group to external databases. DMPs prove to be the most profitable to web publishers, marketing agencies, media houses, etc.

Furthermore, as mentioned earlier, CDPs and DMPs do not necessarily replace one another but are complementary in nature. Meaning, data collected by CDPs can be enriched for better segmentation using DMPs and CDP data can help in creating better lookalike audience segments when used within DMPs. Hence, depending upon your marketing needs, choose either one or both of these valuable platforms.

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Customer Data Platform (CDP) vs. Data Management Platform (DMP)

While customer data platforms (CDPs) and data management platforms (DMPs) are closely related, they each have a few key differences that separate them from each other. In this article, we’ll explore the differences between the two data platforms and share everything you need to know to choose which one is right for your business.

What is a CDP?

A customer data platform (CDP) combines data from all user touchpoints to create a single, centralized customer database. Unlike DMPs, which only store anonymous data, CDPs store personally identifiable information (PII) that can be tied directly to an individual prospect or customer.

Using this data, CDPs can build unified customer profiles that businesses can then use to create personalized marketing campaigns for their users. If your business is trying to better understand your customers and how they interact with your brand, a CDP is an immensely valuable tool to have in your technology stack.

What is a DMP?

A data management platform, on the other hand, collects, organizes, and activates non-personally identifiable information from various sources. It’s the backbone of data-driven marketing, giving businesses the ability to manage and analyze complex data sets in order to pull unique customer insights.

While DMPs can collect first-, second-, and third-party data, their collected data is all anonymized. Businesses can then use this anonymized data to build audiences and create look-like audiences to better target their ads.

Facebook is one of the most well-known examples of a DMP. The social networking company collects data from its users, anonymizes it, and sells it to advertisers who in turn use that data to target Facebook users with targeted ads.

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What are the major differences between CDPs and DMPs?

Still unsure how these two platforms differ? Here’s a more detailed look at the areas where CDPs and CMPs diverge.

1. Use cases

While CDPs and DMPs both store data, their core uses are quite different. As mentioned earlier, DMPs only collect anonymous data that businesses can purchase and use to refine their ad targeting.

CDPs, by contrast, store customer data that can be tied to a unique user. Using a CDP, businesses can:

• Have a single, centralized view of the customer
• Build custom audiences
• Create personalized campaigns at scale

• Make data-driven product decisions
• Streamline compliance and privacy regulations
• Accelerate experimentation

• Measure and improve site conversation

• And so much more

Like a DMP, collecting and federating data for advertising purposes is one of the primary CDP use cases for marketing teams, but it can also help businesses accomplish so much more.

2. Data types

While CDPs store both PII and non-PII, DMPs only store anonymous data. This means businesses must purchase third-party data to get the most out of a DMP. With this purchased data, businesses can get a deeper understanding of what customers like and do outside of their own properties, which can help marketing teams build look-alike audiences that they can use to reach a larger audience.

By contrast, CDPs can combine customer data collected by your business and data collected by trusted third-party sources. Having all of this information in one central location, businesses can develop a holistic customer view that they can use to improve ad targeting, build real-time marketing campaigns, personalize product features and messaging, and so much more.

3. Data storage duration

CDPs store customer data over long periods of time, meaning your business can continue to use unified customer profiles to fuel your personalization efforts and marketing campaigns.

On the other hand, DMPs only store data for a short time — usually around 90 days. This short duration is designed to give advertisers the most recent and accurate information on prospective customers.

For example, if an individual is looking for a winter coat, they will probably have made a purchase within 90 days of starting their search. Advertisers don’t want to waste budget targeting users who have already converted or who are no longer interested, so third party cookies are typically deleted every 90 days.

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When should I use a CDP vs. DMP?

Deciding when and where to use a CDP, DMP, or both can be boiled down to a quick and simple process. Here’s what you should consider before you determine which platform is best for your business.

1. Understand the differences between the platforms

Before you can pick whether a CDP, DMP, or both are the best fit for your company, you need to understand what these platforms are and how they differ. To help, we’ve outlined some of the platforms’ key facts and differences below.

CDP: A platform that unifies data across all customer touchpoints to produce a single view of the customer.

• Types of data collected: Can store both PII and non-PII data, as well as first-, second-, and third-party data.
• Data storage duration: Long-term storage, while meeting compliance requirements.
• Customer view: Provides one single view of the customer.
• Target users: Engineers, product teams, marketers, advertisers.

CMP: A platform that collects, organizes, and activates anonymous user data to help marketers and advertisers better target their ads.

• Types of data collected: Only stores anonymized, non-PII data, most known for their ability to collect and activate third-party data.
• Data storage duration: Typically 90 days.
• Customer view: Does not provide a single view of the customer.
• Target users: Advertisers and marketers.

Consumers are switching between devices and channels like never before, and companies are using several tools to engage them across every touchpoint. CDPs and DMPs not only connect these different tools, but also orchestrate the flow of data between them. As a result, customer profiles and audience lists are automatically enriched with data from sources like customer relationship management (CRMs), customer support systems, or advertising platforms to reflect real-time behavior. The companies that leverage this data for personalization will be the ones that win.

3. Know how you want to use your data

CDPs and DMPs are complex pieces of software that help marketers achieve different goals. If your business is looking to invest in long-term customer relationships and engage your existing users, a CDP is your best bet. If your business is in growth mode and looking to tap into new audiences, a DMP can help you find and reach new prospects.

Before you determine which platform is right for you, consider what your business is looking to get out of a data platform. This can help direct your decision.

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4. Decide if you have the resources to use these platforms

CDPs and DMPs are powerful platforms that rely on customer data to function. Because of this, setting up these platforms can require a bit of time and effort upfront.

To get the most out of your CDP, you’ll need to combine and consolidate all of your cross-channel first-, second-, and third-party data. The CDP itself handles this data integration by combining information and identifiers from separate databases to create one, unified view of the customer that your team can use to power your campaigns.

For DMPs, the majority of your implementation will include setting up tagging, behavior categorization, rule creation, and audience building. This ensures you can reliably track your users’ journeys and gather more information about your customers’ behavioral, geographic, and demographic data over time. In order to properly install your tracking tags, you may require assistance from your engineering team. You might also want to keep your analytics team close, as you might need help pulling insights from your data.

Better Together: Using a CDP alongside a DMP

While CDPs and DMPs can work together, typically businesses use them for two distinct purposes. CDPs are your best bet for long-term customer engagement and relationship building, as they store PII customer data for an extended period of time. This helps your customer data get more accurate and reliable over time, so your business can use it to send personalized content and campaigns to your known customers.

DMPs, by contrast, are better suited for businesses needing to drive leads and conversions in the short-term. They help you reach bigger audiences and serve targeted ads and marketing campaigns to individuals most likely to do business with your brand.

Depending on the type of CDP, there are also potential opportunities to combine platforms. For example, you can use DMP data in real-time to personalize interactions with anonymous visitors, helping your company establish and maintain trust. Of course, you can connect your CDP and DMPs to share data across the two platforms, allowing your business to benefit from both first- and third-party data. Together, you can drive new leads with your DMP and connect and engage with known customers via your CDP.

Learn more about CDPs with Twilio

CDPs are built to help with customer data protection and privacy, analytics and insights, and organization and management. Put simply, their biggest strength is helping businesses harness the untapped potential of their customer data.

Using a CDP, companies can build customer-first experiences and send them to the right person at the right place at the right time. They’re the data powerhouse helping businesses convert a one-time buyer to a lifetime customer.

https://www.cdpinstitute.org/netcore/customer-data-platforms-vs-data-management-platforms-a-definitive-guide/

https://www.twilio.com/en-us/resource-center/cdp-vs-dmp