How to measure the performance of a Customer Data Platform
Many businesses rely on Customer Data Platforms (CDPs) to ensure the implementation of top technologies like predictive analytics, customer 360 view, and personalization capabilities for delivering exceptional customer experiences. Before one can measure the performance of a CDP, it’s imperative to figure out what it is and how it’s used.
What is a Customer Data Platform (CDP)?
A Customer Data Platform or, a CDP, has a centralized database that ingests, integrates, manages, and delivers customer information to other technology solutions, helping to deliver a personalized customer experience (CX). It is designed to –
- Handle data from multiple disparate sources
- Unify customer-centric efforts across sales, marketing, and customer service
- Enable brands to centrally manage data and stay in compliance with all data privacy regulations
All structured, unstructured, and semi-structured customer data is compiled by the CDP to create a unified customer profile or a Single Customer View (SCV). This unified perspective helps redirect all business endeavors around a single source of customer truth.
CDP deploys data-driven insights to tailor experiences that are personalized at scale, improving the efficacy and efficiency of marketing campaigns. Consumer behavior, transactional data, and demographic are collected by the platform to help monitor and analyze customer interactions with the business.
CDPs easily integrate with the rest of a business’s technology stack through pre-built connectors or APIs, allowing the platform to operate as a smart hub. As a result, the technology stack becomes more flexible, scalable, and agile by allowing the best software to be plugged in for the relevant industry and applications.
CDPs also allow the democratization of data so that it can be conveniently used across the entire organization to deliver consistent messaging and integrated CX that builds strong, mutually beneficial customer relationships.
Use Cases of Customer Data Platforms
A Customer Data Platform ensures that the right messages reach the right customer at the right moment. The two most popular use cases are personalized CX and targeted advertising. Some other widespread use cases include:
- Profile unification: Customer records are put together into a single dashboard to give a 360-degree view of the customer, allowing more personalization and reducing ad waste.
- Segmentation: Marketers can easily drag and drop attributes, user behaviors on various channels, and other segments.
- Personalization: Marketers can personalize CX across all channels.
- Data unification: Multiple identifiers can be assigned to a customer and a profile is stitched together that is saved for all future use and purposes.
- Predictive scoring: Marketers can predict customer behavior, such as the likelihood of customer churns, clicks, purchases, or conversions in the near future.
- Retargeting: Retargeting accuracy is improved by linking customer and advertising data, which leads to optimized audience segmentation and automates the entire process.
- Customer journey orchestration and optimization: Robust customer data, analytics, and Artificial Intelligence (AI) can predict the optimal next step as part of a smart customer journey design and experience. Customer scoring and real-time customer journey optimizations are performed across all channels.
- Predictive modeling and analytics: Predictive modeling and analytics help determine the likelihood of purchases, customer churn, and customer lifetime value (CLV).
- Programmatic advertising: Targeting customers is better with CDP-powered programmatic advertising that automatically buys and optimizes digital campaigns.
- Lookalike marketing: CDP also enables advertising to audiences that share similar characteristics with a business’s top customers.
- Measurements and insights: Comprehensive business and customer reporting are possible through data-driven insights and measurements.
- Customer loyalty: Customer loyalty, churn, and repurchase can be measured and predicted with the help of CDP.
- Marketing automation: Customer data platforms improve the efficiency of marketing campaign operations through automation.
With the wide availability of vendors that specialize in various industries, many valuable use cases, and a set of diverse strengths and capabilities, choosing the right CDP can be confusing. By paying close attention to the impact of a CDP on different areas, businesses can make more informed decisions that align with their requirements.
Measuring the performance and ROI of a Customer Data Platform
Before evaluating the impact areas of CDPs, it is important to understand a few things. There are many factors that influence the ROI, including media budget, marketing creatives, testing and optimization of campaigns, the business culture, current business activities, level of analytics and technical know-how, and more.
However, it is seen that the most effective CDP implementations that generate the highest return are the results of a customer-centric culture, more testing and learning, and strong adaptability of the team. The impact is, therefore, not just about ROI but also other hard and soft outcomes for leadership, teams, and customers. It is always better to pay attention to the unique circumstances of a business and how they can lead to a tangible revenue lift.
The top four CDP impact areas to consider when choosing a CDP vendor for a business are:
1. Customer-centric transformation and agility
Having every team informed by the same set of customer data from a single view accelerates decision-making and agility, promotes easy collaborations across the entire business, helps maintain superior performance reports, and establishes result-driving customer-centric products and marketing strategies.
2. Revenue growth and increased CLV
While revenue growth is critical for all businesses, revenue-generating strategies that aren’t customer-aligned are unsustainable.
With the help of a CDP, businesses can implement revenue growth strategies that are backed by real customer behavior and ensure long-term customer satisfaction. With a unified and actionable set of customer data, every stage in the customer journey can be improved, thereby increasing returns and driving customer loyalty.
CDP-powered measurement and reporting tools can help different teams understand the direct impact that their activities have on the overall growth of business revenues.
With the help of the above revenue-based KPIs and metrics, businesses can renew their focus and drive better outcomes.
3. Cost savings
Despite the recent uncertainty in the e-commerce landscape, there shouldn’t be a decline in customer experience in an attempt to save business costs. Customer Data Platforms can help in this regard by increasing operational efficiencies, automating menial tasks, reducing wasted ad spend, and eliminating the need for third parties.
Businesses can save substantial costs with CDPs without compromising on the customer experience. Cost savings, along with accurate, insight-driven targeting, lead to high-impact campaigns, due to which businesses experience rapid growth.
Tracking and improving these customer-related cost-saving metrics with the help of a CDP facilitate personalized and well-executed CX at every touchpoint.
4. Frictionless and personalized CX
Multiple customer personas can have varying needs within and across each persona, which demands tangible data to help understand these customers, their buying behavior, and how to interact with them.
A CDP consolidates and standardizes all of this information into enriched customer profiles, as well as empowers businesses to work on high-value customer segments and activate personalized campaigns for efficient targeting of those segments across all channels.
Proactive, personalized, and streamlined experiences set a positive tone for the customers and act as differentiators for the brand.
While direct customer feedback from NPS scores and surveys is most crucial, traditional surveys don’t reveal the reasons behind the scores. Through additional preferential and behavioral questions and associating each survey response to individual customer profiles, the NPS surveys can be augmented to generate deeper customer insights and improved personalization.
A customer data platform may be the right choice if a business wants to improve the overall CX with data-driven insights and establish more efficient and agile marketing operations. However, the true value of a CDP depends on how it is used, and by approaching it with a customer-centric mindset and an eagerness to continuously learn, test, and optimize campaigns, businesses can maximize their returns.
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Prakash Hariharasubramanian, Director & Practice Lead, Intelligent Process Automation (IPA), HGS
Prakash has led various IPA implementations across multiple industry verticals in his tenure of 7 years with HGS. In his role, Prakash develops IPA practice frameworks, creates IPA solutions, and serves as a key automation evangelist for HGS.
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