Why CDPs Are Essential for a First-Party Data Strategy

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In an era defined by data privacy concerns, evolving consumer behaviors, and the ongoing deprecation of third-party cookies, enterprises face a pressing need to prioritize first-party data as a strategic asset.

And for that reason (and others), marketers and other business leaders need to revisit customer data platforms (CDPs) as a strategic investment.

Specialized software platforms that collect and manage customer data from various sources, including online and offline interactions, transactions, social media, and other touchpoints, CDPs aren't new. Although they're still in their adoption growth phase, the industry is far enough along in the cycle that CDP software providers are sophisticated and the products have evolved into a mature state.

In fact, Gartner released its first-ever Magic Quadrant report for CDPs in February 2024. Between 2022 and 2030, the global CDP market is expected to expand at a compound annual growth rate of 17.9%.

When we talk about "investing in the CDP approach," we're talking about more than just a SaaS purchase. We're talking about implementing a process and infrastructure capable of managing a company's first-party data in a strategic and future-proof way.

Let's examine the importance of this approach in aggregating, unifying, and activating first-party data—today and into the future.

A Forward-Looking Approach to the Evolving Data Landscape

In discussing the importance of a robust first-party data strategy, we first need to acknowledge the hurdles encountered on the third-party data front. Across industries, businesses today are encountering limitations associated with third-party data and the evolving regulatory environment surrounding privacy.

Third-party data, often acquired from external sources, can lack accuracy and relevance because of its indirect nature, leading to incomplete or outdated customer profiles.

Moreover, concerns over data privacy and consumer consent have intensified with the enactment of stringent regulations, starting with GDPR and CCPA and continuing to proliferate state by state and country by country. The shifting regulatory landscape has prompted organizations to re-evaluate their reliance on third-party data, recognizing the inherent risks of noncompliance and the potential damage to brand reputation.

In response, businesses are turning to first-party data as a cornerstone of their customer insights and engagement strategies.

First-party data, collected directly from interactions with customers, offers unparalleled accuracy and depth, providing genuine insights into customer preferences, behaviors, and sentiments. The challenge, however, is that first-party data can come from a wide array of sources, online and offline. Thus, the ability to organize and activate the data becomes the real linchpin for success.

That's where the CDP approach comes in. The primary purpose of a CDP is to create a unified, centralized view of customer data that can be accessed and used by marketing, sales, customer service, and other teams within an organization.

By aggregating and analyzing data within a CDP, businesses can enhance their understanding of customer behavior, preferences, and interactions, facilitating more personalized and effective marketing strategies.

Implementing a CDP for Better Insights and Activation

From a workflow perspective, a CDP helps you capture and consolidate data into centralized user profiles, typically through the following steps:

Collect your data: Initial CDP setup helps you collect, clean, and structure your data in one place.
Clean your data: With your data in one place, you can remove bad data and ensure user privacy is being properly managed.
Synthesize your data: Once data is cleaned, you can use your good data to build profiles and audiences to use across tools.
Activate your data: Those profiles and audiences can then be used across the many platforms needed to stay in touch with customers and reach new ones.

The right CDP will simultaneously unite a brand's data and alleviate security concerns via data encryption, security testing, and granular access controls.

Building the Business Case for CDP Investment

Enterprises often struggle to unite the many disparate data sources—CRMs, e-commerce platforms, social media channels, email platforms, point-of-sale systems, Web analytics, customer service interactions, mobile apps, and more—leading to fragmented customer profiles and inconsistent insights across departments.

In addition, the sheer volume and velocity of data generated can overwhelm traditionally siloed data management systems, hindering timely analysis and decision-making.

By consolidating customer data into a unified platform, CDPs facilitate targeted marketing initiatives that resonate with specific audience segments, resulting in higher conversion rates and increased customer lifetime value.

The strategic value of CDP implementation, however, extends beyond immediate returns, because a CDP it equips businesses with the agility and adaptability needed to navigate evolving market trends and purchase preferences.

That's especially relevant when you consider that the future of marketing is increasingly moving toward participatory and experiential marketing driven by interactive technologies and evolving consumer expectations. As our lives move deeper into the metaverse and online communities, brands are tasked with providing reciprocal value exchanges with consumers within these environments. That absolutely cannot be achieved if all the data related to a brand's relationship with a consumer is not united.

After all, how can you engage in a community-centric way with people if the information you have about each person is broken up in a way that makes individuals look like five, 10, or even more separate entities with no clear or easily discernible connection?

Use Case: MongoDB

Major brands are acknowledging that challenge and turning to CDP implementations to overcome it. MongoDB used a CDP to unify its data into a single source of truth. Doing so allowed MongoDB to blend data from multiple sources and create advanced analytical workflows, significantly enhancing its ability to deliver targeted communications and improve developer engagement.

As a result, MongoDB achieved a significant increase in revenue, attributed to improved targeting and personalization of communications.

Specifically, product adoption, customer satisfaction, and overall revenue growth increased by implementing just-in-time communications and utilizing a dynamic ecosystem of educational content.

Other CDP Uses

Although MongoDB's use case is a great example, there are several other common and highly effective uses for a CDP, including the following:

Designing custom workflows for customers based on their engagements and transaction history, allowing all communications to be fully and dynamically customized
Removing current customers from retargeting ad groups, thereby saving budget by not targeting existing customers with ads
Enhancing audience targeting in social platforms by using first-party customer data to refine and enhance targeting options and build custom targeting profiles
Helping to visualize and understand the entire customer experience journey, from initial awareness to purchase and beyond, allowing you to create more personalized experiences and identify areas of lower performance
Enhancing data privacy, security, and compliance by classifying data storage, visualizing data transfer across varied sources in the martech stack, and automating data storage and scrubbing functions to maintain regulatory compliance

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By embracing CDPs, businesses can both navigate the challenges of data privacy regulations and unlock new opportunities for customer engagement and long-term growth in an increasingly digital and dynamic landscape.

In other words, a CDP will enable the centralized, intelligent, and personalized execution of your full marketing strategy. Finally.