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CDP Hype Collides with Marketers’ Reality

Marketers Salivated Over CDPs

After a series of pivots, Peter Reinhardt, the founder and CEO of Segment, stumbled upon a solution that helped create the  $15.5B Customer Data Platform market. Version 1 of the CDP commercialized Segment’s homegrown Javascript library by empowering marketers to easily connect disparate data streams themselves using a single unified JS tag. From this simple aggregation of data pipes, the promise of digital advertising began to trickle for marketers. 

A year or so later the term Customer Data Platform was coined to describe various flavors of marketing systems that shared the ability to build a database of unified customer profiles. However, in the beginning, most of these products were designed to support specific point solutions that focused on solving challenges associated with predictive modeling, attribution, site personalization, or campaign management. 

As the CDP segment matured, vendors realized the potential to connect their unified databases with other marketing execution platforms and channels. They added features to allow access by other systems, creating the CDPs we know today. Taking a parallel path to arrive in a similar space, several web analytics and tag management vendors recognized they could modify their data-gathering solutions to also build persistent databases, creating another form of CDP. In no time both types of vendors converged to form the CDP industry. 

After having suffered the shortcomings of existing CRM and DMP technologies, marketers quickly anointed the CDP as the one data platform that rules them all. The number of new entrants quickly ballooned as marketers salivated over the potential of unified first-party datasets. They thought the promise had been finally realized: a golden record of unified online and offline data that could inform 1-to-1 marketing across any addressable channel. 

But, alas… Just as Gartner predicted 2 years ago in their Digital Marketing Hype Cycle, adopters of CDP solutions have begun a slide into a trough of disillusionment as they discover the limitations of CDPs. 

Not a Marketer’s Tool

From the beginning, CDP solutions have been positioned as a Marketer’s technology. They were touted as platforms boasting intuitive interfaces that empowered non-technical folks with the ability to unify all their data across every conceivable silo. Marketers were now armed with tools to globally manage identity resolution, establish a golden user record, and inform 1-1 marketing conversations with personalized recommendations at any user touchpoint. A benefit of a single user record meant that preferences and intents signaled in one channel could be used in any other channel to make every impression more relevant. 

Combine the first-party data stored in the CDP with third-party data — demographic, firmographic, location, and weather, for example — and every message could be tailored in real-time to gently guide users along a journey optimized specifically for them. Unfortunately, these types of 1-1 dynamic interactions are limited to owned-and-operated impressions on websites or apps and a few email platforms. The vast majority of the user endpoints lie outside of the reach of even the most sophisticated CDP decisioning engines. 

No Organizational Alignment

Fundamentally, most marketing teams lack the experience, expertise, and bandwidth to realize ROI against even the most basic first-party data use cases. Therefore, an investment in CDP technology requires organizing a slew of skills and disciplines including, development, data analysis, campaign management, content creation, and data visualization. This is not to mention the fact that the marketing department is unlikely to own or control the various data sources available or have the clout to muster the change management to successfully align priorities, budgets, and expectations across the entire organization.

 Not Purpose Built

The next dirty little secret is that most CDP solutions started with another focus. Consequently, the focus of feature/functionality sways wildly between data pipes and data activations. Practically,  this means each solution is inherently limited to supporting only use cases that match with the underlying tech. Venturing outside of defined workflows means making concessions and adding complexity, each flying in the face of the Swiss Army Knife positioning of CDPs that marketers were sold on. For instance, there are CDP platforms built on CMS functionality that excel at real-time personalization on websites, while others focus on data aggregation and rely on connectors — both native APIs and custom batch integrations — to best-in-class platforms for identity resolution, audience segmentation, and paid media executions. 

Unification is Expensive

As attractive as democratizing data across the organization is, there is no getting around the fact that it requires huge capital expenditure to get it right. Apart from the cost of the technology license, marketers can expect data storage costs to double as most CDPs require replicating data to build unified records and facilitate unknown-to-known identity processes. Storage costs can be mitigated, but the ETL processes and data warehousing needed to ingest only relevant data into the CDP have their costs too. Additional budgets may also be needed for managed services to address any deficits in skills or human capital.

Data locked In

Though CDPs are designed to manage first-party data and the platform license ensures the buyer retains ownership of the data and the environment, there are practical implications to understand. CDPs add to the vulnerable places that your sensitive data lives. Think of it as an additional front to defend in your data security war. As a licensee, marketers depend on the vendor and any third parties with official access to maintain vigilant best practices to ensure the security of your data. In the event of a breach anywhere along the data owner/processor continuum, it’s the licensee who has the most at stake. Another consideration is that the unified database is subject to strict software license levels. Unanticipated overages in recorded events are costly, and any data migration to other environments is even more so. 

First-Party Data is Tricky

The unreliability of third-party and unavailability of publisher second-party data remains at the top of the list of reasons why marketers invest in their first-party data via CDPs. Everybody knows first-party data is more reliable, right? The truth is it probably is not. Universally, marketers have done a poor job of data stewardship. Using a CDP to organize old, unstructured, and poorly collected data that is not privacy-compliant is a sure recipe for disappointment. Just managing an accurate state among separate data systems is exceedingly difficult as each platform will try to overwrite another’s data in an attempt to establish and maintain a universal ID and record. Also, as abundant as it may be, irrelevant historical first-party data is unlikely to ever become a marketer’s secret weapon. 

Lack of Analytics

Data and reporting may sound synonymous, but they certainly aren’t when it comes to CDPs. Even leading solutions have anemic user interfaces with limited custom reporting capabilities, let alone any data visualization. In most cases achieving useful reporting requires porting data into a separate platform. 

The promise of first-party data-driven customer engagement still may be largely unrealized for marketers. And, they may indeed find themselves in the trough of disillusionment, but a CDP investment remains a solid step in the right direction. So all is not lost, albeit marketers do find themselves on a longer journey that requires a more comprehensive digital transformation..  Look for a future blogpost to see where marketers go from here to realize the promise of digital. 

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