What Is This Thing We Call A CDP?

“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Martin Kihn, research vice president at Gartner.

A new technology appears, seemingly from the ether, and promises to change our lives. Customer data integration, labeling and storage problems will disappear. Identities will merge. You’ll be able to find new audiences until your ribs squeak and deliver them to any execution system in the barn.

Oh, and it will scale, rarely fail and enable (yes) true one-to-one marketing.

The name of this magic machine is … CRM. It was 1998. Companies piled in, dropping $3.5 billion a year on apps and databases alone – consulting fees not included – and yet, by 2001, 50% of CRM projects “failed.”

The same thing happened, on a lesser scale, during the great marketing automation boom of the 2000s. And it’s happening again.

Marketers unite! You have nothing to lose

It takes a generation to forget our parents’ wisdom. This fact is great for startups, whose founders and funders tend not to look back anyway. But it should inspire buyers to wonder what we can learn from the past.

No marketing tech in recent memory has shot up the hype curve so far, so fast, as the customer data platform (CDP). One new vendor received more RFIs last month than it had all last year. Companies with related solutions, such as tag management or data integration, are rebranding themselves as CDPs. A thriving Customer Data Platform Institute (CDPI) formed and already features 55 logos.

Big clouds smell a threat. VCs hear that party sound. Engineers get busy. And it is left to the hard-working marketer to wonder: What is a CDP, anyway?

The category was named in 2013 by David Raab, a respected mar tech analyst and founder of the CDPI. He put forward some sensible criteria, including a focus on first-party data and known identities and an ability to connect with common marketing systems for input and output.

Above all, the CDP has two guiding principles:

1. It is a clean and open database for customer information
2. It is owned and operated by marketers

Although it took a few years – some might say, until this year – for any real market to appear, those two principles were, in retrospect, the CDP’s Declaration of Independence from CRM and marketing automation.

The CDP is not the new CRM, because CRM is not a category. It is 190 different capabilities that span five areas – only one of which is marketing – and a massive cross-functional domain that scrambles from information and asset management to personalization and voice-of-customer.

And that’s the problem. CRM is labyrinthine, slow, cross-functional and controlled by IT. Marketing is fast, loose, self-centered and (if we’re honest) annoyed by IT. It wants its own flexible customer database. Now.

Marketing automation and multichannel campaign management systems still fill this need for many, but they’re showing seams. They are purpose-built, limited in scope and can have rigid taxonomies. They are obsessed by email and aren’t built for tag and API management, identity mapping, data integration – all things marketers say they want from CDPs.

The great CDP-vs.-DMP debate

It is ironic that the technology most often confused with the CDP is the one it resembles least: the data management platform (DMP). As Luma Partners’ Brian Andersen pointed out in his Industry Preview closing keynote this year, CDP vs. DMP is “not an or … it’s an and.” They do different things.

The DMP negotiates our beloved programmatic advertising, while the CDP – by definition – is grounded in individuals known by name, email, customer number or another personal ID. The DMP operates on massive audiences; the CDP, on a sensible number of souls. When Salesforce acquired Krux, a DMP, it encountered a data store many times larger than all its clouds’ previous requirements combined.

And the DMP and CDP are complementary, spanning the customer journey from ignorance to devotion and winback. They have much to learn from one another and a similar mission, namely personalization. Someday, they may be artfully combined.

In fact, the technology CDPs most resemble are tag management systems. It’s no coincidence that major tag management systems are now CDPs and that at least two well-known CDPs started as the mobile equivalent of tag management systems. The intent of the tag management systems was to zigzag IT and give marketers control over data collection; add a database and identity management, and you’ve got a CDP.

It is also no coincidence that right around the time marketers started chanting five-syllable words at conferences – probabilistic and deterministic – the CDP appeared. Identity is required for people-based marketing, and a customer database that can’t match devices and browsers and so on to people isn’t better than the status quo.

Naturally, most CDPs claim to provide identity management. Examine this claim. Identity management traditionally meant fuzzy matching on personal info and using tables to link records to a common ID. But most marketers today think of “identity” as a synonym for the cross-device conundrum.

But solving cross-device requires something that CDPs do not have: an identity graph. Graphs require alliances, co-ops, hard math and time. There is a reason people still need companies like Acxiom and Neustar.

Back to the future, part deux

Admitting it’s a new space with the requisite froth, what can the marketer do to set realistic hopes? How can we miss that CRM Y2K moment?

First, know what this product does. Last month, the CDPI issued a good vendor definition for public comment. Tempering this with my own Irish skepticism, I think the CDP can be pictured like this:

Click here for larger image.

It facilitates data collection, unification around a persistent ID, flexible storage and easy access from outside. You’ll notice that the areas of “predict” and “decide” – the decision-making parts of the tool – are labeled “optional.” They’re optional for CDPs, but should not be for marketers.

Be careful here. It’s a region rife with false whispers and future broken hearts. It’s where the dreaded shibboleth “AI” appears in pitches – where most CDPs have done the least amount of work – and where the greatest future differentiation will occur. Everything else is just transportation.

At the height of the CRM boom, Gallup issued a moving screed called “Is CRM All Hype?” It suggested some principles we can adapt to our CDP moment. Combined with my own observations, they are:

1. CDP is not a system of record – it’s a system of innovation
2. Failures won’t be caused by the tech – they’ll be caused by you
3. You probably don’t know how messy your data is now
4. You will overestimate your team’s technical skill
5. You want short-term results but use long-term evaluation metrics

This last point is the one stressed by Gallup. What does it mean? Simply that most marketers say they want to improve the customer’s experience while caring only about their own experience. They’ll use the CDP to boost quarterly revenue but deem it a failure when retention falls.

There is no CRM system – and no CDP – that can change the existential truth that the needs of the business and customer are almost always in tension.

Follow Martin Kihn (@martykihn), Gartner (@Gartner_inc) and AdExchanger (@adexchanger) on Twitter.

This post was syndicated from Ad Exchanger.