What’s the Difference Between a CDP and a CRM (and why should you care)?

Customer Data Platform Series: 1 of 5

Over the next 5 weeks, read a new blog each week from our CDP Series as our CMO helps you to understand the CDP landscape, capabilities and functionality.

Gartner's 2018 Marketing Technology Survey suggests that 52% of enterprise marketers have already fully deployed a Customer Data Platform (CDP), while 26% are in the process of deploying one and a further 12% plan to do so within two years. That means 90% of the respondents are invested in CDPs, a very high proportion of the market considering the technology has only come to the forefront in the past three or four years.

However, dig deeper into the research and you find that 51% of the self-proclaimed CDP-equipped organizations said that their CDP was their Customer Relationship Management (CRM) system, with 11% of these naming Salesforce as their CDP. It's worth noting that in November 2018, when the survey was issued, Salesforce was vehemently against the idea of a CDP, and that even today the provider is still in the process of developing one.

This, then, raises some questions:

What is a CRM and what does it do?
What is a CDP and what does it do?
How does a CRM differ from a CDP?
Why are so many marketers confused about what a CDP is?

Let's take a look...

What is a CRM and what does it do?

First, let's look at the definition of a CRM software application used on the Microsoft Dynamics 365 website:

CRM stands for customer relationship management. It's a category of integrated, data-driven software solutions that improve how you interact and do business with your customers. CRM systems help you manage and maintain customer relationships, track sales leads, marketing, and pipeline, and deliver actionable data.
Source: https://dynamics.microsoft.com/en-gb/crm/what-is-crm/

CRM systems collect and amass data on a company's direct interactions with its customers, usually in a 1-to-1 scenario (whether via the website, telephone, mail, live chat or social media). They can be used to view as much information as possible on one screen about an individual record, including contact details and previous conversations, to help businesses manage their relationships with existing and prospective customers alike.

CRM platforms in the B2B context enable businesses to track pipelines of potential deals, helping them to forecast future revenue. The resulting data about interactions and conversations makes the sales process more transparent and accountable.

In the B2C world, where the sales process is not as long and purchases are more numerous and of lower value, pipelines are less critical but the core requirements are similar. Customer-facing departments, such as call centers and customer services teams, require the ability to view lots of customer interactions and relationship histories in one place, helping them to provide a good customer experience during future 1-to-1 interactions.

In both environments, unlike with a CDP, marketers are not the primary users of a CRM. Instead, these tend to be sales and customer service representatives.

What is a CDP and what does it do?

unified-data-system The CDP Institute defines a CDP as:

Packaged software that creates a persistent, unified customer database that is accessible to other systems.

Moreover, the recent RealCDP Certification from the CDP Institute states that a CDP must have the following capabilities:

Ingest data from any source
Capture full detail of ingested data
Store ingested data indefinitely (subject to privacy constraints)
Create unified profiles of identified individuals
Share data with any system that needs it

In other words, the CDP enables marketers to bring in huge amounts of online and offline data from a multitude of sources, then match, merge and deduplicate this information into a Single Customer View, without the requirement of help from a team of engineers or IT specialists. Each unified customer record can then be segmented, analyzed and used to make recommendations to help create a personalized customer journey.

So, the aims of the CDP are to empower the marketing team to use clean, trustworthy and compliant data across all their marketing channels, and to act as a single source of truth about their customers to enable analysis, intelligence gathering and the automation of targeted, personalized marketing campaigns.

How does a CRM differ from a CDP?

A Customer Relationship Management system is best used to help optimize a company’s 1-to-1 interactions with each known customer. However, if a customer is ‘unknown’ (as in, you hold data about them but it’s in a system or data point your CRM doesn’t refer to), a CRM cannot identify or engage with them. Moreover, a CRM is not designed to ingest data in real-time from any source, or share it with other systems. It therefore cannot capture full detail, and it will not store the data indefinitely.

Data collected by CRMs is not commonly treated to a Single Customer View process, so records are not cleansed, deduplicated and normalized. This makes it very difficult to get an overview of the information held, and data quality is often an issue (unless the CRM is fed by a CDP of course).

A Customer Data Platform, however, can identify customers (and new prospects) from multiple data sources and, importantly, unify all that data through a process of cleansing and deduplication to create a Single Customer View across millions, or tens of millions, of records.

The advantages CDPs hold over CRM applications include scale, profile unification, segmentation and a direct connection to many different marketing systems (meaning large amounts of available data can be imported with ease from different locations and platforms).

Why are so many marketers confused about what a CDP is?

Since the CDP market is still a relatively immature one, many marketers are still trying to figure out how a CDP will fit into the technology ecosystem. The recent Gartner Hype Cycle 2019 showed that CDPs are at the peak of inflated expectation right now, and the resulting mass hype is breeding confusion in the technology sector, particularly with CRM, marketing cloud, tag management and personalization software vendors with good data unification components altering their marketing to align with the CDP space.

CRMs and CDPs, though, are two different marketing and sales technology systems with differing strengths. It's not about choosing between them, rather marketers should know the difference in order to apply the right system to their individual needs. In fact, CRM systems can be used as an input and output channel to a CDP, while a CDP can in turn be leveraged to provide a better, more consistent and holistic data set within the CRM.

CRM systems work best as a contact management solution, allowing salespeople to view as much data as possible about an individual record and related interactions, so they can manage their accounts with ease. A CDP, meanwhile, is a more specialized, marketer-managed system, capable of importing large volumes of data from email management platforms, personalization engines, CRMs, advertising technology and other platforms. It can then sort this data, make it usable to enable real-time, cross-channel communications, and make real-time recommendations of how to personalize customer experiences at scale.

This blog article is an extract from BlueVenn’s “A Marketer’s Guide to Customer Data Platforms” eBook.

Remember, this is blog 1 of 5 in our Customer Data Platform series. For more from our CMO on the CDP landscape, capabilities and functionality, read blog 2 of 5 now or subscribe to the blog for alerts.