By now it’s a universal experience. You browse for a while on a particular site, and for the next few days or weeks, you see ads promoting the products you viewed. Or, you click on a link in a promotional email, and then your next visit to that site has similar product recommendations for you. This type of targeted marketing is possible in part because of customer data platforms (CDPs) and data management platforms (DMPs).
CDPs are tools that collect user data to improve the customer experience. DMPs are similar, and using them can result in better ad targeting. However, the battle of CDP vs. DMP doesn’t always end with a business using one or the other. Because they fulfill different marketing needs, CDPs and DMPs can work together to produce the most value.
Differences Between CDP and DMP
While CDPs and DMPs both manage customer data, they operate differently. They share the overall goal of improving the customer experience as well as improving ad targeting and market segmentation. However, they accomplish these goals in different ways and for different purposes.
CDPs and DMPs, Explained
A customer data platform is a type of software that integrates data from multiple sources, like profile data and real-time interaction data, and collects it into a single database. The CDP then creates a detailed and personalized customer profile by continuously updating and unifying the collected data. This benefits the entire organization, from marketing to sales and customer relationship management. The purpose of a CDP is to tailor a customer’s experience based on identifiable data and deliver consistent messaging, which increases retention rates.
A data management platform works on a more aggregate level. It collects anonymous data from sources like cookies and IP addresses to help advertisers better understand and target their audiences. It divides users into categories based on their demographics and browsing habits. Advertisers use this data to gather insights about their target audience, measure the effectiveness of their marketing strategies, and deliver targeted ads online.
CDPs and DMPs, Contrasted
The biggest difference between CDPs and DMPs is the type of user data they gather. CDPs primarily gather first-party data—it comes directly from an advertiser’s company. For example, if a customer creates a website account to buy something, their purchase history becomes part of that business’s first-party data. DMPs use third-party data, which is gathered by a data collection company through cookies and other secure browsing trackers and then sold to advertisers.
Next, a big point of differentiation is the use of personally identifiable information (PII). PII refers to data that identifies an individual, such as a full name, phone number, or address. CDPs can collect this type of information with user permission while DMPs use anonymized data to comply with privacy laws.
CDPs and DMPs Compared
Both CDPs and DMPs use some second-party data. This type of data refers to first-party information shared between noncompetitive businesses. For example, one company could share customer details with another as part of a partnership. DMPs get second-party data from data exchanges while CMPs get it through marketing tools, such as email collection widgets.
Another similarity between CDPs and DMPs is the value of their analytics. Both CDPs and DMPs can track what marketing strategies are successful. This helps businesses better understand their customers and, as a result, create more effective ad campaigns.
Reasons to Choose a CDP Over a DMP
The first advantage that CDPs have over DMPs is that first-party data is safer and more valuable than third-party data. Advertisers can guarantee the accuracy of first-party data while a data collection company may not verify any information. In addition, advertisers can prove that they collect first-party data ethically.
CDPs also offer a competitive advantage over DMPs. Any advertiser can pay to access the services of data management platforms; all competitors end up using the same information to design their marketing campaigns. On the other hand, first-party data can give a company unique and powerful insights that are not available to their competitors.
Next, a customer data platform can store and update data long-term; DMPs retain data for less than 90 days. This makes CDPs much more useful for persistent, in-depth analysis. Advertisers can learn more about their customers by using a CDP—and they get a more complete picture as well.
Finally, companies can use CDPs for more than just advertising; they can inform every step of the customer journey. Meanwhile DMPs are specialized for advertising to new customers through ad targeting. According to Treasure Data, businesses report that the heaviest users of customer data are marketing and sales departments, at 62 percent and 59 percent respectively. At the same time, more than 40 percent of businesses also use customer data in inventory management, product development, and contact centers.
The unified customer profiles that CDPs create make it possible to deliver more relevant and personalized messaging through emails, product recommendations, and other direct retargeting methods. This approach offers more value to customers than targeted ads alone and increases retention by showing them exactly what they want.
How a CDP Can Work with a DMP
When it comes to these platforms, businesses don’t have to choose one or the other. CDPs and DMPs work well together to increase the effectiveness of a targeted marketing strategy by filling in each other’s information gaps.
Integration of CDPs and DMPs
CDPs can integrate a DMP’s data to get more information about an individual customer and make it easier for advertisers to communicate with them. Similarly, when a DMP integrates CDP data, the result is stronger ad targeting.
Most CDPs work with any DMP, so the only thing a business needs to integrate the two is the DMP identifier. Once the two platforms establish a link, they can send data back and forth.
Benefits of Using CDPs with DMPs
Using these platforms together gives advertisers the most complete picture of their audience. It also strengthens both platforms. Together, CDPs and DMPs can do the following:
- Improve a customer’s personalized experience
- Reduce marketing expenditures
- Generate actionable insights
- Offer an advantage over competitors
- Increase the efficacy of targeting through programmatic advertising
Best Uses for CDPs vs. DMPs
So should a business invest in a CDP, a DMP, or both? To make the best decision, companies should ensure the technology aligns with their marketing strategies and goals by understanding the use cases for each choice.
When to Use a CDP
According to the CDP Institute, 57 percent of businesses use CDPs for acquisition, 61 percent use them to improve retention, and 65 percent use them to add customer value.
CDPs are useful for the following functions:
- Centralizing customer data. CDPs unify the data a business collects across all channels.
- Personalizing content. Using first-party data gathered by a CDP, businesses can set up 1:1 marketing efforts based on individual customer behavior.
- Increasing customer engagement. CDPs make it possible to show customers what they need to see at the right time to improve retention and make sales.
When to Use a DMP
A DMP is most effective for attracting new customers. Businesses should take advantage of DMP data if they are running an advertising campaign with the goal of stretching beyond their current reach. DMPs can help engage a target audience that has never interacted with a brand before.
For instance, a DMP like Google or Facebook tracks their users’ likes and browsing history and then organizes users into demographic segments. Then, publishers can display ads relevant to their users’ market segment. If a company is planning an ad campaign around a new product, they can reach a specific demographic of new customers. With the help of a DMP, there’s no wasted campaigning—only interested parties will see the ads.
When to Use Both
DMPs draw in new customers, and CDPs keep existing customers coming back. Companies should use a combination of these tools to get the best value out of each.
For example, an ad targeted with a DMP can generate thousands of clicks and lead to increased traffic on a website. Once the potential customers arrive, though, what happens next? CDP information can step in to turn visits into sales by improving the customer experience in real time.
Learn More About CDPs Today
A CDP is a powerful tool designed to leverage user data into more effective marketing and an improved customer experience. When businesses add a DMP, marketers can learn even more about their customers.
Keep in mind that CDP vs. DMP is best approached as both/and rather than either/or. By using a CDP and a DMP together, companies can create a complete and unified customer view. This helps them target the right audience, drive sales with appropriate messages, and deliver more value to customers.