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What the Tech are CDPs?

What the tech are CDPs?

Illustration by Ollie Catton / The Current

Explaining what CDPs are and why they will play a huge role in digital marketing as cookies become obsolete.

Everyone in digital marketing is scrambling to prepare themselves for a world without third-party cookies, which is why brands have been adopting customer data platforms (CPDs), the latest entry to the ad tech acronym mix.

Which invites an important question: Just what is a CDP?

Don’t worry. We’ve got you covered.

What’s a CDP?
Short for customer data platform, a CDP is where a brand stores its first-party data, arguably the most valuable currency in all of digital marketing.

Isn’t that what a DMP does?
Not quite.

DMPs, short for data management platforms, also function as data repositories, but they house both first and third-party data. DMPs collect third-party data from a variety of sources. Brands then layer in their first-party data and use the combined datasets to build audience segments and target them with personalized ads.

CDPs are exclusively for first-party data, however, such as a customer’s purchase history, payment information and shipping address. That’s why CDPs are especially popular among retail brands.

CDPs are often likened to customer relationship management (CRM) platforms, software programs popular among business-to-business marketers. CRMs, such as Salesforce, the leader in the category, help the sales teams at enterprise marketers keep tabs on and communicate with their clients. CDPs do the same thing, but for consumer-facing brands hoping to better manage their relationships with customers.

Okay. So, what do they do?
CDPs act as a central warehouse for a brand’s first-party data, allowing brands to store and deploy first-party data from one centralized location.

You’ve probably encountered a CDP when interacting with a company’s customer service team. All of us have dealt with the pain of calling a customer service line and having to give our personal information six different times, to six different customer service agents. Nowadays, though, a brand can recognize the number you’re calling from and immediately connect it to your email and account profile. They can instantly pull up your order history and find the product you want to return or the shipment that went missing. This is a CDP at work.

So CDPs are only for customer support teams?
Nope. Because CDPs act as the central repository for all customer data, they can be used by virtually any team within an organization — sales, customer support, ecommerce, social, advertising, marketing. Prior to CDPs, brands built separate, redundant databases for each business use case. CDPs provide an elegant solution.

This is another major difference between CDPs and DMPs. DMPs are used almost exclusively for advertising purposes. CDPs have a variety of uses (including, yes, advertising).

Why are CDPs so popular?
CDPs aren’t new; they’ve been around for years. There were around 20 CDPs in the market in 2017. As of last summer, there were 150 by some counts.

Having a centralized storage space for customers’ information helps an organization function more smoothly, as in the customer service example above. But this data is also valuable for advertising, especially with the inevitable decline of third-party cookies.

Come 2023, Google says it will no longer allow marketers to use third-party cookies on its Chrome web browser, effectively rendering third-party cookies obsolete (although that date could change. Google has already delayed the phase-out a couple of times.) Once that happens, brands will have to rely more heavily on first-party data (the kind of data stored in a CDP) to build and target their ad campaigns.

That’s why CDPs have become big players in the ad tech industry, and its why CDPs should remain popular as the industry transitions to a cookie-less digital ecosystem.