Many brands are revisiting their customer experience initiatives, and are looking into investing in either a customer data platform (CDP) or customer relationship management (CRM) platform. The question is, what are the basic functions of CDPs and CRMs, which would serve a brand better for improving the customer experience, and why?
Definition of a CDP
A CDP is a data management system that has a unified and persistent database, which can be accessed by other marketing technology (martech) systems, according to the CMSWire 2020 Customer Data Platforms Buyer's Guide. CDPs ingest and integrate behavioral, transactional, structured and unstructured data from multiple sources into a single repository that allows a business to build a unified profile around an individual customer. Once customer data has been combined into a CDP, the ability to unify user profiles into a single record gives marketers the ability to form a 360-degree view of their customers. These customer profiles can then be segmented into groups to allow for better targeting of valuable audience segments.
The CDP industry is expected to reach $1.5 billion in 2021, according to the CDP Institute.
Definition of a CRM
Salesforce said, CRM enables you to focus on your organisation’s relationships with individual people. "You can store customer and prospect contact information, accounts, leads and sales opportunities in one central location, ideally in the cloud so the information is accessible by many, in real time," according to a post on Salesforce's website.
A CRM may have some overlap with a CDP in terms of functionality. A CRM system is primarily to support sales, while a CDP delivers a more complete view of the customer beyond the sales cycle. CRMs are more limited in scope than CDPs as they do not necessarily provide the development environment or integration flexibility to support the full customer experience cycle, as well as being more focused on managing customer interactions, business transactions and process management.
The global CRM industry was worth $55.3 billion in 2019, according to Research and Markets.
The Primary Function of a CDP
A Customer Data Platform is a software package that is used to unify transactional, demographic, and behavioural data from all of a brand’s channels, all of which are used to create a persistent, single-person view of each customer. It then makes the customer data available to other systems so it can be used for marketing, personalisation, customer service, sales, and customer experience initiatives.
Heidi Bullock, CMO at Tealium, a real-time customer data orchestration solutions provider, believes that brands need to understand their customers by taking a closer look at customer data. Because that data is spread out through multiple channels and departments, the use of a CDP can be vital for gaining actionable insights. “A real-time, vendor-neutral CDP can promote a top-of-the-line experience in a primarily digital environment by helping companies collect, standardise, enrich, activate, and even govern data from all of these channels in real-time. This ultimately creates a holistic view of the customer regardless of where they’re interacting in that moment,” explained Bullock.
The CDP Institute explains that a CDP is able to create a comprehensive view of every customer by capturing the data from various systems, creating personal identifiers that are used to link data relating to the same customer, and storing that data to track customer behaviour over time. By using personal identifiers, the CDP can be used to target marketing messages and single-user marketing results. It creates a single-person profile for each customer based on information that comes from all channels and touch-points in the customer’s journey.
Although there are variations in the functionality of different CDPs, all CDPs have four core capabilities: the ability to create unified, persistent, single-person customer profiles, the ability to develop market-based segments using a variety of data (multi-dimensional segmentation), the ability to respond to each customer according to where they are on their customer journey (customer lifecycle orchestration), and the ability to assess historical customer data, discover patterns and trends, and use that data to create actionable insights (predictive modelling and analytics).
The Primary Function of CRM
CRMs were created with the intention of simplifying the process of customer relationship management. They enable sales and customer service professionals to store customer and prospect contact info, identify leads, store service tickets, manage marketing campaigns, and facilitate the ability to provide information about each and every interaction between a customer and a brand to anyone at a business that requires access to it.
According to Sridhar Jayaraman, VP of Engineering at Qentelli, a Texas-based digital services provider, a CRM is a one-stop platform that is used to capture all conversations with or about a brand’s customers. “Every professional involved in these conversations — including lead generation specialists, inside sales and field sales reps, sales engineers, account managers, customer support reps — all capture the information in CRM, so it becomes the single source of truth!”
There are three functions that are common to all CRM platforms. Contact management is the function of storing customer contact information, including names, phone numbers, addresses, email addresses, and social media accounts in a searchable database. Interaction tracking is the process of inputting notes and tracking customer interaction history in order to document conversations with each customer. Lead management allows businesses to manage the process of converting prospects into leads (potential customers) by identifying, scoring, and moving leads through the sales funnel.
Types of CRM
Additionally, there are three types of CRMs: operational, analytical, and collaborative. The primary roles of each type of CRM are different.
Operational CRM streamline and automate sales, marketing, and service processes, and their role is to generate leads and convert them into contacts, while at the same time capturing all details. This type of CRM helps to provide service throughout the customer lifecycle.
Analytical CRM fulfil the role of analysing customer data that has been collected from the various touch-points in the customer journey and help brands to make more informed decisions, enable the marketing department to evaluate the effectiveness of its campaigns, the sales team to increase sales, and improve the quality and efficiency of customer service.
“CRM is also used for contracts management and forecasting. As the sales process involves efforts from multiple resources, while identifying the probability of a particular opportunity, a CRM platform can offer visibility to the sales leadership with a monthly or quarterly review of best- and worst-case scenarios,” suggested Jayaraman.
Collaborative CRM allow brands to share their customer information between departments such as sales, HR, marketing, IT, customer service, and others, and enable all the departments in a business to share the same goals, which are to improve customer service, increase customer loyalty, and acquire new customers.
Marketers 'Free Restraints' With CDP
Many marketers may think of CRM as simply a database with customer or sales contact information, but Gartner defines customer relationship management as both a business strategy and technology category, according to Foo Kune. CRM application functionality can cut across a bunch of disciplines: sales, marketing, customer service, field service and digital commerce, she added. "And this is also why most organisations report that they have multiple CRM instances and no real unified customer database," Foo Kune said.
CRM software is generally a solution focused on sales and service, and not intended to support real-time marketing, according to Foo Kune. Furthermore, marketers look to CDPs to free themselves of the constraints of CRM. Most practitioners will say they have a lot of CRM databases, but they actually mean, "We have a bunch of relational databases or tables of names and contact information," according to Foo Kune. "CDPs," she said, "offer marketers a way to manage big, unstructured data, which is a modern way to meet their needs."
CRM applications are designed for sales teams to capture, track and manage the details needed about customers and prospects during a sales process. But it's not as if marketing never touches CRM. It very much does.
Marketing activity does come into the CRM through data integrations with marketing automation platforms, or by capturing sales activity from sales reps and their tools. Transactional information is added from financial systems, and service activity is pulled from customer support systems, according to Frank Moreno, vice president of solutions marketing at Bottomline Technologies.
The Similarities and Differences of CDPs and CRMs
Customer service professionals and sales professionals typically use CRMs, as they are customer-facing positions. By simplifying the management of customer relationships, CRMs enable customer-facing professionals to gather more leads while retaining current customers.
“While CRMs are a key part of many businesses’ stacks, they are fundamentally different from CDPs. They were designed for a different purpose. It all boils down to the type of data each tool collects — the target user of a CRM is also different from that of a CDP,” said Bullock. They are not mutually exclusive, however, as many brands may find it useful to use a CDP in conjunction with a CRM. “CRMs help manage customer data in a sales-focused environment — but do not collect data across channels — so the two can still accompany each other for varying business needs.”
CDPs, on the other hand, are typically used by marketing professionals, as well as product managers, customer experience professionals, and sales campaign managers, as their roles are non-customer facing positions. CDPs are used to manage and gain a better understanding of all customer data from across all channels, in order to make more accurate business decisions as they relate to the customer journey. This is accomplished by obtaining customer data from every touchpoint a customer has with a brand, and unifying it in one location.
CRMs are able to provide data about the interactions between customers and a brand, and the data is typically used by customer-facing employees who are going to communicate or interact with a customer. Through the use of a CRM, they have access to data about the customer such as their purchase history, customer service tickets, chat history, and more, which enables them to more effectively serve the customer.
CDPs typically use Application Programming Interfaces (APIs) and code to integrate with other software in order to gather data from locations where it may be siloed or otherwise difficult to obtain, and it is usually an automated process. The customer data in a CRM is typically manually gathered, and more challenging to automate, though modern CRMs are beginning to use automated processes as well.
What Role Do CRMs and CDPs Play In CX?
Although CRMs are not typically thought of as being used for improving the customer experience, there are several ways that they can be used for that purpose.
First, they can be very effective tools for enhancing relationships between brands and customers. Many CRMs include functionality that provides the ability to send automated emails to customers after a specified number of days past the customer’s last purchase. This allows brands to stay in touch with customers through the use of personalised emails that deliver relevant content, offers, coupons, seasonal promotions, and incentives.
Second, CRMs provide customer service support staff with instant access to every interaction that the customer has had with a brand. This includes chat history, purchase history, and customer service tickets, and access to this information enables customer service personnel to provide more informed, quick responses that leave customers feeling emotionally satisfied.
Brad Birnbaum, founder & CEO of Kustomer, a customer service CRM platform, told CMSWire that research by his company has indicated that 77% of customers expect problems to be solved immediately upon contacting customer service, and furthermore, 70% will cease to do business with a brand over what they perceive as poor customer service. By using modern CRM platforms “that provide a complete view of the customer, guided self service, and the ability to engage across all communications and social channels,” Birnbaum said, “companies are able to support their customers between 10%-25% more efficiently all while improving both customer and agent satisfaction levels.”
Third, many CRMs use AI and process automation to identify customer sentiment through analytics and facilitate faster responses to customer service inquiries and social media posts.
Finally, CRMs enable a finer degree of customer segmentation, which enables brands to understand how to approach each customer. Similarly, a CDP enables the hyper-segmentation of customers. This allows a brand to target specific groups of customers or exclude specific groups of customers who are not likely to be interested in what the brand is delivering.
By aggregating, unifying and analysing data from all of a brand’s channels, a CDP provides actionable insights that can be passed on to other tools in the MarTech stack to create the next best step in the customer journey. The single-person profile that is built by the CDP allows the creation of a hyper-personalised, emotionally positive connection with each customer. David Raab, founder of the CDP Institute, explained that a CDP creates a hyper-personalised experience by assembling detailed data and making it accessible in real-time. “Depending on the system, it could simply provide profile data for a personalisation system to process, or run models and algorithms to pick the personalised messages itself.”
Additionally, a CDP uses the data that comes from customers that have purchased from or opted-in to a brand to create a holistic view of each customer based on their specific preferences, past history, and current real-time behaviour. All of this allows brands to craft an exceptional customer experience through all of a brand’s channels.
CDP Connects Data Strategies
Brands can best understand customers through their data. Whether customers are making a purchase or looking for technical support, brands need data to properly communicate and build those customer relationships, according to Heidi Bullock, chief marketing officer at CDP provider Tealium. "Whether it’s data collected from a call centre or engagements via email, a real-time, vendor-neutral customer data platform (CDP) can help promote high quality experiences both in person or remotely," Bullock said.
Through data, CDPs offer a holistic view of the customer. They collect, standardise, enrich, activate and govern data across various channels immediately. Without a CDP, organisations will face a disconnect in their data strategies as CDPs are essential in unifying data from multiple channels and sources, Bullock added.
CRM Connects Sales-Focused Customer Data
Bullock said CRMs are also an essential component in many businesses' tech stacks. However, it is crucial to understand the differences between a CRM and a CDP. CRMs are different from CDPs in that each tool’s data capabilities are completely separate.
"Companies seeking a new strategy to form personalised customer experiences through data will need a CDP as it offers the resources to create a comprehensive view of the customer across each platform they interact with in real-time — whether it's social media, apps or mobile," Bullock said. "CRMs, on the other hand, helps manage sales-focused customer data rather than collecting data across different channels. Because of this, CDPs and CRMs can actually operate simultaneously, as they work to fulfil different business goals."
Both CDPs and CRMs are useful for enhancing and improving the customer experience. For customer-facing roles, CRMs are difficult to beat, because they provide access to the historical data that enables sales and customer service professionals to interact with customers in a more personalised and effective way. If the brand’s goals are to gain a better understanding of its customers and how they interact with the brand across all of its channels — in real-time — CDPs are invaluable tools in the customer experience toolbox.