By: Reetwik Jha, Principal - Consulting, LTIMindtree

Customer Data Platforms (CDPs) are perhaps among the most revolutionary technological innovations in the MarTech world in the last decade. In a world full of siloed data, CDPs are designed to gather and organize customer data and share this structured data with customer engagement platforms.

To make it easy for businesses, popular CDP solutions available today are offered as packaged solutions. It provides structured customer data storage, identity resolution, audience building, and third-party API integrations with downstream systems. Businesses of all sizes have explored packaged CDP solutions to create a customer 360 view to power audience segmentation and personalization at scale.

According to a study by MarketsandMarkets, the CDP market size is expected to grow from USD 4.8 billion in 2022 to USD 19.7 billion by 2027, exhibiting a CAGR of 32.4%. A packaged CDP offers tightly bundled components of data storage, identity resolution, audience building, and third-party API integrations to send data models to downstream business systems. However, some of the limitations of a packaged CDP are driving innovations that are expected to disrupt the Customer 360 space in the future.

Packaged CDP limitations that are driving some of the innovations in the customer 360 ecosystem

• Bundle option only
  Businesses have no option but to pay for the entire package, even if they want to use only a single component.

• Data storage outside an organization’s data infrastructure
  Businesses must move customer data outside their existing Data Warehouse, creating a second source of truth. Moreover, how CDPs store and manage data is a black box for most businesses.

• Rigid data ingestion framework
  While CDPs are well designed to collect clickstream data, bringing other first-party attributes into CDP still requires complex engineering.

Most businesses didn’t have a data warehouse when packaged CDP solutions came into existence, but now, most businesses already have them. Hence, they seek a solution to activate their customer data in the existing warehouse. Moreover, businesses need more than just first-party data to personalize customer experiences. All this has led to many innovative solutions in the customer 360 space.

Disruptive innovations garnering attention in the customer 360 ecosystem

Reverse-ETL solutions

These solutions allow querying and copying data directly from a data warehouse, transforming the copied data into a state compatible with the API connection of business systems, and loading it into these downstream systems to activate it. Hence, they provide a way to forward data models directly from the data warehouse to downstream customer engagement platforms.

Zero-ETL solutions

This emerging next-generation approach is for scenarios where speed is important and data formats are consistent enough to let go of transformation before loading. It employs schema-on-read (data structure is applied at the time of query), and only the data necessary for a specific query is transformed (not the entire ingested data). Zero-ETL is commonly used in finance and healthcare industries that rely on real-time data for decision-making. However, traditional ETL is still required for scenarios requiring complex transformations to ensure the data is analytics-ready.

Data clean rooms (DCR)

DCR provides a secure environment for data partners to share data without revealing personally identifiable information (PII). Since first-party data can’t provide the necessary scale for personalizing customer-facing experiences, collaborating with data partners is crucial for businesses moving towards a cookie-less world. Understanding this opportunity, many CDPs have announced capabilities allowing the feeding of first-party data from CDP to DCR. It would channel back aggregated insights from the DCR in the CDP to enrich the customer 360 views.

Concluding thoughts

As the technology and domain mature, a data warehouse will be a foundation for a CDP. However, for businesses to be able to use a warehouse-first CDP solution, they must master the craft of capturing, storing, unifying, and governing their customer data. Each of these steps comes with challenges. Point solutions for each of these steps are available but are fragmented. A packaged CDP presents a holistic approach, eliminating the limitations imposed by the fragmented solutions.

DCR, as an extension of CDP, is likely to become more relevant in a world moving towards the absence of third-party cookies, as this will allow collaboration on anonymized first-party data. Encrypted data from CDP could be loaded in DCR and matched against PII to create lookalike audiences. Combining CDP with DCR could be a very useful solution for businesses that do not have a rich first-party data foundation. However, this would require their data partner to adopt the same CDP, which is a big task.

References

• Composable CDP Vs. Integrated CDP: What’s The Difference?, Brian Carlson, CDP.COM: https://cdp.com/articles/composable-cdp-vs-integrated-cdp/
• A technology blueprint for personalization at scale, Sean Flavin and Jason Heller, McKinsey, May 20, 2019:https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/a-technology-blueprint-for-personalization-at-scale
• Reverse ETL for Improved Scalability, Observability, and Performance of Modern Operational Analytics -A Comparative Review, Bibhu Dash, Researchgate, December 16, 2022:https://www.researchgate.net/publication/368816467_Reverse_ETL_for_Improved_Scalability_Observability_and_Performance_of_Modern_Operational_Analytics_-A_Comparative_Review
• Towards a Zero ETL Future, AIM Research: https://aimresearch.co/product/towards-a-zero-etl-future
• Data Clean Rooms: What Marketers Need To Know, CDP.COM:https://cdp.com/articles/data-clean-rooms-and-cdp-what-marketers-need-to-know/
• The Role of a Customer Data Platform, Seth Earley, Researchgate, February 01, 2018:https://www.researchgate.net/publication/323196693_The_Role_of_a_Customer_Data_Platform
• Customer Data Platform Market Share, Forecast – Growth 2027, MarketsandMarkets:https://www.marketsandmarkets.com/Market-Reports/customer-data-platform-market-94223554.html