Where Does a CRM End and a CDP Begin? A Brief History of the CDP

Dec, 4 2018

AdobeStock_102270095-1For marketers just starting to explore whether a CDP is right for them, there is a lot of confusion about the difference between CDP and CRM. Where does one start and the other begin? To understand the difference, it is important to start with definitions.

CRM stands for “customer relationship management.” But many years ago, with the rise of SalesForce CRM for B2B sales teams, the term “CRM” came to be linked solely with B2B, as a sales tool that tracks opportunities through the different sales stages – not as a B2C marketing tool. So for a long time, the term was hijacked by the B2B world.

In recent years, the term “CRM” has been reclaimed by B2C marketers who are using marketing-focused CRM-like systems to bring together customer data. There are two types of what I’d define as a B2C CRM: operational CRM and behavioral/ analytical CRM. Operational CRM (e.g., Microsoft Dynamics, Oracle RightNow, and SalesForce Service Cloud) is typically used to support customer service use cases, such as creating a customer record, creating tickets, or any use case where a representative is directly interacting with a customer.

So then what is an analytical CRM? This analytical CRM rose out of the challenge of customer data living in different silos. For example, customer data lives in the behavioral CRM system, but customer data also lives in systems such as the email service provider (e.g., what emails have the customer opened and clicked), the personalization engine (what segments does the customer belong to), the social sign-in provider (what social interests does the customer have), the ecommerce system (where the customer may have an account that indicates more than one ship-to address), the product review system (where a customer has shared product feedback), etc. A behavioral CRM doesn’t have access to any of these systems, or any of this important customer data. These additional systems create separate customer profiles, with corresponding transactions or events associated with each of these profiles. The role of the analytical CRM is to collect all the profiles and corresponding transactions and events, and do three key things.

  1. First, the analytical CRM must be able to identify the same customer everywhere that person engages: the store, online, through the loyalty system, product reviews, etc. The analytical CRM must be able to identify all email addresses, phone numbers, physical addresses, etc., associated with the customer, and resolve these identities into a clean, current master customer record that all systems can use.
  2. Second, now that the data is all in one place and resolved into a unified system of record, the analytical CRM must enable marketers to ask questions like, “Who are my most valuable customers?” “What promotions do they respond to?” “What product affinities do they have?” By learning the answers to questions like these, marketers can know how to personalize experiences, know what products to recommend, and know how to engage with those customers going forward.
  3. And finally, the analytical CRM needs to connect to and make this data available to customer-facing engagement systems (e.g., website personalization, ESP, online chat, etc.)

Customer data platforms have gained market traction in response to the need for an analytical CRM. And as I’ve defined it, a CDP is essentially an analytical CRM. An operational CRM is just one data input into an analytical CRM.

Also, analytical CRMs can support real-time web events (e.g., browsing, adding to cart, etc.); operational CRMs are not built to support real-time use cases.

When you think about CRM in this way, you’ll see that the idea of an analytical CRM / customer data platform is not a new concept. In one form or another, it has existed for the last 50 years, defined as customer databases or marketing databases. In the past, these traditional databases coupled with marketing service providers have been able to meet the analytical CRM needs of marketers.

But as the size, shape, and currency of customer data exploded with the Internet, mobile devices, and thousands of marketing tools and customer engagement channels, a traditional database with a services team enhancing it is no longer sufficient. This, plus the need to compete with Amazon by providing hyper-relevant customer experiences, has paved the path for the CDP.

Today’s customers now have endless transactional, profile-based, and event data that are important for marketers to understand. And this massive size of data, along with the need for marketers to be able to leverage data in real-time (which traditional analytical CRMs didn’t support), drove the analytical CRM industry into the cloud and launched the CDP industry.

What’s new about CDPs is that they are built on modern SaaS architecture to be infinitely scalable, with high performance, and to support real-time use cases—while giving marketers, data scientists, business users, and anyone within the organization who needs it, direct access to customer data and intelligence. This is why we have seen the skyrocketing momentum for CDPs in the last two years. A CDP is the best that an analytical CRM has to offer, with all the benefits of an extensible SaaS platform, fast data processing, and modern APIs.