5 min read

What is a Customer Data Platform?: CDP Definition And More

Holly Shuffett
Holly Shuffett
Updated on
March 20, 2023

Today, prioritizing convenience and tailored content are crucial for a positive user experience. Big retailers like Amazon reflect these very values with recommended products and seasonal buyer’s guides. And with Forbes’ anticipated 10.4% increase in ecommerce sales for 2023, it’s clear that now is the time to put users first. 

That’s where customer data platforms (CDPs) come in. CDPs are an increasingly popular investment for many businesses looking to meet consumer needs in an efficient, future-focused way. According to a 2022 Statista report, 86% of marketers expect to renew their CDP contract year over year.

So, what is a CDP? And is it worth the investment? Let’s find out. 

What is a CDP?

A customer data platform, typically called a “CDP,” is a marketing software tool which allows businesses to collect and manage customers’ first-party data. The main appeal of CDPs is that they act as comprehensive hubs, unifying data from multiple sources to create holistic insights into consumers. This lets marketers efficiently analyze, reach, and develop messaging strategies which can help businesses maximize their existing data. 

By definition, CDPs meet all of the following criteria: 

  • CDPs ingest real-time or batched data from any source. Digital sources typically include behavioral data, which tracks consumer actions; transactional data, like purchases or returns; and demographic data, like a consumer’s birthday or location. 
  • CDPs capture full details of ingested data. Some CDPs, however, recommend only ingesting necessary data to eliminate higher storage costs and slower calculations. 
  • CDPs store ingested data indefinitely (subject to privacy constraints). 
  • CDPs create unified profiles of identified individuals. CDPs take information from independent sources to identify users and build new, integrated profiles that can be used for audience segmentation. 
  • CDPs implement relevancy, propensity, and other behavioral and preference-based intelligence. 
  • CDPs can share data and audiences with other systems. 

To avoid conflating CDPs with data warehouses or other storage solutions, ask if it meets the above criteria. If the tech doesn’t satisfy all of these qualifications, it’s likely not a CDP. 

how a cdp work scheme
Source: The Customer Data Platform Resource; CDP.com

CDP: What it’s not 

It can be easy to confuse CDPs with customer relationship management (CRM) systems or digital monitoring products (DMPs). Let’s explore the differences between these three kinds of tech to better understand everything that CDPs have to offer. 

CDPs vs. CRMs 

While both CDPs and CRMs collect customer data, CRMs are more business-focused, organizing and managing interactions with existing customers and your team. Since CRMs can also store information on partnerships, suppliers, and other servicers, they’re a relevant tool for business areas beyond marketing, like sales and HR. Some well-known CRMs include Salesforce, EngageBay, and Hubspot. 

CDPs differ from CRMs because they more broadly collect data on customer behavior with your product or service. CDPs best serve marketers and advertisers since they have the added benefit of collecting data on both existing and prospective buyers. Not only do CDPs offer more in-depth customer insights, but they also help teams develop what audiences to target and with what kind of messaging to drive revenue. 

CDPs vs. DMPs

The boundary between CDPs and DMPs can seem less distinct since both collect and organize vast amounts of data. The key difference boils down to where DMPs get their data from. 

DMPs collect and manage large data sets obtained through transactions with a data seller or by having such a large consumer base that their data could be aggregated and anonymized. CDPs, on the other hand, deal with first-party data owned by a business. This eliminates issues like a short data retention period or less-specific customer data.

First-party data Third-party data
PII Anonymized data
Retain data for long periods of time Avg. 90 day data retention period
Mostly used in marketing and integrated with ad tech Mostly used in advertising

There are some DMPs that work with first-party data, and therefore, see a lot of overlap with the mechanics of a CDP. For a better look at how first-party DMPs work and differ from CDPs, check out our article here

What’s the market value of a CDP? 

In the previously mentioned report from 2022, Statista also found that CDP industry revenue boasts an estimated $2 billion. This figure is an impressive 25% more than 2021’s previous value of $1.6 billion, showing the immense growth and popularity of CDPs. 

With 161 different CDPs currently on the market, many marketers are already onboard with the new tech: 

  • 47% of marketers say they will increase their CDP budget over 25% in the next 5 years. 
  • 56% of marketers expect a ROI of 5-10x from a CDP.
  • 62% of marketers say they will spend over 100K on a CDP.
  • 86% of marketers retain their CDP.

With this cadence, it’s increasingly likely that marketers will either adopt a CDP or risk being left behind. 

Why buy a CDP? 

According to the Customer Data Platform Resource, these were the most cited reasons marketers invested in a CDP: 

  • Customer acquisition
  • Customer value
  • Customer retention
  • Unified customer view
  • Analytics

As the industry continues to shift emphasis from third-party cookies to first-party data, marketers and ad publishers are met with an increasing demand not just for data collection, but also for in-depth data insight and understanding. 

First-party data isn’t hard to come by, but understanding how to leverage it, especially in a cost-efficient way, is the tricky part.

Do companies build their own CDP in house? 

Most mid-size to small companies don’t have the resources to build an in-house CDP. Even with the right resources, businesses might still shy away from adopting their own due to the complexity of it. Building a CDP from the ground up involves cleaning and sifting through troves of data, and building integrations with countless partners. 

Larger tech-focused companies who aren’t strangers to data aggregation and standardizing might want to build their own version of a CDP. Working with one is typically a marketing-led initiative, so it makes sense that a development team might insist on building their own. But the reality is that buying a CDP is faster, simpler, and never costs a company its data; sometimes, the solution really is that simple. 

CDP at Kevel 

Here at Kevel, we can help you maximize your first-party data to help grow your business. All signs indicate that CDPs are on the rise and you don’t need to be a tech giant with the right resources to own and leverage your data. 

Kevel Audience is a customer data platform which provides first-party data collection and segmentation for audience activation and personalization, all deployed on a private infrastructure. Privacy and security is at the forefront of Kevel Audience, alongside effortless integration with platforms like Google and Facebook.

Learn more about how Kevel Audience can help you launch your first-party CDP

All ad tech in your inbox

Subscribe to our newsletter to stay up to date with the latest news.