Learning the difference between CDP vs DMP gives your business the ability to ethically and effectively use data to grow your business. A CDP focuses specifically on personal interactions customers have with a business, while DMPs use broad data sets from multiple sources.

When brands and individuals add over 2.5 quintillion bytes of data to the Internet every day, data management tools are a must-have to help you sort, use, and protect vast amounts of information. Without them, you run the risk of losing valuable first-party data for your next marketing campaign or failing to comply with data privacy protection laws (which could yield a hefty fine).

We want you to benefit from the power of customer data platforms and data management platforms. This guide will explore the strengths and weaknesses of both platforms, ethical considerations to follow, and how you can use these platforms to deeply understand your customer journey.

Key Takeaways

• A customer data platform helps you organize and sort through first-party data obtained through digital touchpoints, while data management platforms usually handle second-party and third-party data.

• Customer data platforms are crucial for gathering and understanding customer data to build personalized marketing strategies, improve customer relationship management, or craft accessible UX design.

• Learning how to use a customer data platform or data management platform is easier with a seasoned marketing partner. Rightpoint has several years of experience helping brands skillfully manage customer data to build smart, timely marketing campaigns.

What is a CDP?

A customer data platform gathers customer data from any digital touchpoint, such as your business website or your mobile app. It's a vital tool for creating customer segments, predicting customer behavior, or simply saving marketers time managing different sets of data.

A customer data platform is able to process and store all kinds of personally identifiable information, such as email addresses or full legal names. Ethical considerations you have to take into account are opt-in options and giving users the ability to delete their information on request. Not only are these features important for building trust, but your business could also face fines if it doesn't comply.

A CDP easily integrates into your pre-existing workflows and programs, such as a CRM. Many brands use CDP data to provide personalized messages in email marketing campaigns or give marketing teams deeper insights into their target audience's behavior.

The Difference Between a CDP vs. a CRM

A customer data platform can seem pretty similar to a customer relationship management platform since they both handle large amounts of customer data. Their key difference lies in the volume of data and the kind of data: a CDP focuses on large data sets across all digital touchpoints, while a CRM focuses mainly on customer-facing interactions.

For example, a marketing team may use a CDP to gather up information on customers that tend to frequent their business. After aggregating and organizing data sets, they can look for insightful patterns or contradictions that give a fresh perspective on their marketing strategy.

Meanwhile, the same marketing team may use a CRM to consistently attend to customer help requests or organize prospects and leads separately. With the help of a CDP, they can later generate useful ideas for their CRM, such as creating brand new customer profiles.

What is a DMP?

A data management platform is more general and gathers anonymous data from multiple audiences. This data originates from several sources, such directly from the platform, data collection companies, or a trusted seller.

A data management platform is helpful for crafting large sets of data to help advertisers more consistently connect with a target audience. When you think about it, the larger data size makes sense for narrowing down an impactful marketing strategy: will you rather use fifty people or five thousand people to get the bigger picture?

CDP vs. DMP: Key Differences

While a customer data platform and a data management platform both gather up large amounts of data, they generally differ when it comes to areas like storage and data types.

Data Types

Customer data platforms store first-party data, while data management platforms usually store third-party data and occasionally second-party data.

As a quick refresher:

• First-party data revolves around any customer data found through direct business interactions.

• Second-party data is data a business collects from a trusted partner, such as another marketing firm or a specialized business within the same niche.

• Third-party data involves large amounts of anonymous data from a data collection company.

Storage Duration

A customer data platform often stores information for a long time to gradually build a massive library of insightful information on a specific industry's target audience. However, you can also use it for short term data retention.

To contrast, a data management platform usually stores information for only a few months to keep information as fresh as possible.

Neither approach is better or worse - simply different. Long-term data retention is incredibly valuable for studying the growth of trends or building a bigger picture on a lesser-known niche audience.

However, constantly refreshing your data sets can be helpful for time-sensitive advertising campaigns in dynamic industries, such as travel and hospitality or global concerts.

Customer Identities

Since customer data platforms process multiple types of personally identifiable information, they're well-known for maintaining data security measures with features such as data encryption, permission and user controls, and authentication.

Data management platforms fundamentally run on broader and simplified information to sell large data sets to businesses. They're less specific than customer data platforms, and as a result, it's sometimes more difficult to verify their ethical data usage or data collection techniques. According to a 2023 study, almost 40% of customers want companies to be clear about their data usage practices.

Should You Use a CDP or a DMP?

The size of your business, the industry you operate in, and your marketing needs will determine which one is most effective. Generally, start-ups and small businesses tend to get more useful information with a CDP, while larger businesses fare better with a DMP.

CDP Works Well for Start-Ups Building Their Audience

According to a Statista study, nearly 55% of business managers favored first-party data because it offered higher quality information than other data sources. Since a start-up is in the beginning stages of building a core audience, large amounts of anonymous data from a DMP won't be as helpful for building targeted marketing campaigns.

Start-ups need extremely specific information from individual customer interactions to learn whether or not their campaigns are doing the trick. The best way to get this data is by letting customers simply interact with a business and studying their behavior.

Just keep in mind that setting up a CDP still takes time and money to set up. Jean Christophe Gabler, the publisher and founder of the wellness and lifestyle brand YogiTimes, has found the trade-off of a CDP's personalization is a higher time investment.

"Since I began using Customer Data Platforms, I deal with people in a very different way. I was able to fully understand the path of every customer by putting together info from different sources. As an example, when I combined web behavior with buy history, I could make more relevant offers, which increased the number of people who bought something."

Setting up a CDP isn't simple, though. It takes a lot of time, money, and care, especially when customers' habits change."

Consider a CDP if You're a Small Business with a Smaller Customer Base

Similarly, a small business with smaller profit margins may find the massive data sets of a data management platform to be too broad. This approach is even more true if the business operates in an underserved niche that needs to prioritize first party data over third party data.

In a short, customer data platforms prioritize personalization and unique information over the bigger picture. According to a case study in Customer Data Platforms by Martin Kihn and Christopher B. O'Hara, conversion rates on e-commerce sites rise by up to 20% after more personalization efforts.

Another case study they explored was the personalization efforts of a convenience store chain. After the chain noticed customers who enjoyed pizza often bought the same type over and over again, they customized their email newsletters to showcase pizzas the customers previously bought. This approach created a 16% increase in conversion rates after customizing email newsletters based on previous pizza purchases.

Use a CDP if You Have Several Digital Touchpoints to Manage

Lastly, a business that collects multiple types of data across several digital touchpoints will benefit from the convenience of a customer data platform. Having a single hub to organize several data sets will save marketing teams back-and-forth as they put together content, campaigns, or reports.

Larger Businesses Do Well with a DMP's Large Data Sets

On the other hand, larger businesses that want to scale and expand their reach will work well with data management platforms. Massive, aggregated data can give them broad overviews on customer behavior as they put together advertising systems.

A Trusted Seller Will Give Businesses Even More Value with a DMP

You may not always know where data sources come from with some data collection companies. When you work one-on-one with a specific seller, you'll become familiar with their best practices in gathering specific second-party data and third-party data.

That said, you don't have to choose between one or the other for your business strategy. You'll often get the most valuable data by filtering your customer experience through both platforms.

The Benefits of CDP and DMP Together

Ideally, businesses do best when they combine the strengths and weaknesses of each platform. While a CDP should be your go-to resource for high-quality first-party data, you can also turn to a data management platform for saving time on gathering larger data sets.

CDP Provides More Personalization, While DMP Provides Quick Overviews

When you need to dive deep into the psychology of a niche audience, a CDP is the way to go. You'll gather up first-party data directly fed through your digital touchpoints with no middlemen to dilute or erase valuable details.

However, if you're new to an industry and need the bigger picture, a data management platform will speed things along. You'll receive third-party data from a wide variety of sources that quickly and accurately show you how to craft customer personas, advertising campaigns, and more.

CDP Works Well for New Businesses, While DMP Is Helpful For Scaling

When you're just starting out with a new business -- especially if it's extremely niche -- a CDP will give you more valuable first-party information for learning about your target audience. As you grow and scale, a DMP can become a helpful tool for helping you target larger audiences or adjacent audiences in different industries.

Does that mean you should drop your CDP when you start growing your business? Far from it -- as we explored above, a CDP tends to work better with a DMP than without it.

We know studying the customer journey or putting together customer profiles based on data sets can be complicated. Instead of trying to wear a dozen different hats on your own, let us help you gather the data you need for your next marketing campaign.

Rightpoint Will Help You Organize, Protect, And Use Valuable Customer Data

Whether you're concerned about the validity of third-party data or want to start using more first-party data, we're here to help you start organizing all your data. At Rightpoint, we combine first-hand experience with modern tools to make sure you're not missing out on information you need.

Our customer experience suite provides a well-rounded selection of tools and processes to help you sort through all of your customer data and create the foundation you need for your marketing or advertising campaigns. We provide in-depth customer research as well as analytics and insights to start narrowing down what you need to take the next step in your action plan.

We also help you integrate mainstream customer data platform tools like Adobe Experience Platform into your existing workflow. When it comes to your unique business needs, we're not here to slow you down -- we're ready to get you caught up to speed so you can finally start growing your brand.

Contact us today to collaborate with us, start collecting data, and turning customer insights into tools you can use.