Understanding the Differences Between a CRM and a CDP

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Editor’s Note: This article was updated to reflect changes in CRM and CDP technologies and best practices.

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Customer relationship management (CRM) and customer data platform (CDP) systems are two of the major software systems that collect and manage customer data.

And while managing customer data isn’t just a hard-lined choice of CRM vs. CDP, it’s worth exploring the differences if you’re a marketer or someone charged with managing customer data and crafting digital customer experiences. This is especially true when you consider the promises of each technology are similar, according to Lizzy Foo Kune, senior director analyst at Gartner.

“CRM solutions were often proposed to tackle customer data management problems,” Foo Kune said. “The idea was that you could get ‘all of your data in one place’ to use for sales, marketing and customer service. The promise was they’d break down silos in enterprises and design a view of the customer that wasn’t specific to sales or marketing or customer service. That sounds familiar to the promise of CDPs, doesn’t it?”

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 organization’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.

Related Download: Customer Data Platforms Buyer’s Guide

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 organizations 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.

Related Article: Improving the Customer Experience: Should You Invest in a CDP or CRM?

Some Overlap, But Limited in Scope

Mark Beckner, owner and principal of Inotek Consulting Group, said the CRM space has expanded dramatically in the past several years. CRM overlaps with what was traditionally part of the CDP space. Platforms such as Microsoft Dynamics CE and Salesforce have solutions that manage traditional CRM as well as functionality that handles integration and the bubbling up of disparate data points that make up the full picture of a customer and the customer life cycle. Further, traditional CRMs like Salesforce, Oracle and Microsoft now offer CDPs. “In 2021, you can no longer separate the concept of CRM from CDP,” Beckner said.

Gartner predicts by 2023, 70% of independent CDP vendors will be acquired by larger marketing technology vendors or will diversify through M&A of their own to enter adjacent categories such as personalization, multichannel marketing, consent management, and/or master data management (MDM) for customer data.

“CRM systems have seen the competitive threat that CDPs brought to the table,” Foo Kune said. “As CRM technologies recognize that they need to update their aging databases to meet the needs of modern business functions, including marketing, augmenting your CRM with a CDP may be unnecessary.”

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 center 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, standardize, enrich, activate and govern data across various channels immediately. Without a CDP, organizations will face a disconnect in their data strategies as CDPs are essential in unifying data from multiple channels and sources, Bullock added.

Related Article: What Does the Arrival of Enterprise Players Mean for the CDP Market?

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 personalized 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 fulfill different business goals.” 

Related Article: 4 Ways a CRM Can Improve the Customer Experience

We’ve Been Here Before

Marketers have lofty expectations for CDP technology and may see it as a sort of saving grace to address customer data management issues, Foo Kune said. “If that sounds familiar, it’s because that’s what we all thought of CRM in the late 90s and early-to-mid ‘00s,” she added.

Much like CRM — with databases that might have existed across multiple functions in the enterprise — CDPs are at the risk of becoming a mess if deployed poorly. One common challenge martech teams face is that while CDPs are owned by marketing, many other business units seek unified customer data, ranging from sales and service to BI, finance and operations. The scope of data, and which workflows are supported, are key reasons that applications promising a “single view of the customer” often stall before reaching productivity.

“In reality, multiple views of the customer are often needed by an enterprise,” Foo Kune said. “As a result, disparate business teams have applications that their own business users need, as well as data stores that are maintained and integrated by technical users. For many, solving one business unit’s application needs may serve as only a short-term remedy.” 

That doesn’t mean that CDPs are not a worthy investment, according to Foo Kune. “I’m hopeful that organizations will have learned from past failures of CRM,” she said. “Organizations will certainly face obstacles in deploying a CDP, but the promise of a unified and central repository is a worthwhile endeavor — especially for marketing teams that are deliberate in how they plan and manage deployment and ongoing use.”





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