Distilling the Differences: CRMs and CDPs

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Customer Data Platforms: Solving the 5 Key Business Challenges in 2023

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To best serve your customers, you need marketing, sales and product data, and a way to collect and manage it. Two technology platforms: customer relationship management systems (CRMs) and customer data platforms (CDPs) can both fulfill this need. Customer Data Platforms (CDPs) are the newer entrants into this technology space and are often used to better understand customer behaviors for more personalized marketing and sales initiatives.

The confusing part is that most companies have been using Customer Relationship Management (CRM) systems for years. And in response to the availability of CDPs, many software providers are augmenting or modifying their current CRM offerings to include some of the features of a CDP.

So how do you know which one you need? The answer isn’t that easy — they aren’t mutually exclusive. Of course, there are many differences as both deal with customer data in a unique way. And there are similarities as some functionalities can overlap.

It’s not about choosing between them — you need to know the differences to use the right system for your individual needs. Let’s break down CRMs and CDPs and why you might need one or the other, or both.

What Is a Customer Relationship Management system (CRM)?

CRMs solutions track and manage interactions with prospects and customers. They are primarily a sales and marketing tool and are used to keep track of customer data in one place. With operational CRM, processes can be included:

  • Teams can track the status of leads and identify those that are likely to convert or need more nurturing.
  • Tasks can be assigned to the sales team based on customer interactions
  • Personalized email campaigns and communications based on customers interactions and interests

What Is a Customer Data Platform (CDP)?

CDPs gather and unify a wide variety of data from marketing and point-of-sale systems, websites, and social media, as well as your ERP and CRM, and eCommerce solutions. The platform unifies and cleans the data and makes it available to systems throughout the organization to support the building of customer profiles, segmentation, and more targeted marketing. Rather than a single tool, a CDP is a cloud-based platform of tools and web services that unifies customer data from multiple source systems.

With the right reporting and analytics tools integrated with a CDP platform, non-technical people like marketers can produce advanced analytics, including reports, dashboards, and KPIs, that provide customer segmentation and sentiment insights they can use to personalize marketing campaigns and customer interactions.

Who uses CRMs and CDPs?

CRM applications are primarily used by sales teams and customer service, to track transactions, manage customer data, examine the sales pipeline, and maintain customer records of prospects and customers within the sales process. In these customer-facing roles, contact management is critical, so a CRM’s ability to capture notes and manual inputs about one-to-one interactions facilitates that function. 

CDPs are primarily for marketers, product development, and a company’s leadership. Marketers can use segmentation to better target priority audiences, while in-product behavior and product reviews can guide engineering and product development. Leadership can also use a CDP to better understand the lifetime value of their customers and the overall cost of acquisition. Sales teams and other customer-facing roles can use a CDP to help create personalized, account-based sales and service interactions. Thus, CDPs can be used by a wide range of company employees, depending upon their needs and the workflow they are engaged in.

How do CRMs and CDPs gather and manage data?

CRM data is generated by salespeople manually or through automation to enter contact engagement and sales activity; this is often referred to as first-party data about your consumers — the data that only your organization possesses. CRM data is tightly focused on logging an interpersonal or transactional interaction — for example, notes from the latest sales call — to inform future interactions. Additional data can come into a CRM system through integrations with marketing automation platforms, ERP or financial systems, and customer support systems.

CDPs, on the other hand, can aggregate all kinds of structured and unstructured data. To be useful, a CDP should provide pre-built connectors to ingest data from a myriad of sources and integrate that data with all channels of consumer interaction — transactions, website, mobile engagement, email, or customer service calls. It should also provide integration capability to the CRM, operations, finance, and BI platforms you are currently using.

Once data is ingested, a CDP standardizes and transforms all this data by matching individual customer identities from each system (called identity resolution) and combining them into a single consistent and accurate customer profile. Then the profile data is used as input to a variety of processes and systems, for example, analytics, marketing automation, personalization, and social media outreach.

CDPs make it easier and faster for nontechnical people to access and query data. When integrated with reporting systems, dashboards and reports can provide data in a way that makes it actionable. Specifically, the retail sector has benefited from CDPs producing customer profiles that optimize marketing efforts in real-time.

What are the key differences between a CDP and CRM?

A CDP is not a customer relationship management (CRM) platform. You may have been confused because they both store customer data. But that’s where the similarities end.

The architectures of CDP and CRM solutions vary greatly. A CDP deployment is built on a data lake architecture that has been optimized for big data processing. It can match and merge data across various sources and handle large data sets in real-time. CDPs can also connect to machine learning and data engineering to provide more predictive analytics.

A CRM solution, on the other hand, is a persistent database that holds personally identifiable information (PII) regarding your prospects and customers. While CRMs help optimize a company’s interactions with existing customers, the customer view is limited because it only considers direct interactions.

Third-party data gathered from internal and external sources.
First and second-party data can be integrated
Data SourceFirst-party data—known customer and prospect PII manually entered by company employees
Transactional, behavioral, demographic, and social data related to prospects and customersData TypeTransactional and relationship data sourced from company interactions with prospects and customers
Marketing, IT, and company leadership as well as sales, customer service, and store associatesAudienceSales and service professionals
Unifies customer data for omnichannel purposes to drive customer acquisition and retentionPrimary UseCreates and stores customer account and prospect records to increase sales and service efforts and close prospect leads

Can CRMs and CDPs Work Together?

While CDPs and CRMs offer different marketing and sales data management solutions with differing strengths, you don’t necessarily have to choose between them. Each serves a different and valuable role in improving the customer experience.

To leverage the rich source of PII and behavioral data in a CRM, you can pull it into your CDP where it is normalized and becomes part of the overall customer profile in real-time. It’s also possible to use CRM as an input channel from the CDP, however, that is done less often due to the integration difficulties in many CRM systems.

Which One Is Right for You?

It all depends on what you are trying to accomplish. What’s for sure is that being able to make sense of and use data is a table stake. You can use both, and it may be a question of your maturity with one system or the other.

A CRM system alone might be fine for your organization if your customer data is simple and easy to unify and analyze, and personalization isn’t a requirement or goal. You may have already connected your CRM system with a marketing automation system, and it’s working well for you. However, as the number of customer channels grows, your marketing automation system may struggle to leverage data from all the online and offline channels.

You may consider investing in a CDP along with your current CRM system if you need to better understand who your customers are and want to use the information to drive marketing and personalization efforts. CDPs are designed to help you create and deliver true omnichannel and cross-channel marketing campaigns at scale.

You can use both in tandem, but keep in mind that if deployed and managed poorly, you’ll end up with a mess of data and not much more.

Thus, you need to ask yourself:

  • What does your existing marketing technology stack look like?
  • What data management technologies are already in place?
  • What gaps are you trying to fill?

We Can Help

Hitachi Solutions can help provide clarity into your current CRM system’s capabilities and gaps and help you distill whether you need to consider additional integrations or a full-fledged CDP solution. We have nearly 20 years of working with the full Microsoft stack and the right combination of industry and technical expertise to help your company develop and execute a comprehensive customer service and experience strategy.

Connect with us today!