The Future of Customer Data Platforms Needs to be Vertical

This article by Subra Krishnan, CEO, Lemnisk, elucidates the direction CDPs are headed in. It throws light on how cross-device analytics and experience/orchestration activation have naturally emerged as leading CDP use cases. It also explains the need for CDP companies to focus on solving vertical problems for a particular market.

Last year, especially towards the end, saw a lot of debates and discussions on Customer Data PlatformsOpens a new window , their utility and future, and whether they truly represent the “holy grail” of centralizing disparate data sources and simplifying complex orchestration processes.

In a matter of weeks between October and November, three fairly divergent views presented themselves:

• Forrester’s Joe Stanhope came up with a critical reviewOpens a new window of B2C customer data platforms. The central premise of the report was that CDPs have “over promised and under delivered”.
• Michael Katz, mParticle’s CEO, wrote a defense to Stanhope’s article and in the process tightened the definition of CDPs. His article defines and builds on the notion of “foundational CDPs” that focus exclusively on building and maintaining customer-centric data pipes. It says that CDPs are only just scratching the surface of their potential.
• Last year’s DMS West had a panel on CDPs and how “everyone is a CDP”. It was easily one of the most engaging panel discussions of the event and one that added more fuel to the fire. The inevitable consensus was – let the CDP space evolve.

Also Read: ) Be the Next Digital Experience Platforms (CDPsWill Customer Data Platforms (Opens a new window DXPsOpens a new window )?Opens a new window

Startups will obviously glorify and hype up the category. And it behooves analysts to temper expectations and bring buyers back to reality.

Here’s what we know for sure.

Barring rare exceptions, practically every company out there is struggling with exploding data. And barring rarer exceptions still, no one has been able to solve this problem at scale. Companies are either ill-equipped or are failing in massively high percentages in their attempts.

And so by extension, this is a vacuum that innovation will fill. CDPs Opens a new window are the right start and are here to stay. So what’s the real deal?

There are two obvious insights that everyone seems to miss but can give clarity on where CDPsOpens a new window are headed.

1. Poorly structured and disconnected data is not just a “Customer Experience” or “Activation” problem

In fact, it’s not even an exclusive digital marketing problem. Sure, the nature of early data sets getting captured is marketing-oriented. This is understandable. Marrying high volume, high-velocity behavioral data from mobile and web assets with other high variety of data sources brings incredible targeting benefits.

And so, cross-device analytics and experience/orchestration activation has naturally emerged as leading CDP use cases.

But digital marketing is not the only use case for well-structured data.

Let’s take the example of banks. Structuring bank data sources can have so many other benefits:

• Product teams start getting high-quality real-time data as they design new products or create up-sell/cross-sell offerings
• Data governance across the organization becomes centralized and simplified
• Analytics teams can start developing a nuanced, long-term understanding of users and start offering products to a user that they may otherwise drop or ignore
   

2. None of the players – large marketing clouds, identity resolution vendors or Google – would want to solve these vertical problems. They may not even be foundational CDPs.

This second insight derives by extension from the first. Large marketing clouds will keep solving horizontal digital marketing problems across various industries – and package them vertically for a particular market.

Vertical growth requires a deep-dive into an operating market. This means that an organization gets a chance to scale up its martech product within their line of business; as they are well-versed with the market dynamics and customer expectations.

Google probably couldn’t care less about whether core banking data can be processed and streamlined into the CDP. This means that all of these players will HAVE to be treated as “data sources” and not the central Customer Data Platform.

CDP companies need to start picking industries not called “E-commerce” and solve their digital marketing problems. They need to move to use cases beyond ones that involve DMPs (Data Management Platforms), DSPs (Demand Side Platforms) and other exotic three letter digital marketing acronyms.

And that’s where the CDP promise will get delivered. Where the data rubber will firmly meet the value road. Where founders need to stick to a hard vision.

Also Read: 

What Is Customer Data? Definition, Types, Collection, Validation and AnalysisOpens a new window

Where easily large TAMs (Total Addressable Markets) will shrink, widely cast sales nets need to be replaced with fishing rods, account engagements will have to deepen. That’s very difficult.

Does this sound boring? Like a lot of hard work? Great, welcome to 2019 and the future of the CDP!