When it comes to managing customer data, there are many viable options on the market. Master Data Management (MDM), and Customer Data Platform (CDP) solutions are frequently considered by businesses. They all have significant differences, but they’re all marketed in such a way that they appear to be the same.
They are not interchangeable. An intuitive choice may meet immediate needs, but it may be vulnerable to challenges or re-implementation as new capabilities are required. Prior to engaging with vendors and analysts, it is recommended that you complete an internal discovery process.
In order to help you in this discovery process, today we present you a detailed analysis of differences between Customer Data Platform and Master Data Management. This article talks about both concepts and also lists the main differences between the two. We hope after reading this piece you will have a crystal clear understanding of both CDP and MDM. With that, let’s begin!
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Defining the Terms
Before we begin with talking about the difference between Customer Data Platform and Master Data Management, let us explain what these terms actually mean. Here is a brief definition for you:
What is Customer Data Platform(CDP) ?
According to the CDP Institute, “Packaged software that creates a persistent, unified customer database that is accessible to other systems, is a Customer Data Platform.” It’s a pre-built system for collecting customer data from a variety of sources and provides access to other systems for marketing strategies, customer service, and other customer experience strategies.
Customer Data Platforms combine data from a wide variety of first-, second-, and third-party sources to create customer profiles. Your CRM and DMP, transactional systems, web forms, email and social media activity, website and e-commerce behavioral data, and more are all included.
What is Master Data Management(MDM) ?
Master data management (MDM) entails combining data from internal and external sources and applications to create a single master record for each person, place, or thing in a company.
This data has been de-duplicated, reconciled, and enriched, resulting in a reliable and consistent source. Once created, this master data serves as a trustworthy view of business-critical data that can be handled and shared across the organization to improve accuracy, reduce data errors, eliminate redundancy, and assist workers in making better business decisions.
An MDM’s primary purpose is to provide a ‘master record’ that guarantees data accuracy, consistency, and reliability across all corporate data. MDM enables multiple departments within a company to try to ensure its master data assets can be shared throughout the organization, providing professionals with the appropriate data to meet their business needs by pooling data into a single point of reference (master data files) and tracking the most important data points within a company.
Use Cases for CDP and MDM
Even though Customer Data Platform and Master Data Management may be talked about simultaneously, the cases of use for both platforms are quite different. If we talk about CDP, this technique is made when prospects need to be converted into customers quickly. It can be said that the use of CDP is to ensure rapidity of customer conversion.
The data which supports this use case is usually less detailed and has no identifying qualities of a customer. CDPs link conversations associated with descriptors like email addresses, cookies, MAC addresses. These identifiers are used to drive prediction models so you can take the next best action or send the right offer at the right time.
On the other hand, Master Data Management is more personalized and in-depth. The use of MDMs is to increase the engagement rate of pre-existing customers. MDMs use and go more in-depth with the already existing database of knowledge about customers.
This data is structured, and it necessitates governance processes to create a single trusted view of customer data from multiple sources. The ultimate goal is to provide the most complete and trusted information to marketing, sales, support, finance, operations, and legal teams so that they can do their jobs more effectively.
Advantages of CDP
Here are some key advantages of using Customer Data Platforms:
Discovering new Audience Segments
It’s fairly easy to segment your customers and audiences and apply basic and advanced analytics when all your data is in one place. Even though the customer data management platform does not perform segmentation, it is a valuable resource. Marketers must still use software that sits on top of the CDP to set the conditions for the segment of several audience groups.
All data in one place
Which information should you rely on? Data from the first, second, or third parties? All of them, and all in one place, is the answer. Companies frequently have difficulty combining and utilizing all of the data they collect. It is impossible to get the full picture if data streams are not centralised, especially since they come from various sources.
Customer 360-Degree View
Companies can identify every part of the customer journey, products, and transactions with a 360-degree view of the customer. It aids the company in gaining a better understanding of customers and their behavior. As a result, having a complete picture of the customer allows sales, marketing, and service teams to strategically promote the company’s products to the right people at the right time and place.
Advantages of MDM
Here are some key advantages of Master Data Management systems:
Better Data Quality
Bad data is eliminated as the MDM application streamlines the data. As a result, users will be able to work with more current data of higher quality and thus more useful.
The usability of master data can be harmed if it is stored in multiple locations such as different formats, traditional spreadsheets, and isolated applications. Furthermore, inconsistency in data formatting reduces the productivity of various processes that rely on master data to complete their tasks.
Gets Rids of Data Duplication
One of the major issues with decentralised data applications is redundancy. Data duplication causes a great deal of confusion, which can lead to errors in the master data process and other business processes that rely on master data.
An MDM solution creates a single data source, eliminating data duplication and improving the efficiency of business processes.
Better Data Accuracy
MDM eliminates data duplication and inconsistencies. Because discrepancies in master data have repercussions throughout the organization, it’s critical to get it right at the master data level. As a result, the risk of data inaccuracy is reduced. It also gives the data a logical structure, eliminating ambiguity when retrieving data from the application.
Key Differences between CDP and MDM
Let’s take a look at some of the key distinctions and approaches between MDM and CDP.
Data management
Both Customer Data Platforms and Master Data Management can handle huge amounts of data. However, bad data is of no use to any business. A CDP is unable to distinguish between good and bad data. Once the data is in the system, there are no rules for dealing with bad data. As a result, the data’s worth is significantly diminished.
MDMs, on the other hand, are intended to produce unified data views. The system collects data from multiple sources and validates it to create a reliable data source for the organisation. Data from MDMs is frequently used in CDPs.
Contextualizing data
The context must accompany any type of data to be useful. CDPs collect and compare data, but they are limited in managing customer data hierarchically. MDMs are far more suited to this task.
MDMs help businesses understand which two customers are related, which customers are also suppliers, and so on. Understanding how customers interact with one another and with the various parts of a company provides valuable operational intelligence.
Multi-Domain vs. Single-Domain
Data is complicated, and different domains frequently interact with one another. CDP provides an excellent view of customer data within a domain, but it is a siloed customer view. Users can use a variety of rules to match data for various purposes, and each application can use its IDs to unify data within the CDP.
MDMs offer better functionality if you need a multi-domain view. A business can see the different factors affecting it by organising data with cross-domain relationships in mind. For example, you can see the types of products sold to a segment of customers and the modes of purchase to improve promotions and, more precisely, target customers. MDMs adhere to stricter rules when it comes to matching data sources.
Integration of data
The marketing team is considered when creating CDPs. It gathers structured and unstructured data from various marketing applications to assist the marketing team in determining what or why a customer is doing something and, as a result, what the next step in wooing the customer should be. Further integrations are not possible with this system.
MDMs, on the other hand, are intended to establish a single source of truth. They are not limited to marketing and can collect and send data to various enterprise applications. It can be used for business analytics, data-driven decision-making, and so on.
Conclusion – Which One is Right for you?
Now let us dive right into the main question for the day: what is right for you? Well, that depends on the type of goals you wish to achieve. Let’s talk about both the concepts and their ideal use.
CDP will be the perfect option if you want to provide real-time personalisation for your clients. CDPs can be used to power a personalization engine, allowing for that elusive personalised experience and decision-making based on the next best action. CDP would serve the purpose very well if one of your goals aligns with behavioural retargeting. Similarly, some other purposes that CDP would serve for you will be Account-based marketing, Lookalike advertising, Feedback loops, and tracking marketing campaigns.
Let’s talk about MDMs now, MDM enables data-driven and informed decisions, making it a must-have for any modern business. MDM also ensures that there is no duplicate data, that a record system is identified, and that changes in data are propagated to the various other systems that rely on that data.