CuriousOwl

CRM and CDP both seem like two sides of the same coin. Marketers often get confused with both platforms. Because the use of both platforms almost looks similar. Both are utilized for enhancing customer interactions. Both are customer data-collection software. Both are used in providing more personalized interactions with customers to deliver quality assistance to customers.

With so many similar functionalities, anyone can get the idea of both being the same and may use them interchangeably in describing them. But in reality, though they may share many things in common, they are pretty different from each other and vastly used for various purposes.

As a modern-day marketer, it becomes very critical to understand differences between and two and have explicit knowledge of how and where to use both platforms to increase the overall efficiency of the organization’s approach towards customers.

Brief history of CDP and CRM

The idea of CRM came around the 1990s when people started realizing the need to personalize the interactions with the customers. There was an increased demand in keeping and maintaining a seamless record for all communications with the customers in one platform. Not only just details of the existing customers but also prospective customers. It was required to have an accessible, go-through repository at their disposal, which they can utilize whenever there is a requirement.

Fast forward, around 2000, Salesforce introduced their CRM Product with some enhanced capabilities to track and manage customer interactions. It just revolutionized how customers relationships were maintained using cloud-based software. The sales and marketing teams were now empowered with information usually ignored in the past, usually due to data negligence.

CRM to date is used extensively by several organizations to manage and track day-to-day interactions and activities with their customers. But, in early 2010, people started to realize that CRM could not fulfill their needs in many aspects. Many things were missing on the platform. No single unified view of customers, data duplication across all departments within the organization, extensive dependence of IT department for getting required data, personalization was happening but not at the organization level.

By 2013, all issues led to developing a new product as CDP(Customer Data Platform), which can help solve these issues and take a unifying data approach across all departments within the organization. It helped in bringing valuable insights with available data. CDP is an evolution of CRM platform, keeping marketing as the central front. Data analysts and marketers started figuring out ways to utilize this robust first-party data by integrating all customer data into one single source and creating a seamless connected customer journey across all channels used by the marketing team to have better and more personalized interactions with the customers.

Let’s deep dive further to understand more about both platforms :

What is CRM(Customer Relationship Management) platform?

Definition of CRM

“technology for managing all your company’s relationships and interactions with customers and potential customers”

Salesforce

CRM(Customer Relationship Management) is software used in tracking all the interactions with the current customers(clients) and potential customers. CRM is primarily designed for the sales team, which helps them handle all communications with the customers and maintain records.

Types of CRM

There are three major types of CRM –

1. Operative CRM – This CRM is used in automating streamlining business processes in the organization. It includes Marketing Automation, Sales Automation, and Service automation. It helps generate leads from potential customers and keeps records of all the details and communication. This CRM is utilized throughout the customer lifecycle. 
2. Analytical CRM – It helps top-level management gauge the organization’s overall performance and its department and understands the effectiveness of marketing, sales, and service teams. It helps identify insights from customer data and make informed decisions to administer and improve each team’s overall performance to do their job more efficiently. 
3. Collaborative CRM -Also called Strategic CRM. The primary purpose of this CRM is to share Customer Data with the internal team of the organization. And they are collaboratively using that information to improve the service quality and enhance customer experience. 

Main Functions of CRM

 There are many uses of CRM in an organization. It helps to streamline all significant activities and identify the issues related to processes or in the departments. Following are the main functions of CRM:

• Lead Management: Managing details of Prospective Customers is very crucial. CRM helps record all the details such as Name, Email Address, Phone, Location details, etc.; it also keeps track of the customer interaction details where it left off. 
• Automation: Whether it’s Sales Automation, Marketing Automation, or Service Automation, CRM helps in automating all types of business processes for increased efficiency and reducing the time which usually takes to solve any issue or assisting customers with any requirement. 
• Reporting, Analysis & Forecasting: With all the Customer data available in the CRM systems, it helps management in regular reporting, analyzing the facts & figures to gain insights for making informed decisions. It also helps in forecasting and making projections based on past data collected.
• Task Management: CRM helps in distributing and allocating necessary tasks to all teams and respective individuals. It keeps track of all functions’ status and informs task owners whether everything is working as per schedule timings or a delay. 
• ERP & Finance: CRM helps integrate and maintain the finance processes, supply chain, operations, HR, and manufacturing activities. All this comes under ERP(Enterprise Resource Planning).
• Maintaining Customer Record & Interactions: Also called Contact Management, CRM helps in keeping a detailed record of all existing customer details so that in any case, if there is a requirement to cross-check those records, it’s easily identifiable, and CRM users can get all details with all previous communications with the customer. 
• Transactions Tracking: Whatever transactions, such as Purchase, Subscription, Cancellation, Upsell, Cross-Sell, all types of transactions with time and other details are recorded in the CRM system. 

How do Companies use CRM?

• CRM’s are used in the Automations of all Business Processes. 
• Sales Management. ( Whether it’s pre-sales or post-sales services).
• Collecting and Maintaining all data records for all departments. 
• Helping Upper Management for better decision-making using Reporting & Analysis.
• Projecting and Forecasting numbers. 
• Customer Acquisition with Prospecting details in hand. 

CRM Limitations

With so many variations of utility, CRM is a must-to-have software for any organization. It can help any organization to streamline their day-to-day activities and valuable insights with rich first-party customer data.

But still, there are many limitations to the CRM systems. Some of them are listed below:-

• CRM cannot provide a single unified view of any customer’s journey. It can only help get all details about the customer from each department, but integrating all these customer details to get a unified view about the customer cannot be done. Therefore, identifying and creating a Buyer Persona(A Customer Profile, which determines what type of customers are interested in your product or service) is impossible. 
• Data Duplication. Since all departments in the organization keep separate records for each customer, data redundancy becomes an issue. 
• You cannot easily create various audience segments from your customer database to utilize for effective marketing campaigns. 
• Using CRM, you cannot create an Omnichannel, personalized experience for your customers, which could have helped in increased customer engagement with your organization. 

To overcome all these limitations, CDPs came into play, which helps address all these issues, but can do much more, enhance the overall experience for the customer, and increase the CLV(Customer Lifetime Value).

What is CDP(Customer Data Platform) ?

Definition of CDP

“a marketer-managed system that creates a persistent, unified customer database that is accessible to other systems.

David Raab, founder of the Customer Data Platform Institute.

As the definition describes, CDP is designed to create a unified customer database used to develop a single view of the customer. It’s an advanced tool that is utilized in creating an efficient marketing strategy. It is used in creating audience segments and personalized messaging across all channels which any customer uses.

Types of CDP

There are mainly four different types of CDPs as categorized by the CDP Institute.

1. Data CDPs: These CDPs are the base CDPs that are available. These are used for collecting data from various sources(such as websites, apps and analytics platforms, etc.), link that data with Customer identities, create audience segments, and make it available to external sources such as Ad Platforms for targeting purposes. 
2. Analytics CDPs: CDPs have all the functionalities of Data CDPs and have advanced analytical systems. They are majorly used for Predictive modeling, advanced customer segmentation, and journey mapping. 
3. Campaign CDPs: These CDPs include functionalities of Data CDP, Analytics CDP, and customer treatments. Customer treatment means reaching customers with any personalized messages, marketing campaigns, real-time interactions, or product recommendations, which can be done across any channel.
4. Delivery CDPs: These systems have all capabilities of Data CDP, Analytics CDP, and Customer treatments and can do message delivery. This message delivery is not for the marketing campaigns available with Campaigns CDP’s but delivers messages through emails, push notifications, text messages, websites or mobile apps, etc. 

Main Functions of CDP

• Data unification: Data is available in multiple formats(structured and unstructured data) with different platforms in the organization, which creates data silos. All these data silos are identified and removed on the CDP platform. It makes a single unified view of the customer with all the touchpoints of the customer interactions. 

• Data Activation: Once customer unification is done and data is linked with the customer identity, data is exported to various systems such as Ad Platforms, Analytics software’s, Marketing Automation tools, etc., for marketing purposes. 

• Profile Mapping: User profiles are mapped whether with the same attributes or different attributes of the user. An attribute can be anything; it can be age, gender, or behavioral activity. It’s used to identify and create buyer persona’s to identify customer types. 

• Audience Segmentation: These are the customer segments that are grouped with certain common behaviors. This can be a certain type of customer interaction with the products and services across various channels. Once these segments are ready, they are exported for targeting on external platforms. 

• Message Delivery: CDP is used in sending personalized messages as per customer preferences via all available channels such as Email, Push Notifications of Mobile Apps and Websites, text messages, etc. 

• Analysis and Forecasting: Analysing performances of overall marketing efforts can be easily measured using CDP. It can help identify the ROI at the customer level and also helps in identifying Customer Lifetime Value(CLV). It helps in predicting overall sales volume, revenue, churn rate, retention rate, etc. 

How do Companies use CDP?

• Customer Matching and Journey design. 
• Marketing Automation.
• Creating Audience Segments for targeting marketing Campaigns.
• Identifying and Creating Buyer Personas. 
• Omnichannel execution for marketing campaigns and message delivery. 
• Machine Learning and Predictive Analytics. 
• Identifying and classifying both Online and Offline data based on customer behavior and attributes. 

Differences between CDP(Customer Data Platform) and CRM(Customer Relationship Management)

So far, you might have got an idea about both platform’s functions, characteristics, types, and utilization throughout the customer journey. And also, understood how they are different from each other. The below table will help further in describing the difference between CDP and CRM.

Attributes	Customer Relationship Management(CRM)	Customer Data Platform(CDP)
Data Sources	Structured Data such as Name, Email Addresses, Phone etc. are collected using CRM’s. It collects only Online data.	Structured and unstructured data such as cookies, IP addresses, and Mobile IDs are also collected in CDPs. It can also collect data from both, Online as well as Offline data.
Data Activation	Data is majorly used for Message delivery and Personal interactions with the customer. Customer interactions are manual.	Data in accumulated from various sources, and unified for a single customer view. That data is used by marketing across all channels. Customer interactions are primarily automatic.
Objective	They are majorly used for Automation, Record Maintenance, Lead Management, Contact Management, Task Management, Reporting & Analysis, Purchase Tracking, etc.	Majorly used for Omnichannel Marketing, Personalized Messaging, Building Customer Journey, Predictive Analysis, Identifying Customer Lifetime Value(CLV), Creating Buyer Personas, Audience Segmentation, and Profile Mapping.
Scope	CRM is meant to help perform tasks related to operational activities in the organization, such as supporting marketing, customer support, and sales teams to simplify their day-to-day business activities.	CDP is mainly for analytical purposes, such as helping upper management identify best marketing channels, insights on customer behavior and customer loyalty, and staying with the company, which will churn out. It helps in identifying valuable insights and taking actionable steps.
Built For	CRM is mainly built for Sales teams within the organization to track and maintain a record on prospects and existing customers. It helps them in maintaining communication and have much deeper personalized interactions with their customers.	CDP is mainly built for Marketing teams to identify actionable items by creating effective marketing strategies which can help in upselling or cross-selling to existing customers. It also allows marketers to gain in-depth insights into their customers’ behaviors to effectively identify new ways of engaging with their customers.
Data Duplication	In CRM, there are multiple instances of the same data present. There is no direct way of integrating data from all departments. Data is recorded differently in various departments.	In CDP, there is no issue of data duplication, as data is brought from multiple sources and integrated into one system. That data is linked to a single user identity(it can be an email address, phone number) and made available throughout the departments.
IT	The help of IT department is adamant with the CRM systems for setup and maintenance. Business Processes are complicated and can be pretty messy for a regular CRM user who does not have an idea or proper understanding of how to set up CRM effectively across the organization.	In CDP, the use of IT is very minimal. IT help is required only at the initial setup. CDP is designed keeping in mind the primary users of the product, the marketers, who are usually not very technical. Its built-in modules can handle complex processes at the backend, and marketers can directly input data of their use to get the output.

What are the similarities between CDP and CRM?

CDPs are nothing but the evolution of CRM platforms but from the marketer’s perspective. Following are similar characteristics of both platforms –

• Both platforms use First-Party data as their data sources. 
• Both are designed to increase the efficiency of customer engagement and enhancing communication. 
• Both platforms help in analyzing customer data and deriving insights about the customer. 
• Both platforms can help in forecasting and predicting future performance. 
• Both platforms are utilized for Customer Segmentation. 

Does that mean CDP can replace CRM?

Not at all !! You can take advantage of both CDP and CRM strategically together to get maximum results. Though they may have some similarities, that doesn’t mean that they both can be interchangeable. As you have gone through already, the core functionalities of both platforms differ a lot. CDPs are majorly meant to be used by Marketers, while Sales and other departments use CRM.

If you are starting with these platforms, the right thing will be to start with CRM first because this will help begin with data collection and take initial steps towards being data intelligent. CRM data is used as a data source for the CDP platform.
Once you have enough data on your customers, you can start leveraging that robust enriched data with the help of CDP to understand your customers at the macro level and get deeper insights into your customer’s behavior.

You can then move ahead and create marketing strategies, which construct on customer insights derived from CDP. You will be able to reach out to customers with more personalized communication across all channels.

Which one is right for your business?

Both can work as an integral part of your communication and marketing efforts. It depends on what type of work you are looking to accomplish within your organization. Suppose you want to collect and manage data about your prospective customers and existing ones. And want to enhance your relationships with customers, then CRM will work best for you. But it won’t help you get the single unified view of the customers.

On the other hand, CDP will help you better understand your customers with a single unified view. If you want to know your customers better and gain better insights for more informed decisions, you should go with CDP.

Summing-up

CDP and CRM both are having their place in the organization. It entirely depends on your use case on what you are trying to achieve in your organization at this point. Both are having some overlapping functionalities, but both are used for distinct purposes. CDPs are a little costly compared to CRMs but can be a beneficial investment.

As a growing business, you will mainly start with CRM, which will be utilized extensively in the company. But at some point, you will realize it’s just not enough. Then you should move ahead and opt for CDP to bring scalability and improved performance to your business.