CRM vs CDP: What’s Their Use For Your Business
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      CRM

      CRM vs CDP: What’s Their Use For Your Business

      CRM
      05/12/22
      13' read
      05/12/22
      13' read

      One of the most important aspects of running a business is having current and relevant information on who you’re selling to and what they’re buying. It could be easy to fall into the trap of capturing all this data and keeping it in one place, but that’s rarely the best solution.

      The right solution ecosystem helps businesses better manage the customer experience, including improving conversion rates and taking advantage of cross-selling opportunities.

      Customer data platforms and customer relationship management systems offer businesses a variety of methods for taking customer data from each step in their customer journey, capturing and correlating it, then analyzing it for insights that can be actionable and helpful.

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      In this blog post, we will help you understand what a customer data platform (CDP) and customer relationship management software (CRM) are — how they differ, and which one is ideal for your business.

      What Is CRM?

      Customer Relationship Management (CRM) is a tool that helps manage your company’s relationships and interactions with prospects and customers. It helps in organizing contact information and sales, and defines how a business communicates with its customers for a long-lasting relationship.

      According to a 2022 survey, CRM technology is all set to attain a value of around $128.97 billion in 2028, suggesting a CAGR (Compound Annual Growth Rate) of 12.1% in the next 7 years.

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      A typical CRM’s objective revolves around three major goals — to help acquire and nurture leads; boost conversion rate; increase customer satisfaction and retention. CRM software armors a business with:

      • Contact management
      • Pipeline management
      • Customer service
      • Marketing campaigns

      There are three primary types of CRM software:


      Operational CRM

      Operational CRM software helps you organize customer data, channelize marketing activities, and streamline the sales process. This tool is focused on simplifying and structuring all business processes.

      For example, Salesforce is a well-equipped operational CRM system that focuses on sales processes and collaborative work. Advanced automation help in low-stake decisions and smooth working within the teams. Its plans begin from $25/user per month.

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      Operational CRM software offers three kinds of automation:

      • Marketing automation — It helps your business by automating and evaluating marketing tasks to increase revenue growth. You can leverage customer-specific CRM data to create personalized promotional campaigns and cater efficiently to customer needs. For campaign management, you can choose specific communication channels (depending on customer preferences), allocate a budget, and assess campaign effectiveness.
      • Sales-force Automation — This allows you to automate the entire sales process. It helps you identify new potential customers, track B2C interactions, make sales projections, and handle documentation. This documentation further helps with lead generation which is the main forte of the sales-force automation process.
      • Service Automation — It helps you in the timely and efficient resolution of customer issues resulting in high-quality customer service. The stored interaction history can be readily accessed by the customer support executives to provide faster service to customer queries.

      Analytical CRM

      In customer-centric organizations, Analytical CRM software helps with data collection and analysis. This system assists targeted marketing campaigns by using data warehousing, data mining, and OLAP (Online Analytical Processing) tools.

      For example, HubSpot CRM is a full-scale CRM software that helps you analyze live chat support, upgrades to view in-depth sales analytics, and tracks the whole customer lifecycle. It has a leading free version and the paid plans begin at $45 for two users per month.

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      Analytical CRM tool equips your business with:

      • Consolidated customer information and secures them in a data repository.
      • Tailored interactions to improve customer relationships and increase prospects.
      • Improved efficiency of marketing campaigns by classifying the audience as per required parameters.
      • Enhanced prediction regarding customer deflection, which improves customer retention rate.
      • Financial predictions based on analysis of performance metrics.

      Collaborative CRM

      The goal of collaborative CRM is to help sales, marketing, and service divisions share historical data between them. It achieves this by letting teams work together in sync to meet an organization’s common purpose of customer satisfaction and revenue growth. It unifies the team effort by eliminating silos.

      For example, Zoho CRM provides essential collaboration and communication tools with plans beginning from a robust and free version to a $52/user per month plan. It offers ample customization and multi-channel marketing tools.

      [Source]

      Collaborative CRM comprises two parts:

      • Interaction Management — It allows you to get a 360-degree understanding of your customers by recording the B2C interactions and optimizing them.
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      • Channel Management — The collected data equips the sales reps to communicate effectively with the customers. This helps increase the efficacy of the communication channels.

      This is how a collaborative CRM system works:

      • In-built Chat Application — In-built chat tools help your teams to stay connected for better work management and a vast customer base. Real-time notifications keep the teams updated about important events and follow-ups.
      • Tagging Records — Tagging the data and documents with labels helps in the smart organization of the data. The deal-related record can be easily segregated using it.
      • Project Management — The task allotment of every employee is streamlined and all documents are stored in a centralized location. This helps eliminate duplicate data and makes task management easy by granting role-based access to the users.
      • Real-time Reporting — It absorbs insights from the visual reports containing information on pending tasks, leads, revenues, and sales predictions.

      What Is CDP?

      A Customer Data Platform (CDP) is a single location for all collected customer data from multiple sources aimed at creating a single database of customer interactions and touchpoints —which provides a single view of the customer and assists in identity resolution. This single source of data streamlines the process of the support teams.

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      It draws information from three types of data:

      • Behavioral data — It involves customer behavior on a website or in an app, on live chats or digital assistance, or the length and frequency of interactions.
      • Transactional data — It suggests how many times a customer has purchased or returned using eCommerce or POS (Point of Sale) systems.
      • Demographic data — This allows you to know the location and basic customer information.

      According to the statistical data of the CDP revenue study from 2020-2022, the CDP industry revenue was estimated to have increased by $2 billion (about 25%) from the earlier reported value of $6 billion.

      Most of the CDP data comes from first-party data, which is collected directly from the customers. But some data comes from third-party as well, i.e. the data that companies purchase or share with other businesses.

      The first-party data is useful for customer data integration (the process of consolidating and organizing customer data from different databases into a single customer view easily accessible with increased analytical capabilities).

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      For example, Insider is a CDP platform for individualized cross-channel experience. It utilizes machine learning (for its AI intent engine) to help enterprise marketers predict customer future behavior (by connecting with customer data across channels) and orchestrate personalized experiences for customers.


      Key Functions


      First-Party Data Collection And Consolidation

      CDP aims at eliminating any kind of miscommunication or lack of data sharing between teams. It connects the tools used by marketers and acts as a single source of first-party customer data (collected from email, CRM, analytics, e-commerce sites, social sites, etc.).

      Customer Data Management

      The first-party data, consumer privacy, and data right(s) must be protected and controlled while it flows between different marketing systems. This is ensured by CDPs.

      Customer Data Activation

      After the first-party data is collected, it is unified and organized into profiles. CDPs create audience segments which are then used across various channels and marketing platforms.


      Types Of CDP Systems

      To zero in on the best CDP for your business, you must familiarize yourself with the four types of CDP systems:

      • Marketing Cloud CDP — Available with well-equipped cloud service providers, this CDP is ideal for capturing data and allowing your business to work by accessing a single database.
      • Smart Hub CDP — This CDP type emphasizes marketing coordination and personalization with the help of a single interface. This allows organizations to access a simple, clean, and user-friendly back-end interface helping marketers to make the most out of the provided tools. This ensures an improved customer experience.
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      • Marketing Data Integration CDPs — Businesses that collaborate closely with data and development teams often require similar data collection, hence requiring access to a larger platform. These CDPs have reliable APIs (Application Programming Interfaces) and data governance capabilities. Also, they are flexible and easy to use. These CDPs are mostly used in combination with other visualization platforms.
      • Engines and Toolkit CDP — These are free and open-source solutions that are specifically intended for businesses that aspire to develop their own solutions.


      CDP vs CRM — Key Differences


      Functionality

      CRM is ideally designed for sales. It aims at increasing revenue growth and profitability while focusing on customer satisfaction and loyalty. A CRM tool focuses on organizing and managing customer interactions with your teams. In addition to letting you store customer information, this tool helps you in identifying sales opportunities, manage marketing campaigns, etc. in a centralized location.

      [Source]

      CDP has been specifically designed for marketing teams. Its primary function is to collect data — first-party data (mostly) plus third-party data — from various sources and consolidate it into one coherent and complete view of individual customers. This data is then made available to marketers to target and customize marketing campaigns.

      Data Ingestion And Management

      A CRM software’s capability is limited when it comes to channels and data sources it can use to extract the data. They deal with first-party data that has been derived from sales and marketing. They are mostly used for:

      • Managing customer data
      • Tracking transactions
      • Organizing customer records
      • Examining sales pipeline

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      CDPs are designed to derive data from every possible offline and online source. They combine the data including intent, behavior, and preferences of each customer by activity tracking. This helps in providing you with a complete understanding of your customers. It also helps avoid duplication of customer identities, profiling, and segmenting.

      The Purpose

      CRM is always directed toward building, tracking, and strengthening customer relationships. Being a user interface for data collection, CRM directly impacts enterprise revenue and growth. This makes CRMs a part of an extensive management strategy that helps enterprises to attain scalability with customer satisfaction.

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      CDPs are more analytical than CRMs. It comes equipped with the ability to facilitate data collection, profiling, and segmentation, and helps in taking the most appropriate actionable steps. It has become necessary because with expanding marketing, data integration and multichannel campaigns have become integral.

      Ideal For

      CRM tools help sales teams to capture, track and manage customer and prospect details in a sales process. According to a market survey conducted in 2020, among SMEs, about 79% use CRM tools for business growth and enhancement. Manufacturing businesses, professional service firms, B2B companies, etc. benefit the most from CRM.

      A CDP converts raw data into mature customer profiles that can be used for predictive insights and for actionable decision making. It is ideal if a business has an expansive martech stack. According to a study, firms with sophisticated data profiles are 7.9 times more likely to see revenue growth of about 10%. CDPs are being used by 25% of business marketers with nearly 24% expected to adopt them by the coming year.


      Wrapping Up

      Looking at CDP and CRM side by side, although both are data-driven platforms, it’s clear that each has its own specialty. CDPs are excellent for cross-channel campaigns, because they can pull from unstructured data and information from social media and your loyalty programs. They can tap into sources of information that CRMs cannot. But CRMs are built for managing the direct interactions and relationships you have with customers, between a company and its existing customers.

      The choice will largely depend on the use cases and what your business aims to achieve. If you intend to conduct extensive customer profiling and individualized marketing strategies, CRM software might be your best bet. With this option, you can have effective control over interactions with customers and better adapt to their needs over time.

      Conversely, CDPs are suitable for those businesses that don’t require a range of contact management tools. They give easy access to comprehensive information via one platform—a valuable asset for identifying potential trends in your marketplace or new business opportunities.

       

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