Published On: 07 Nov 2023
Data is the lifeblood of any organization. From delivering personalized customer experiences to driving engagement and boosting profitability, everything hinges on data. CDPs (Customer Data Platforms) have made the handling of this data more cohesive, streamlined, and seamless. However, as the CDP ecosystem has evolved, different approaches to building and deploying these platforms have emerged. Two of the most discussed models in the current debate are "Packaged CDPs" and "Composable CDPs." What sets them apart, and how should enterprises choose the ideal fit?
Packaged CDP presents a ready-to-deploy framework, bundling together functionalities and tools tailored for specific use cases or industries. Whereas Composable CDPs offer a more adaptable, component-based structure, empowering businesses to select the elements that align with their objectives.
It's essential to factor in the requirements of your data and marketing teams when choosing the preferred CDP for your business. These teams, though interlinked, have unique roles and demands concerning customer data utilization. In this blog, we will delve deeper into the nuances of each, providing insights to help you chart the best path forward in your data strategy journey.
David Raab first coined the term in his 2013 blog post, 'I'veDiscovered a New Class of System: the Customer Data Platform.'
At its core, CDP in marketing refers to software that collects, centralizes, and organizes customer data from various sources to create a unified or 360-degree view of customer profiles. Other marketing tools and systems can use this unified profile to provide more targeted and personalized customer experiences. An IDC research indicates that 65% of CDP use cases are front office, such as real-time personalization, lead generation, campaign execution, and measurement.
Consider that you have two ways of constructing a LEGO castle set. The first way is to buy a pre-packaged LEGO castle set with a specific design, instructions, and all the bricks you need to build that one castle. This is similar to a Packaged CDP; everything is predefined, and you know exactly what the outcome will look like. We will discuss the other way later in the article.
A packaged CDP, also known as a bundled CDP, is a conventional ready-to-use solution. As described by the CDP Institute, it is "a software system that establishes a consistent, unified customer database, accessible to other platforms." A few packaged CDPs provide tools for setting privacy laws, implementing data governance procedures, and defining data quality guidelines.
Packaged CDP requires storing a duplicate of the data it collects to resolve identities (ID resolution) and create unified user profiles. Yet, the approach to identity resolution, whether probabilistic or deterministic, differs among vendors. Typically, a Packaged CDP provider allows businesses to craft their packages by blending fundamental features with supplementary tools.
These systems integrate foundational capabilities with business features, aiming to provide a holistic solution for collecting, consolidating, segmenting, managing, and leveraging customer data.
For companies that have yet to invest heavily in infrastructure or have significant gaps in any of the above areas, a packaged CDP is a compelling option. It offers swift benefits and caters to essential business cases dependent on customer data. Here are a few of them:
Packaged Customer Data Platforms (CDPs) leverage cloud-based data warehouses to manage and process customer information. The process begins with data collection, where these CDPs efficiently gather information from diverse sources like CRMs, websites, apps, POS systems, email, and social media. They handle various data types, including transactional, behavioral, and demographic customer details.
The next step is data unification, where the CDP breaks down data silos, merging info from various platforms to create a cohesive customer profile. Identity resolution is a vital part of this, as the CDP identifies and links different identifiers, such as email addresses and device IDs, to consolidate user interactions across various channels.
For data storage, the CDP houses this amalgamated customer data in a dedicated database, maintaining the information until actively removed, which assures a durable and reliable customer view. This centralized data then allows for sophisticated segmentation, providing businesses with the means to categorize their audience for more precise and personalized marketing outreach.
Lastly, data syncing is crucial; packaged CDPs are equipped with built-in integrations for a range of APIs, facilitating seamless data transfer to essential business tools like marketing automation, CMS, and advertising platforms, streamlining the entire process from data collection to campaign execution.
Coming back to our LEGO castle set example. The second way to build it is by having a collection of individual LEGO bricks of various shapes, sizes, and colors. You don't have a fixed design in mind, but instead, you have the freedom to pick and choose each brick, placing them wherever you like based on your creative vision. You can even modify your castle over time, adding towers, bridges, or whatever else you imagine. Composable CDPs follow a similar approach.
They consist of interconnected tools built from either open-source or proprietary software. Depending on its configuration, a composable CDP might possess all, or only some, of the features found in a packaged CDP. These platforms utilize open-source software, managed versions of open-source software, or specialized SaaS tools.
Instead of offering a fixed set of features in an all-in-one package, composable CDPs allow organizations to build, customize, and adapt their CDP based on their unique needs by choosing from a set of components or modules. They enable a single source of truth across the entire organization, greater flexibility, improved data security, and greatly reduced launch times.
Initially, CDPs gained popularity for tackling a fundamental issue in the martech space, bridging the divide between data and marketing teams. Yet, their closely-knit architecture also introduced additional intricacies. Composable CDPs present a solution to this dilemma, bringing along numerous benefits.
A Composable CDP isn't merely a black box that stores and manages your data. It lets you leverage your prevailing data collection, storage, and modeling methods.
Visualize a Composable CDP as the facilitator for audience engagement and management. It empowers you to create audience segments using first-party and third-party data and integrate them seamlessly with your essential marketing tools. This could range from advertising platforms and email systems to comprehensive lifecycle or multichannel marketing tools.
Its technology-agnostic nature ensures versatility, irrespective of where your data resides be it in a data warehouse, data lake, operational database, or even a simple spreadsheet. Moreover, this activation interface overlays your current system architecture without retaining data.
Lastly, from a technical standpoint, data activation platforms operate through Reverse ETL (Extract, Load, Transform), a process of transferring data from your existing data stores and syncing it to your operational systems.
Making the choice: Factors to consider
When deciding between a packaged or composable CDP, it's crucial to weigh the unique advantages each brings against the specific needs and capabilities of your organization. Here are some key factors:
Factors To Consider
Business size and complexity
Small to mid-sized enterprises with simpler processes will prefer bundled CDPs since they are easier to set up and operate.
Larger enterprises with complex data needs will favor composable CDPs due to their flexibility in integrating various data sources and technologies.
Offers limited customization, sufficient for organizations with standard data management needs.
Provides extensive customization options, catering to unique business requirements and data workflows.
Typically, it is quicker to implement, given its out-of-the-box functionality.
Require a longer implementation timeline due to the customization involved.
Internal expertise and resources
Requires less internal expertise due to its user-friendly design and predefined functionalities.
Demands a higher level of Technical expertise and resources for setup, customization, and maintenance.
Budget and cost implications
Usually more cost-effective upfront, but could lead to extra expenses down the line.
For example, organizations might end up purchasing a broad suite of features while only requiring a fraction of the functionality provided.
Requires a more significant initial investment than Packaged CDP.
Data privacy and compliance
The level of scalability and adaptability is conditional on the specific vendor selected.
Offers a flexible architecture that can evolve with your business needs.
Arpit Choudhury, a data and growth expert, sheds light on what questions a business must answer before deciding on a CDP.
Choosing the right CDP strategy can be an intimidating task, given its invaluable role in effectively harnessing customer data, enhancing customer experiences, and driving higher ROI. The absence of a precise definition and workflow for CDPs can add to the difficulty of identifying the solution that best suits your organization's distinct needs.
Going ahead with Composable CDPs will definitely need a capable data team that can weave all the requisite components together, which can ultimately be a labor-intensive task. On the other hand, Packaged CDPs are synonymous with simplicity and ease, providing a more straightforward approach to managing customer data.
Explore Lifesight today to discover how you can take your customer data activation and marketing measurement with a flexible solution.
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