WHITE PAPER

Check out your 360 Customer Profile: Lytics.com/Profile

CDPs AND DMPs DEMYSTIFYING DATA MANAGEMENT FOR MARKETERS

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

2 © LYTICS 2019Lytics.com

TABLE OF CONTENTS

CDPs and DMPs: cutting through the jargon ............................ 3

The value of CDPs and DMPs ........................................................6

What kind of data solution does your business need? ........10

CDPs, DMPs, and data privacy ...................................................... 11

Let’s Talk CDPs! .................................................................................12

What are CDPs and DMPs? How are they different? Can they work together? And why might I need one?

DMP

AD

CDP

1 Data solutions are the top tech being implemented by Enterprises. 2 Data-driven businesses grow 30% more each year than other businesses.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

3 © LYTICS 2019Lytics.com

CDPs and DMPs: cutting through the jargonDATA SOLUTIONS ARE THE NUMBER ONE type of tech currently being implemented by Enterprise companies.1 And with data-driven businesses experiencing 30% more growth than their competitors,2 who could blame Enterprises for jumping at the chance? Not every business is getting data strategy right, but the ones that are are thriving. But here’s the catch: With a fast-growing, ever-evolving MarTech market, it’s tough to know what kind of data platform is right for your business. What’s the difference between data platforms? They make similar promises about more customer insights. They all claim to organize and center around data. And they all promise big results. So how do you figure out what’s best for your company—what’s going to move you toward your business goals? The first step is understanding the difference between Customer Data Platforms and Data Management Platforms, what kind of use cases each supports, and how they work together to move you toward your goals.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

4 © LYTICS 2019Lytics.com

WHAT IS A CUSTOMER DATA PLATFORM (CDP)?According to Gartner, at a minimum, CDPs are responsible for collecting data from a variety of sources, unifying that data into user profiles, segmenting data so that you can target customers based on predefined rules, and activating that data by push-ing it out into other marketing tools like Facebook, email, and advertising channels. In other words, CDPs collect, centralize, and stitch together first-party customer data for a better understanding of the customer, and they give you the ability to take action with your data. But here’s where our experience diverges from Gartner’s. All of the biggest marketing success stories we’ve seen—the 300% increases in subscriptions, the 167% jumps in revenue—have come from CDPs with built-in data science. They’ve come from predictive and decisioning capabilities through AI and machine learning. They’ve come from prioritizing personalization alongside good data management. So if big results like those are what you’re after, a CDP that simply centralizes and segments your data isn’t good enough. You need one with predictive insights. Because at the end of the day, a CDP should tell you everything you need to know about your customers and uncover real-time insights to help you understand what you don’t yet know. This is only possible with a CDP with built-in data science. Without it? Well, one recent survey3 found that about ¾ of marketers say technology has made personal-ization harder—not easier. Because without a CDP with data science insights, more technology and more data means more work. It means more silos. It means more guesswork from your team and more decisions made without full information. And with about 50% of customers saying brands aren’t meeting their customer experience expectations? You can’t afford guesswork and silos and overwhelming piles of data that aren’t actionable.

3 Survey says ¾ of marketers say the tech they’re using has made personalization harder and created even more data silos.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

5 © LYTICS 2019Lytics.com

When we talk about data, we talk about first-party and third-party. First-party means data you collect directly from your customers through engagement with your brand. This can range from infor-mation about themselves that they submit in an online form to behav-ioral data—including views on a website or clicks in an email—you collect across channels. Third-party data is customer data collected by, no surprise here, a third party like Facebook or a survey site. The core differences here are accuracy and who you’re getting to know. First-party data is data about your customers, site

visitors, and users—people who already know you and probably already have purchased or want to purchase from you. Third-party data is data you buy to target people who are not yet your customers. Because you know exactly where your first-party data comes from, how you collected it and when you collected it, it tends to be more accurate and real-time. Since it’s gleaned from multiple sources and is anonymous and cookie-based, third-party data accuracy can be trickier to gauge. 82% of brands and marketers question third-party data’s reliability.6

WHAT IS A DATA MANAGEMENT PLATFORM (DMP)?Similar to CDPs, DMPs also promise a place to store data and glean customer insights. But where CDPs use first-party data collected directly from your customers, DMPs mostly rely on purchased, anonymous third-party data. Where CDPs are about knowing your customers better, DMPs are designed to aggregate data from a variety of third-party sites (of variable quality) and use that data to target advertising at new prospective customers around the web. In Gartner’s words,4 “Data management platforms ingest de-identified data from multiple different sources (including internal CRM systems and external data vendors), normalize and configure it, and make it available to marketers to build seg-ments and targets for activation in online advertising campaigns, personalization, and measurement.” Also according to Gartner,5 over 50% of Enterprise companies use a DMP.

WHAT IS FIRST-PARTY DATA?

4 Quoted definition from Gartner in their guide, Deconstructing the Marketing Data Management Platform.

5 According to Gartner, over 50% of Enterprise companies are using DMPs.6 82% of brands/retailers say third-party data is unreliable.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

6 © LYTICS 2019Lytics.com

The value of CDPs and DMPsCOMPANIES WITH DATA-DRIVEN marketing strategies are six times more likely to be profitable than the competition.7 Which is why both the CDP and DMP markets have been growing at a fast clip. So, what value do they bring to the table? THE VALUE OF A CDPCDPs are all about helping you understand your customers and move them along your customer journeys into real business results—sales, subscriptions, customer loyalty programs, etc. How? By helping you match your content, offers, and campaigns to the right audi-ence at the right times. Not to mention that they speed up the time from marketing idea to execution by eliminating IT bottlenecks. Because a CDP like Lytics is built for—and accessible to—the marketer. Which means you can skip lengthy IT data request processes or reporting limitations and get straight to the heart of your customers through their data in real time. But don’t take our word for it. CDP power users like The Economist, Agora Financial, and The Grand Ole Opry are proving the value of their CDPs every day.

Sophisticated ad retargeting grows subscriptions by 300% for The Economist

The Economist came to Lytics to understand who their customers are, how they interact with the brand, and what they want and need. Using their customer data and Lytics predictive scores, they identified web users who were not already subscribers and who

were likely to subscribe. Then, they targeted those users with subscription ads. The results? The brand decreased acquisition costs by 80%, grew digital subscriptions by 300%, and increased overall time on their site.

CDP SUCCESS

7 Companies with data-driven marketing plans are six times more likely to be profitable year-over-year.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

7 © LYTICS 2019Lytics.com

A CDP with AI and machine learning built in can also help you automate these kinds of results—taking the heavy lifting off your team’s shoulders. Instead of choos-ing the content you’ll serve up to each audience by hand, you can tell the system to choose for you. Then, based on patterns and trends in the data, the machine can choose the content most likely to convert each individual customer on a 1:1 level. This is the kind of personalization companies like Netflix and Spotify use and it’s what’s possible with a best-in-breed CDP. THE VALUE OF A DMPBecause DMPs focus on third-party data, their value lies mostly in the realm of adver-tising to prospective customers around the web. By collecting anonymous profiles from various sources online, DMPs allow you to target advertising at new prospects who fall into categories like “recently purchased diapers” or “household income between $50,000 and $60,000 per year.” The third-party data relied on by DMPs can be a bit unreliable, and according to an AdAge report, about 75% of those using DMPs are dissatisfied with how DMPs handle their marketing channels.8

Email personalization drives a 30% click-through rate for The Grand Ole Opry

The Grand Ole Opry integrated Lytics as part of their digital transformation. Using our Content Affinity Engine, the brand identi-fied email subscribers who preferred contemporary artists over classical and tailored their newsletter show lineups to match

each group’s interests. Initial segmentation efforts generated email click-through rates over 30%, year-over-year increases in ticket sales, and, ultimately, a 115% increase in customer engagement.

CDP SUCCESS

8 75% of DMP users are dissatisfied with how they handle channels.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

8 © LYTICS 2019Lytics.com

Those statistics sound grim, but can a DMP help marketers? For some, the answer seems to be yes. Lytics’ own client The Economist uses both Lytics CDP for its first-party data and a DMP solution for third-party advertising. By understanding which platform does what and harnessing the benefits of both, The Economist has a collection of major success stories with both platforms. The trick here is understanding that DMPs are best with quantity, not quality. They’re good for getting a high volume of new users onto your site or in front of your brand. And if volume’s what you’re going for, the fact that the data might be 40% accurate doesn’t matter as much as when you’re trying to reach people at a 1:1 level. And don’t forget: the moment those new prospects click on an ad and visit your site, it’s your CDP that will start collecting that valuable, accurate first-party data that will help you understand each prospect and market to them on a 1:1 level.

Wait…Can’t some DMPs handle first-party data too?

Some DMPs are trying to catch up to the CDP market by collect-ing first-party data. So, what’s the difference between those DMPs and a real CDP? The answer is still in the use cases. Even DMPs that collect some first-party data are still focused on ads and still collecting data anonymously—not attached to a personal identifier and not set up to give you a 360-degree view of the customer. DMPs are focused on activat-ing ads and basic personalization.

They’re not well equipped to activate cross-channel marketing based on a deep understanding of a single customer’s behavior, engagement, and affinities with your brand. While the limited use of first-party data might help refine the accuracy of DMPs’ third-party data for better advertising, it doesn’t make them true CDPs. At the end of the day, the two tools are optimized for different pur-poses—even if they can handle more than one type of data.

DMPS AND FIRST-PARTY DATA

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

9 © LYTICS 2019Lytics.com

WHY IS THIRD-PARTY DATA SO UNRELIABLE?Anybody who browses the web knows that sometimes you click on something you didn’t mean to. In fact, one survey9 found that 60% of mobile banner ad clicks are unintentional. But for third-party data collectors, there’s no difference in an accidental click and an intentional one. So if you slip and click on the engagement ring ad instead of the motorcycle one? Too bad. Now you’re on a list of people interested in engagement rings and advertisers are going to treat you accordingly. Not to mention that it’s in the best interest of third-party data vendors to put customers in as many segments as possible. Which means their settings hone in on affinities you might not actually have. A single visit to a page about kittens—even if you accidentally clicked through or were just in the mood for a kitten video—can peg you as a passionate cat-lover and set your DMP profile to be “in-market” for dozens of products and categories that may or may not apply. Putting users in as many categories as possible is a benefit to DMPs. After all, that’s more opportunities to sell and monetize customer data! But does it actually help companies understand customers? The scenarios above and the data on DMP dissatisfaction lean toward no.

CUSTOMER ACQUISITION

CDPs, DMPs, AND THE CUSTOMER JOURNEY

✓ CDP✓ DMP

HIGHLY ENGAGED✓ CDP

CROSS-SELL / UPSELL✓ CDP

RENEWAL

✓ CDP

9 60% of mobile banner ad clicks are accidental.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

10 © LYTICS 2019Lytics.com

What kind of data solution does your business need?The answer lies with your business goals and use cases. Are you launching a new brand and looking to generate awareness? Are you targeting a new market segment that you don’t yet have a customer base for? These are two common strategies where third-party data might be useful. Which means a DMP might be in order. If, however, your goals are more customer experience-centric—identifying top customers (or customers likely to churn), personalizing 1:1, identifying content that drives real sales, enabling cross-channel personalization—you need a CDP. And if your goals encompass both those things? A combination of CDP and DMP might be right for you.

WAIT…CAN CDPS AND DMPS WORK TOGETHER?Yes! While we’ve often talked about CDPs and DMPs as an either-or set of tech-nologies, the truth is that the two tools do very different things. The only thing they really have in common is data management. The type of data, the ways they use that data, and the business goals and use cases they support with that data are all very different. If your use cases cross the boundaries between the two platforms, your MarTech stack, like The Economist’s, may benefit from both. And in our experience, if you’re going to use a DMP, you should probably implement a CDP first. Because a DMP might be good at getting new users to your site, but what are you going to do with all those new users once they get there? How will you know what campaigns resonate with them, what content they have an affinity for, and how likely they are to buy? How will you keep track of the relationship as it grows or fades? How will you keep them from churning and encourage them when they engage? Those are the things a CDP is good at. And as soon as a DMP brings you new prospects, you’ll want that CDP on your side helping you understand and personal-ize for them at a 1:1 level.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

11 © LYTICS 2019Lytics.com

Not to mention that a CDP can help improve the accuracy of a DMP. You can use your CDP to gather an audience of your best customers and then export that audience into your DMP to create a lookalike audience and find prospects who are more likely to convert. Here at Lytics, we’ve found that most of our customers are using their DMP to attract completely new prospects. And as soon as those prospects become known, the CDP, with its AI and machine learning, takes over for truly effective personalization.

AD

CDPDMP

DMPs and CDPs can work together. A DMP brings you new prospects and a CDP helps you understand and personalize for them at a 1:1 level.

CDPs, DMPs, and data privacyWith new regulations like GDPR and the California Privacy Act (and more in the works), the spotlight is shining ever brighter on technology that collects, connects, and uses customer data. Are CDPs and DMPs compliant with the new laws? Should marketers be concerned? Is this technology future-proof?

CDPS AND PRIVACYBecause CDPs are collecting proprietary, first-party data and because you have full control over that data, they actually help you comply with the GDPR and other pri-vacy regulations.

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

12 © LYTICS 2019Lytics.com

The key to compliance is knowing exactly what data you have, where it comes from, and where it goes—and providing users with profiles they can verify, change, or delete. Without a CDP, this is tricky to do. A user who opts out of email may still receive ads on their tablet. A user who requests an edit to their profile with your customer service team might not see that edit reflected in marketing communications. Siloed customer data is, by its very nature, not compliant with these new regulations. With a good CDP, compliance is simplified. You know what data you have, where it comes from, and where it goes—and you have a single unified user profile, which makes edits and opt-outs simple to keep track of and implement in real time.

DMPS AND PRIVACYUnfortunately, DMPs are another story. DMPs rely on third-party data. Third-party data comes from sites and companies that collect consumer data and sell it. With GDPR and other new regulations, those data collectors will need the consumer’s explicit consent to sell that data. And with less than 17% of consumers saying they’re okay with third-parties collecting their data,10 that consent might not come too easily. If you do choose to use a DMP, make sure to ask the hard questions about how they’re obtaining that third-party data and the required consent, how that data is managed, how they’re handling GDPR’s opt-out requirement, etc. And keep in mind that if your main advertising channels are Facebook and Google, you don’t need a DMP at all. Facebook and Google have their own proprietary targeting tools that you can use to reach extensive new audiences (not to mention direct integrations with CDPs like Lytics that power effective lookalike modeling).

GDPR

OPT IN OFF

ON

10 80% of consumers are okay with brands collecting first-party data. Less than 17% are okay with that same data being sold to third parties.

811 SW 6th Avenue Ste. 700 Portland, Oregon 97204

Check out your 360 Customer Profile: Lytics.com/Profile

WH

ITE

PAP

ER: C

DP

S A

ND

DM

PS

13 © LYTICS 2019Lytics.com

Let’s Talk CDPs!If becoming a data-driven marketing team is on your radar, we’d love to chat. Contact our team for a demo and a conversation about your marketing goals and use cases and how our CDP technology can support your success—with or without a DMP. We’re the best overall CDP on the market according to the Relevancy Ring Buyer’s Guide and we’ve got some customer success stories that’ll knock your socks off. Schedule a demo today online.