CDP vs CRM: What's the Difference and Which One is For You?

Using customer data effectively is challenging. The matter is that the same data can work differently, depending on who uses it and for what goal, while different business and marketing tasks require different tools. CRM (customer relationship management) system and CDP (customer data platform) are the main pillars for working with customers. However, these solutions aren’t interchangeable since they serve different purposes.

In this article, we will define and analyze CDP and CRM to identify their common and most effective use cases.

CDP and Its Main Features

Below are the main functions of the customer data platform:

• customer data collection — a CDP collects huge volumes of structured and unstructured data, which come in real-time from various sources;
• unification of data in a single customer view — the system processes the data and records it in the customer profile;
• segmentation of the audience according to detailed conditions, in particular, by events captured by the system (for example, order value or specific item added to the order);
• data activation — creating content for personalized interaction at both online and offline customer touchpoints and organizing automated omnichannel campaigns.

Therefore, a CDP helps create a comprehensive view of the target audience and allows for complete customer data management. The more information about the audience is captured by the system, the more accurate the client portrait and marketing strategies will be.

What Makes a CDP a Unique Solution

CDP allows you to collect customer data regardless of its structure and completeness. Such a platform helps understand the customers and use the collected information to improve interaction with them. A CDP processes any category of data that is technically possible to collect.

This ability to process diverse information makes CDP unique compared to other technologies. The platform architecture functions as a central repository for different types of data from different sources. The principle of "the more data, the better" is at the heart of CDP. Even excessive data flows of the Internet of Things do not cause difficulties in the operation of the platform. The presence of AI and machine learning allows you to analyze a huge amount of data, build forecasts of future purchases or outflows, as well as personalize communications.

What Is CRM and How Does It Work

Typically, CRM is an internal system implemented for specific purposes within an organization. It helps brands build effective interactions with customers based on customer profile records. Such a profile contains the operational data of a person: name, phone, email address, social media profiles, permissions/restrictions, information from feedback forms, and additional data entered by sales managers manually. There may also be a history of the audience's interaction with the company, including support requests, feedback and surveys, etc. Typically, such systems have the functionality for identifying sales opportunities and managing them.

CRM systems are usually used by sales managers, support managers, and marketers. When interacting with customers, they refer to clients’ profiles to see their personal information and build brand-customer relationships accordingly.

What Makes CRM Unique

CRM facilitates sales management, allows the brand to communicate with customers effectively, and optimizes target audience relationship building and strengthening.

Personalized communications through CRM are beneficial to both companies and customers. People appreciate a personalized approach, and brands benefit from properly organized sales channels. CRM provides information about each customer that allows for improving customer satisfaction. Tracking consumer data and making decisions based on it ensures quality service.

Who Uses CRM and CDP

CRM is important for teams that communicate directly with customers (sales, support), while CDP is excellent for specialists who manage the customer life cycle, being responsible for customer acquisition, engagement, and retention.

CRM is used to achieve instant goals because they have customer data for making decisions here and now. Help desk professionals hardly need a deep analysis of a particular customer's behavior patterns to solve a person's current problem. They need to understand who they are dealing with quickly. That’s why their quick access to a concise customer card, inquiry history, and call recordings with general information and recent profile updates is vital. The CRM system provides them with this possibility.

CDP, in turn, is used to achieve strategic goals. The customer data platform is designed to improve customer engagement and enhance their user experience. It provides a holistic view of the audience for developing an effective business and communication strategy. The information collected and processed by CDP is important for understanding customer needs, predicting their future actions, and making relevant product recommendations.

CRM, in contrast, does not capture or process such data. For effective marketing and customer lifecycle management, a business needs to be able to leverage data from multiple external sources, and CRM alone is not enough. Instead, CDP provides more opportunities to manage the customer lifecycle.

How CRM and CDP Collect Data

CRM systems store records collected during brand-customer interactions and summarize them for shared use. Such information is quite specific, as it is usually collected by a specialist who communicates with customers directly.

Often, data can only be stored and used in a specific CRM system by a specific team. These recordings do not interact with other software. Salespeople and customer service operators collect data manually and arbitrarily enter it into the system. Hence, it is hardly possible to standardize the data to allow other data management systems to use it.

CDP is focused on automated data collection to transform the fragmented marketing field into a centralized database. CDP solutions provide insight into why, how, and through which channels a customer is interested in interacting with a brand. Data is typically collected automatically through appropriate integrations and other code-based sources. Mobile gadgets, computers, websites, apps, and CRM systems can share a variety of customer data that a CDP can filter, clean, and combine with other available information. As a result, different departments of the company have access to a well-structured database.

Goals You Can Achieve with CRM vs. CDP

CRM systems provide data that gradually builds up the history of interactions between a company and its customers. Such records allow you to optimize processes and improve tactics. Sales teams can better understand who brings in the most revenue, which pricing policies best meet customer expectations, and which campaigns deliver the best results. The older the database, the more information is collected and the clearer the picture of each customer category is. Effective customer relationship management is hardly possible without the use of CRM software.

CDP systems enable proactive marketing by gathering data from multiple sources to enable a brand to attract new customers and retain existing ones. What’s more, the built-in AI can identify future VIP clients.

If CRM uses internal information about the client, then CDP uses both external and internal data sources. CDP platforms collect and analyze data from a person's first visit to the site. This allows you to track the entire customer journey, taking into account the actions that preceded the first purchase or authorization on the website or in the application.

CDP systems can provide information that other solutions cannot. They help predict customer behavior based on their journey, regardless of where the interaction takes place: online or offline. All digital and non-digital traces left by the customer are consolidated into a single customer profile that contains all available information about each client. For marketers, using such a system allows for making informed decisions backed by a comprehensive view of customers.

CRM vs. CDP: When to Use Each of Them

The choice between CRM and CDP depends on the company's priorities for a single source of customer information and overall business goals. Tactical goals require the implementation of CRM. CDP will be useful for developing ambitious business strategies. At the same time, both systems are not mutually exclusive — they can work together successfully.

When to Use CDP

CDP technology will help if the volume of customer data becomes huge and it is necessary to structure information from many sources. While processing large amounts of data manually is time-consuming, machine learning can streamline this process significantly. Its neural networks can process and systematize large arrays of information — such technologies are necessary for predictive analytics.

The customer data platform facilitates the data processing from various sources available in the company's technology stack. The platform works as a Smart Hub, where numerous data streams arrive for further processing and use. Automated work with data requires quite sophisticated software, and CDP fully meets these requirements.

CDP implementation is essential for medium and large businesses. For small companies, it may not be the most optimal choice. However, investing in a customer data platform makes strategic sense if the company strongly believes in expanding its operations in the near future. In addition, the use of CDP will make it possible to move your marketing operations to the next level.

When to Use CRM

Brief contact information, customer pain points and needs along with interaction history is the basic functionality of a typical customer relationship management system. This is enough to maintain relationships, grow business, and create targeted campaigns for many brands. In addition, CRM systems are constantly adding new features in line with user expectations. However, even technically sophisticated CRM solutions cannot match a mid-level CDP.

Today's software industry offers a wide selection of CRM for different business segments at an affordable price. If necessary, a company can develop a custom solution matched to the specific requirements of the business. There are a lot of ways to use a CRM system. Any company looking for a well-organized sales channel based on concise customer data can find a CRM solution that will meet the needs before the business grows and requires a CDP.

When to Use Both CDP and CRM

CDP and CRM can be implemented together. They are not interchangeable in terms of the quality and quantity of customer data. Strategic CDP data helps marketers understand how to engage with audiences, while tactical CRM data helps build customer relationships. CDP can combine existing data with CRM information gathered from other sources for a broader view of the customer.

With the help of a customer data platform, you can get an intelligent segmentation of the customer base, a deep understanding of customer behavior, and intelligent personalization of marketing campaigns. But the results can be even better if you combine CDP and CRM. Such a tandem solution is practically not limited in its functionality. Large corporate users can benefit greatly from a split system, as all interactions with a multifaceted corporate audience will be fully covered.

CDP and CRM Use Cases

When it comes to use cases, there are fewer CDP usage examples than practical use cases of a CRM. The matter is that CRM systems are more suitable for companies of all sizes, from giant corporations to small and medium-sized businesses. Each CDP usage example, in turn, is unique because using a customer data platform makes sense for brands with a strong business infrastructure. This technology is younger than CRM but has gained significant popularity in recent years.

CDP Usage Cases

CDP use cases are as unique as specific the tasks and goals of its users. The following examples show how the platform's many capabilities facilitate customer-centric workflows.

RetouchMe

A popular photo-editing app with more than a million downloads has faced customer retention problems because it didn't pay enough attention to potential VIP users. As the product grew in popularity, poor segmentation resulted in the team mechanically processing all orders without focusing on the target core of customers. It was necessary to identify valuable users as early as possible since 50% of the company's revenue came from 2% of VIP customers.

Yespo has created an AI-based segmentation solution to identify VIP customers with 99% accuracy. This led to a quarterly increase in the number of VIP clients by 35% and a 17% increase in the company's profit.

Umico

Umico is Azerbaijan's largest integrated marketplace with a mobile application (about 5 million sessions per month). The company sought to improve user retention with CDP features in response to user growth after the COVID-19 pandemic.

The company had three main tasks:

• combine online and offline user data and create a single customer profile;
• segment the audience based on tracking data;
• build communication in various channels taking into account the client's language.

All this can be implemented in Yespo CDP. In order to increase customer loyalty and engagement, the Yespo team suggested implementing triggers on abandoned actions, in-stock products, complementary products, and reactivation. Mobile push became the main channel in automatic scenarios. Additionally, the marketplace uses email, app inbox, and widgets.

Triggered mobile push promotions brought the following results:

• 1.5 times more purchases;
• 20% less abandoned carts,
• 5x higher open rate,
• 2 times increased conversion.

Brabrabra

A Ukrainian underwear brand with a well-developed loyalty program discovered that its customers were poorly informed about personal discounts. Sending notifications manually wasn’t the best option. The customer database was processed and segmented using Google BigQuery, thus determining the type of messages and the time of sending for each customer. The company needed a centralized solution that would be integrated with BQ (both for receiving data and for sending data to the database).

Brabrabra chose Yespo as a single centralized platform for synchronizing all communication channels, sending personalized SMS, and returning results to the database.

As a result, automated workflows improved customer loyalty, increasing the number of orders by 10% every month.

CRM Usage Cases

The following examples of effective use of CRM do not cover all its possibilities. Instead, they showcase specific use cases that were effective for the businesses below.

Meesho

One of India's largest marketplaces, Meesho, quickly realized that significant business growth is not possible without a customized lead management tool that can eliminate the lion's share of manual processing. Their CRM system is based on an automated approach to supplier engagement: automatic document verification ensures a fast acceptance process. A convenient system allows the organization to easily exchange customer data in the company's infrastructure.

Tricoci University of Beauty Culture

A leading cosmetology school in the US, graduating about two thousand students annually, implemented a CRM to solve problems such as lack of data analytics, lost records, low response rates, and untracked agent activity. A CRM-based enrollment management system allows Tricoci to automate lead distribution and implement electronic data processing. The system acts as a one-stop shop for staff, increasing overall process efficiency by 75%.

Conclusion

CDP and CRM work to automate routine processes and increase business revenue. These systems provide different opportunities for audience analysis and further work with them.

A CRM helps to organize relations with customers. It facilitates sales management and optimizes building and maintaining relations with the target audience.

A CDP is a powerful marketing tool. The platform is focused on collecting data from various sources, unifying them in a single customer profile, and activating customer data. CDP provides a comprehensive view of the client, the completeness and flexibility of all available information about them, and allows you to manage it within the platform: analyze the client's actions, predict future behavior, create personalized content, and automate omnichannel communication.

So, CRM systems are designed to improve sales performance, while CDP solutions are designed to better understand the customer and improve their experience. Their synergy provides high-quality and comprehensive analytics, essential for understanding your customers, predicting their behavior, and optimizing business strategies.

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