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Customer Data Platforms: Can they deliver the ROI that eludes many marketing technologies?

By , CEO, Hanson Dodge

Since the earliest days of Hanson Dodge, we’ve believed we have a responsibility to help clients not only navigate changing technology, but to use it to gain a competitive advantage. That’s why we’re always on the lookout for the next major advance in the marketing technology (martech) space.

22 years ago, we saw this thing called Netscape. We knew right away it would be a game changer for our clients. So our agency became early movers in web design and development, smartphone catalog sites and custom product configurators.

The next big thing in martech?
Today, we see the next important evolution of martech rapidly emerging in the form of AI-driven customer engagement. And Customer Data Platforms (CDPs) are the technology tools driving this evolution.

In this article, we’ll look at why CDPs promise to transform how entire enterprises—not just marketers—engage their customers in the digital space.

Martech spend isn’t generating commensurate ROI
According to Gartner Group in their 2017-2018 CMO spend survey, brands have consistently increased their investments in new marketing technologies. They sunk capital into the latest PIM, CMS, DXP, EDW, DMP, and CRM—often as part of a plan to regain control in the face of marketplace disruption.

In 2017, however, marketing technology spending declined 15%—the first such drop in years. Gartner attributes this decrease to Marketing’s inability to demonstrate ROI that would warrant continuing to spend at the same levels.

Why has martech ROI been so elusive?
For a variety of reasons, martech initiatives in many organizations have failed to deliver as promised. Some of the most common reasons include:

  1. Neither IT nor Marketing can do it alone. The reality is, neither Marketing nor IT can go it alone when it comes to martech initiatives. Neither has the authority to integrate the organizational silos that often impede company-wide adoption of new technologies. Today’s organizations need new approaches to martech governance and accountability.
  2. Integrated platforms overpromise and underdeliver. Software providers have attempted to roll together as many technologies as they can under a single platform. While that sounds good in principle, in practice, “single solution” products tend to be anything but. That’s because some of the more popular single solutions were in fact cobbled together over time via acquisition—rather than built from the ground up into an organic, fully integrated suite. In addition, single solution platforms tend to change more slowly as they grow, not allowing customers to take quick advantage of breakthrough advances in various technology functions.
  3. The tools don’t talk to each other. The sources and volume of data and ad tech distribution opportunities grow every day. But data still resides in silos that can’t be easily connected and leveraged. Contrast that with many CDP tools, which allow a two-way exchange of data between endless choices of digital marketing technologies (DXP, CRM, data warehouse, etc.) and then provide visual dashboards to monitor how campaigns and content are performing in those systems.
  4. The media mix is increasingly complicated. Optimizing spend across social, ad platforms, websites, mobile and the like has been a bit of crapshoot and very manual.

Can Customer Data Platforms save the day?
More than just another pretty acronym, CDP is a class of technologies offering marketer-friendly tools that can integrate all of the enterprise’s data sources and digital tools. CDPs also layer on machine learning that can dynamically enhance customer profiles. This enables organizations to model and optimize timing, message/content and communication channel by individual customer. By doing so, organizations can build deeper customer knowledge, thereby increasing engagement and conversion, and improving their return on digital marketing spend.

The Digital Clarity Group, a matchmaker between brands and technology solutions providers, has produced one of the better research overviews on the subject of CDPs. According to their report, the CDP sits at the center of the marketing tool set--the hub of sorts with all of the other tools and data sources connected to it like spokes. The graphic below represents our attempt to summarize Digital Clarity Group’s overview of a CDP-powered, digital marketing ecosystem.

 

How CDPs work
The CDP acts like the leader of a jazz band: not so much conducting the group, but responding in real time to the inputs and outputs of the other players. The CDP absorbs inputs from data warehouses, websites, CRM tools, POS systems and more.

At the heart of a CDP is an AI engine that continually learns what creates engagement and conversion. That engine allows the CDP to determine not only what messages to send, but when customers are most likely to listen, and what channels for engagement they prefer. The system continually optimizes the enterprise’s marketing efforts without the need for a roomful of data scientists driving the process.

Sounds perfect, right? So what’s the catch? Although this technology promises to deliver in a big way, it faces some of the same uphill battles of the tech tools that preceded it.

Keys to success
Your ability to leverage CDP effectively—and thereby get a jump on the competition—may hinge on a few key strategies:

  1. Make sure the C-Suite and the CEO are involved in this conversation. CDP technology isn’t just about attracting prospects; it’s about managing the entire customer relationship lifecycle. Crafting an effective vision for CDP requires accountability to someone who oversees all functions of the business. After all, multiple business units will have to play well together to fully realize the promise of CDP. And that, as you’ve no doubt already surmised, means the CEO must champion the effort. That doesn’t mean the CEO leads the initiative. It means he or she empowers a trusted lieutenant to serve as the leader, and then holds said lieutenant accountable for driving the cross-functional team to the finish line.
  2. Put the customer at the center of the process. What will delight your customers? Customer data platforms offer the opportunity to deliver more value and a more enjoyable experience to consumers who engage with your brand. Getting there means taking the time to develop a broad and deep set of customer insights, and using them to journeymap customers’ lifetime relationships with your brand.
  3. Favor best-of-breed point solutions. Technology changes too quickly and digital engagement is too important to bet the farm on a single solution or provider. CDPs allow enterprises to more easily incorporate emerging technologies into an already existing framework—and do so in a way that makes sure all components in your digital ecosystem can talk to each other. Organizations will be well served to favor discreet, best-of-breed systems over single solutions that promise to do everything well. That’s a point that today’s CMOs seem to already understand. According to the Digital Clarity Group research, less than 70% of CMOs today favor a heterogeneous approach to building their digital experience platforms (DXP).
  4. Eat the elephant one bite at a time. You can adapt this kind of technology by systematically addressing individual channel opportunities one or two at a time. Email marketing is often a smart starting point, since email campaigns are relatively easy to implement and adapt, and email systems provide clear analytics that point to what’s working and what’s not.


Leading players beginning to emerge
Although this industry is growing quickly, 50% in 2016 alone, total revenue would only appear to be a bit over $300 million in that year.

Dozens of players have entered the CDP space, and a few seem to be sprinting into leadership positions. G2Crowd’s site provides reviews and descriptions of some of the most popular tools.

Companies like Segment appear to have more users than most. Others like Listrak and Zaius have chosen to focus on retail and eCommerce. Products like Lytics appear to be rising quickly with the promise of tools that build end-customer trust throughout the entire lifecycle.

Is it time to jump on board?
If you’re not an early adopter or don’t buy software that’s not on a Gartner Magic Quadrant, you may want to wait a bit. If you’re part of the 30% of marketing leaders who prefer one-stop shopping and a single toolset to solve your martech issues, sit tight. It won’t be long until single solution players like Adobe bolt CDP capabilities onto their offerings.

On the other hand, if you’re part of the 70% who prefer to employ best-of-breed tools, if you’re swimming in data you can’t make sense of (much less capitalize on), or if you’re disappointed with the ROI in your current martech, then there’s no time like now to see how CDP can improve your business performance.

As you wade in to the world of CDP, please stay in touch. Let us know what works and doesn’t. As always, if you want to talk further about this or other trends Hanson Dodge sees driving digital marketing, don’t hesitate to reach out directly.

 

Note: this piece is based on a review of some of the most recent and provocative pieces on CDP, including:

“The Rise of Customer Data Platforms and what it means to businesses,” Forbes Magazine
"Digital Experience Platforms: Trends, preferences and strategies," Connie Moore, Digital Clarity Group
"Five Reasons to Make a Customer Data Platform the hub of your Martech Stack," Lytics
"Customer Data Platforms: The Truth behind the hype," Gartner
"2017-2018 CMO Spend Survey," Gartner

Tim Dodge, CEO, Hanson Dodge

With 30 years of entrepreneurial business management and marketing experience, Tim is responsible for setting the vision for Hanson Dodge's evolution. His understanding of how to create business growth and value through innovative marketing solutions has helped shape the company's unique blend of integrated branding, marketing and technology solutions.

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