CDP vs CRM: Key Differences and Why It Matters
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In today’s world customer data is one of the most revered things for businesses. This is because customer data helps companies create memorable customer experiences that can boost their revenue by up to 80% (Zippia). In situations like this, it becomes vital to thoroughly understand the difference between a Customer Data Platform (CDP) and a Customer Relationship Management (CRM) system. While both of these technologies are primarily used for carefully managing customer data, they do have certain differences and similarities along with their benefits.
We will explore the key differences between CDPs and CRMs, including their functionalities, use cases, and how they can help your organization achieve its goals. So let’s get started!
Brief About Customer Data Platform (CDP)?
A Customer Data Platform (CDP) is a customer solution that collects, unifies, and organizes customer data from various sources/ touchpoints. It gives a unified view of the customer’s data (preferences/ demographics), which can help businesses get a deeper understanding of their customer and help them deliver them more personalized experiences. For instance, one of the most prominent CDPs in today’s time is Salesforce Data Cloud. Let us now take a look at the pros and cons of using a CDP;
Customer Data Platform (CDP) Pros:
- Improved Customer Experience
One of the most prominent advantages of a CDP is that it enables businesses to create a unified customer view, which allows for a deeper understanding of customer behavior and preferences. This unified view helps organizations create more personalized and targeted marketing campaigns, improving customer engagement and loyalty. The platform can do this as it gathers all the relevant information related to the customers from multiple sources/ touchpoints respectively.
- Streamlined Data Management
A CDP also streamlines data management by reducing data silos and fragmentation. This assists in simplifying data integration and processing and improving data quality. This helps businesses automate data processing and workflows ultimately reducing manual data handling and errors. Eventually, this boosts their organizational productivity and efficiency.
- Enhanced Analytics and Insights
CDP provides advanced analytics that enables businesses to gain real-time insights and make data-driven decisions easily. With this, businesses can analyze large amounts of customer data to identify upcoming trends and patterns that may have been missed apparently by a traditional analytics system.
Customer Data Platform (CDP) Cons:
- Complexity
Integrating a CDP with existing systems and infrastructure can be a little complicated and time-consuming. This is why having ongoing maintenance and support costs can be high. Making the platform’s adoption typical for businesses that have limited resources.
- Data Security and Privacy Concerns
Another significant concern is that of data security and privacy. This is because the platform collects and stores large amounts of customer data, which can be an easy target for cyber-attacks and data breaches. Though the platform is highly secure however sometimes the risk of data breaches can be a concern for businesses. Here they should ensure that all the security protocols are adhered to properly.
- Vendor Lock-in and Dependence
Businesses may also be concerned about vendor lock-in and dependence on a single vendor for data management and analysis. This can limit their flexibility and make it difficult for them to switch vendors or adapt to changing business needs/ requirements. Furthermore, there is a risk that the vendor may change or discontinue services, which could hamper the ongoing business operations.
- Limited Customization Capabilities
Finally, a CDP may have limited customization and flexibility. This can make it difficult for businesses to customize the platform as per their specific needs. This could eventually result in having a platform that is not fully utilized or optimized to its fullest potential leading to reduced impact on investments.
Moving ahead now let’s learn more about a CRM platform.
Brief About Customer Relationship Management Platform (CRM)?
A Customer Relationship Management (CRM) system is a solution that manages and analyzes customer interactions and relationships throughout the customer lifecycle. It provides a centralized platform for sales, marketing, and customer support teams. Just like Salesforce, which over 150,000 users across the world choose. Here are some of the advantages and disadvantages of using this platform.
Customer Relationship Management (CRM) Pros:
- Improved Customer Satisfaction
A CRM is a platform that enables businesses to improve customer satisfaction by providing them with a more personalized and responsive customer experience. The platform enables businesses to store and analyze vital customer data such as contact information, purchase history, and communication preferences to make customer interactions more worthy and valuable.
- Enhanced Sales Performance
The platform is also renowned for enhancing sales performance by providing the organization’s sales teams with the tools and insights they need to close more leads. The sales team can also regularly track leads and manage different sales pipelines. This helps them to identify new business opportunities, prioritize leads, and re-imagine their sales strategies for catering to their target audience.
- Better Decision Making
The platform can also enable organizations for better decision-making by providing businesses with real-time insights and analytics on customer behavior and preferences. This enables businesses to make more informed, data-driven decisions about marketing, sales, and customer service strategies. Furthermore, the respective teams in the organizations also have access to centralized customer data/ history that can even further foster customer-centric and informed decision-making.
Customer Relationship Management (CRM) Cons:
- Not Suitable For All Businesses
Yes, a CRM platform might not be ideal for businesses of all types. Specifically speaking the businesses that have and follow a certain standardized procedure might not be a suitable audience for having a CRM platform. Or probably the platform is much more beneficial for businesses that require personalized customer interactions. Thus, it is advised for businesses to have a proper analysis of whether or not the CRM system aligns with their needs and requirements.
- Learning Complexities
CRM is that it can be complex and difficult to use, particularly for businesses that are new to CRM technology. This can lead to a steep learning curve, which can require significant training and support. Plus, the platform may require significant customization and configuration to meet the unique needs of a business, which can be time-consuming and costly.
- Cost Of Implementation
The initial costs of acquiring and integrating a CRM can be significant. This includes software licenses, hardware, and potential customization, which may be particularly burdensome for small and medium-sized enterprises (SMEs).
- Data Quality Challenges:
Developing a functional CRM system can be a lengthy process and can take a long time. Additionally, data quality limitations can pose challenges. All customer information needs to be consolidated in a single location, requiring a thorough review and decision-making process to determine which data should be included in the CRM.
Let’s explore the key differences between CDP and CRM platforms respectively;
CDP vs CRM: Key Differences
The Central Idea of the Platform
While CRM in the first place was designed to support sales, marketing, and customer service teams by managing customer interactions and data. Its central purpose lies in improving customer relationships, enhancing sales performance, and streamlining sales processes. The platform’s solutions are also often presented to deal with issues like customer data management and utilization this is because the capabilities of the platform allow organizations to have ‘all of your data in one place’ access to use for sales, marketing, and customer service.
On the other hand, a CDP is designed to collect and unify customer data from various sources, providing a single/unified view of the customer. So its core purpose is to collect, combine, and organize customer data to enable personalized marketing, and improved customer experiences. The platform enables organizations to deliver a more complete view of customers beyond the sales cycle.
Data Collection and its Scope
When it comes to the collection of data and its scope CRM focuses on gathering data mainly through direct customer interactions, such as sales calls, emails, and interactive meetings. Plus, it also relies on data that comes from customer feedback, surveys, and other sources. Thus, its data scope stays confined to customer interactions and transactions.
Meanwhile, a CDP collects data from a broader range of touch points such as customer interactions, website and mobile app interactions, social media, IoT devices, and third-party data providers. This helps the data to get more refined and also includes sources like online and offline interactions. Additionally, the platform also handles unstructured data/ fragmented data quite well making its data scope much broader.
Focus on Data Types
When we discuss the types/format of data that gets collected we can observe a sharp difference between the two platforms. A CRM platform usually collects structured data (in which the quality of data is good and not fragmented), such as customer contact information, sales/ purchase history, and customer feedback.
Whereas, a CDP collects both structured and unstructured data, including customer interactions, behavioral data, transactional data, and most importantly demographic data. CDPs aggregate and organize customer data from different sources to create comprehensive customer profiles.
Platform’s Integration Capabilities
The platforms also differ when it comes to their integration capabilities, let’s see how;
You may observe that a CRM usually is seen easily getting integrated with other sales, marketing, and customer service tools. For example, a marketing automation platform like Active Campaign, or Mailchimp enhances the utility of the CRM better, and integrating with these intelligence tools could heighten the customer service experience even further.
A CDP typically integrates with a broader range of tools and systems, including customer service software, data management platforms, advanced analytics tools and even marketing automation platforms if required. CDPs have robust integration capabilities, integrating with a wide range of tools and systems.
Understanding CDP and CRM Use Cases
Before choosing CDP or CRM for business, you must know what are the different use cases of the essential customer data solutions.
When Should One Choose CDP?
Use case 1. If you have fragmented data across multiple systems such as CRM, email, or any other e-commerce platforms your organization is facing inefficiency in curating holistic customer profiles.
Use case 2. If your organization is willing to shift its focus more towards providing enhanced customer experiences that are personalized as well. However, if the organization is struggling to have a basic granular segmentation of customers then CDP is the platform to go to.
Use case 3. For having accurate and real-time insights into customer behavior to be able to predict their purchasing decisions. The platform helps marketers get the most adequate information and insights so that they don’t miss out on any trends whatsoever.
When Should One Choose CRM?
Use case 1. When businesses want to prioritize and improve their relationships with their customers a CRM platform will help them manage all the required information throughout and even after the client interactions take place. Either by sending personalized messages or follow-ups that are going to boost their customer’s satisfaction.
Use case 2. When longer-running sales cycles come into the processes, the platform facilitates the tracking of all the necessary information in sales stages right from the beginning of the lead contract to the closing. Making sure no opportunities are left untapped.
Use case 3. When there is a need for centralized accessibility and management of data within the organization. The platform helps the organization to have access to all the required documents/ customer information making it easier for different departments to collaborate and coordinate better while working with each other.
Can We Establish a CDP-CRM Relationship?
Certainly, we can establish a CDP-CRM relationship to understand how both of these platforms work together and see their correlation. For that let’s take an example, think of a CDP as the GPS navigation system in your car. Just like a GPS helps you navigate through unfamiliar roads, a CDP helps businesses navigate the complex customer landscape, providing real-time insights.
In the same car, you also have an infotainment system for music, navigation, and communication tools, to enhance the driving experience. That is your CRM system it’s designed to manage the interactions between the driver (business) and the passengers (customers).
Just as a GPS navigation system and an infotainment system work together to enhance the driving experience, CDPs and CRMs work together to enhance the customer experience. The CDP provides a unified view of the customer, while the CRM manages the interactions and relationships. So instead of putting them against each other head to head you can acknowledge their coexistence and reap the benefits of the CDP and CRM integration such as:
- One can get hold of CDP insights to send alerts and information CRM interactions, which will make sure that the relevant teams always have real-time and relevant information.
- While businesses can also leverage CRM data to enhance the CDP database, making sure its functioning gets better and it has a complete view of the customer.
- Lastly, they can create a seamless customer experience across all touchpoints and channels, from marketing and sales to customer support. They are eventually making the customer experience memorable and garnering more revenue.
Conclusion
In conclusion, CDPs and CRMs are complementary technologies that can work together to enhance customer experiences and drive business growth. While the difference between CDP and CRM exists noticeably, they serve their purpose in their positions quite well. CDPs are better suited when it comes to providing deep customer insights for data-driven marketing. Whereas for managing customer relationships and interactions seamlessly CRMs are valuable.
Thus, by understanding the strengths and weaknesses of each technology, businesses can make informed decisions about which customer data solutions are best suited to their specific needs. Plus, for more tech adept advice and Salesforce consulting services get in touch with our team of experts at Cyntexa.
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