By Manuel Hinz, Founder & Managing Director of CrossEngage

Summary

 

  • The strength of Marketing Clouds – in part because they tend to originate in the field of e-mail marketing – lies in the design and delivery of advertising messages in the most popular channels used for marketing to existing customers (e.g. e-mail or mobile push notifications).
  • Customer Data Platforms (CDPs) are a relatively new category in the field of marketing technology. CDPs specialize in consolidating user and customer data from various data sources to create 360-degree profiles and making these accessible to non-technical marketers (e.g. for the creation of complex customer segmentation and marketing automation without the need for any programming skills). By integrating them in existing delivery tools in the relevant marketing channels, these 360-degree profiles enable a cross-channel approach to users.
  • Depending on the functional scope and positioning of the Customer Data Platforms, they can either be seen as complementary to or in competition with Marketing Clouds.
  1.  Customer Data Platform + Marketing Cloud: In this case, a CDP sits on the Marketing Cloud, and acts to some extent as a higher-level instance. In this configuration, due to its strengths in terms of data, the CDP, is primarily used to create complex user segments and implement marketing automation (often with a focus on real time applications). The segments (in the case of marketing automation this is also referred to as a “Segment of One”) are sent to the Marketing Cloud, where they are used as the basis to deliver campaigns (chains) across multiple channels.
  2. Customer Data Platform + Best-of-Breed solutions: In this case, the use of a Customer Data Platform allows the marketing company, in a sense, to generate its “own” Marketing Cloud. The most appropriate tools are selected or existing tools re-used for the individual marketing channels. Since the most effective channel tools are often used here, these methods are also referred to as “Best-of-Breed solutions”. The CDP sits on the channel tools like a meta layer and acts as a cross-channel customer data and campaign management solution. The CDP and the channel tools are integrated via the corresponding APIs. For this approach to work, the CDP needs to have cross-channel campaign management functions, which is not the case with every CDP provider.
  3. Frequently, there are hybrid solutions, which combine these two approaches. Even when a Marketing Cloud is used, additional channel tools are often required – frequently for new, innovative marketing channels, such as WhatsApp or Messenger, for example, which cannot be accessed via the Marketing Cloud. In order to coordinate the Marketing Cloud with additional channel tools in this kind of setup, and to orchestrate the communication so that it really covers all channels, the use of a CDP as a higher-level instance is a sensible option here.

Introduction

The difference between a Customer Data Platform (CDP) and a Marketing Cloud (also called “Multi-Channel Campaign Management” by market research institute Gartner, or MCCM) is not always obvious to many marketers at first glance. This is mainly because there are no fixed definitions for these terms and therefore the market has many providers scrambling for position, who vary from each other more or less in terms of their particular focus. What follows is therefore a general definition of the two categories, to the extent that is possible.

Marketing Clouds

According to the definition coined by Gartner, MCCMs are software solutions that help companies “[to] orchestrate customer engagements and marketing content to individuals and segments across multiple channels”. The most well-known providers in this category in the German-speaking market are the products from Salesforce, Adobe and Oracle. Many of these solutions originally evolved from e-mail tools (e.g. the Salesforce Marketing Cloud through the acquisition of ExactTarget and the Oracle Marketing Cloud through the acquisition of Responsys). Accordingly, other market participants have a range of e-mail tools, which have now become known as Marketing Clouds – such as Emarsys. What makes these solutions a “Marketing Cloud” tends to be the fact that they have additional features that go beyond pure e-mail marketing. Through the acquisition or development of such solutions, these providers have added features for the delivery of advertising messages in other marketing channels (e.g. solutions for sending mobile push notifications or for personalizing websites) and other functions in the fields of Campaign Management and Analytics. The focus and strength of these solutions is usually found in the design and delivery of advertising messages in the mainstream marketing channels.

Marketing Cloud

Customer Data Platforms

Compared to Marketing Clouds, CDPs are a relatively young category in the field of marketing technology. The American David Raab, founder of the Customer Data Platform Institute, coined the term in 2013 and CDPs were first mentioned by Gartner in 2016 in the Hype Cycle for Digital Marketing and Advertising. Since then, CDPs have attracted a lot of attention and are currently certainly one of the most interesting trends in marketing, as proven by the presence of this subject at leading marketing technology conferences and the relatively large financing rounds for providers in this field. This has ultimately led to the fact that Gartner, in its latest Hype Cycle for Digital Marketing and Advertising 2017, has seen CDPs rise to the highest point of the Hype Cycle just one year after they were first mentioned.   Since the category is still relatively new, there is no conclusive definition as to which functions are covered by a CDP. However, it is possible to ascertain at least the following three key features:

  1. Data: Merging of user and customer data from various systems to create one unified customer perspective (360-degree user profile).
  2. Decision: Complex customer segmentation and the creation of marketing automation (“Segment-of-One-Marketing”) without the need for any programming or database skills. Due to the fact that CDPs use technology from the field of Big Data, which differs for the most part from the relational databases used by Marketing Clouds, it is possible to make real time decisions based on very large volumes of data.
  3. Actions: Provision of the data for the implementation of marketing campaigns by integrating it in channel-specific delivery tools.

David Raab adds the following clarification: “They are designed to be run by marketing departments with little or no support from corporate IT.

As a result, the decision to buy a CDP is generally made by the marketing department. The aim is to achieve greater independence and therefore also greater agility when it comes to implementing data-based marketing measures. When implementing a CDP, help is only required from IT and/or Business Intelligence in the initial stages to ensure a one time integration into the existing data sources. However, the providers of CDP solutions are a relatively diverse group, from which the following key points emerge:

Focus on data: A number of CDP providers concentrate on the issue of data, which is clear from their focus on the provision of standard interfaces for widespread data sources such as shop systems or analytics solutions. This hugely simplifies the integration of the data, but requires the use of standard data sources. These providers have emerged from the field of Tag Management and have chosen to develop their product further in response to the intensified competitive situation – primarily as a result of Google Tag Manager.

Focus on “Out-of-the-Box solutions” for verticals/SMEs: Another group of CDP providers has eschewed the most flexible, versatile offer in favor of developing specialized solutions for verticals such as eCommerce or Travel. Alongside the integration of standard data sources in the verticals, this often covers the specifications for certain campaigns that appear promising for the relevant vertical – such as shopping cart dropout campaigns in an eCommerce vertical. This group is most likely to contain providers that have developed their own solutions, for example for sending e-mails or personalizing websites, instead of integrating delivery solutions in individual channels. This makes it particularly difficult to differentiate CDPs from classic Marketing Clouds in this group of providers.

Focus on cross-channel decisions and actions: Yet another group of providers has chosen to develop a CDP in connection with cross-channel campaign management, in order not only to make the consolidated data available for non-technical marketers but also to enable them to use the data directly. This is done by the provision of features for cross-channel campaign management. In this way, the corresponding solutions make it possible to address users and customers via all available marketing channels within the framework of a coordinated communications strategy. In this respect, the features overlap with those of the Marketing Cloud. However, CDPs are far better positioned in terms of data, and focus on the integration with corresponding channel tools to manage advertising messages in order to ensure agility in the adaptation of new channels and tools. CrossEngage belongs into this category.

CrossEngage Customer Data Platform Model

Differentiation and interaction of Marketing Clouds and Customer Data Platforms

Setting side the more theoretical classification of Marketing Clouds and Customer Data Platforms, in practice two constellations can generally be observed that enable advertising companies to operate cross-channel marketing strategies. Naturally, there is also the option of developing an in-house solution, but this is often not advisable, and indeed seldom seen, due to the financial and personnel resources required and the time it takes to implement.

Customer Data Platform + Marketing Cloud

In this constellation, a Marketing Cloud is used to deliver the advertising messages in the most popular marketing channels. Since the data models of Marketing Clouds are based on relational databases, they are limited when it comes to processing large volumes of data with complex data structures, which means that customer segmentation is usually only possible to a limited degree. As a result, companies often decide to use a Customer Data Platform in conjunction with a Marketing Cloud. The following example highlights the deficiencies of the Marketing Cloud in customer segmentation: It is generally relatively straightforward to select “Customer, male, > 30 years of age”. However, it is almost impossible to select “Customer, last website visit within 14 days or newsletter opened within last 7 days” without enlisting technical support. In this constellation, the solutions tend to take on the following tasks:

 

Customer Data Platform:

  1. Integration of user and customer data from all available data sources and creation of the 360-degree customer perspective
  2.  Complex customer segmentation and creation of real-time marketing automation
  3. Transfer of segments (possibly including personalization data for each user) to the Marketing Cloud

Marketing Cloud:

  1. Creation of cross-channel campaigns based on the transferred segments
  2. Design of advertising material for each channel (e.g. templates in e-mail channell
  3. Coordinated delivery of the advertising messages across the various channels
Comparison Customer Data Platform + Marketing Cloud

Integrated Best-of-Breed stack based on a CDP

In this constellation, no Marketing Cloud is used, but instead the advertising company chooses the right solution for each channel according to its specific needs, or continues to use existing solutions. The cross-channel campaign management happens in the Customer Data Platform. An in-depth integration in the channel tools means that not only are segments transferred but the actual dispatch of the advertising messages using the channel tools is activated by the CDP.   Here the solutions tend to take on the following tasks:

Customer Data Platform:

  1. Integration of user and customer data from all available data sources and creation of the 360-degree customer perspective
  2. Complex customer segmentation and creation of real-time marketing automation
  3. Creation of cross-channel marketing campaigns based on segments, in particular with definition of the messages to be sent out per channel including the choice of advertising material, personalization and, where necessary, renewed (sub) segmentation at channel level (Example: e-mails sent to all customers but postcards only sent to customers with high customer lifetime value)
  4. Activation of the delivery of the advertising messages

Channel tools:

  1. Design of advertising material for each channel (e.g. templates in e-mail channel)
  2. Delivery of the advertising messages to each channel (e.g. send e-mails, display Facebook Ads)
Integrated Best-of-Breed Stack

Digital companies such as HelloFresh have opted for this kind of approach and therefore use a CDP. Even established companies such as Deutsche Bahn now use a CDP as a key element of their CRM technology infrastructure.

Hybrid forms

In addition to these two pure solutions there are a number of hybrid forms. Here, for example, the most popular CRM channels such as e-mail and mobile push notifications are bundled together in a Marketing Cloud, while solutions from smaller providers are used for newer, “more innovative” channels that cannot be serviced by the cloud – such as WhatsApp or Facebook Messenger. As soon as it becomes clear that the Marketing Cloud cannot service all the channels used, the cross-channel campaign management has to occur in the CDP, when it is important to ensure that the communication is properly coordinated across all channels.

About the author: Manuel Hinz, Founder & Managing Director of CrossEngage. Manuel is an experienced entrepreneur, consultant and manager with a track record of leading several e-commerce startups from the initial setup to a successful exit. He worked, among others, for DailyDeal (exit to Google), Toroleo and Scarosso. Beyond his operational experience, Manuel advises Earlybird Venture Capital and eTribes Connect

Podcast with Manuel Hinz