Software-off: CRM vs. CDP - is it time to throw in the towel yet, CRM?

February 26, 2021 Marketing & Sales

Software-off: CRM vs. CDP - is it time to throw in the towel yet, CRM?

If the rings change, the fighters may have to be changed as well. Which is the right choice for your business, CRM or the newcomer CDP?

In the past few years, we have seen major changes in the way digital marketing is done successfully in consumer businesses. We may have been data-driven for decades now, but multichannel and omnichannel marketing have redefined the rings in which marketing matches take place. Traditional retail has been giving way to consumer businesses, and digitalisation has gone way beyond collecting data, establishing trends, and making better business decisions.

Round one: meet the martech opponents

Customer Relationship Management (CRM): what it is and what it does

Let’s start the first round by introducing our “fighters”. Customer relationship management (CRM) is our long-time heavyweight champion. Having been around since the 1980s and popularised in the late 1990s, CRMs are pretty much a household name in any company that values customer relationships as a means to grow their bottom line.

A customer relationship management software’s purpose is to improve an organisation’s marketing and sales alignment. CRMs are used to manage and analyse customer interactions throughout customer lifecycles. The end goal is to enhance relationships, convert leads, nurture sales, and assist in customer retention.

CRMs can also be viewed as management strategies that result in increased profits for businesses, since customer loyalty and revenue are both qualities that affect a company’s revenue.

The four main - and probably the most well known - CRM systems vendors are Salesforce, Microsoft, SAP and Oracle. They all help organisations build customer relationships and streamline processes in order to increase sales, improve customer service, and increase profitability.

Note, that more often than not there is no separate CRM system in place in B2C or in retail. Customer information database resides in an ERP (Enterprise Resource Planning) system or in the webstore platform/server. Or there might be loyalty management systems in place instead of a CRM, or other third party solutions. The point is, that as such, a CRM is not a complete, ready or a set system.

Customer Data Platform (CDP): what it is and what it does

The term Customer Data Platform (CDP) was first used in 2013 to describe a marketing software that could build a collection of all of a customer’s data and events into one single unified customer view. Up until 2016 they might have been the lightweight newcomer in martech, but they have rapidly moved up in their weight classes knocking out alternatives, such as DMPs (Data Management Platforms) and data lakes. Note, though, that data warehouse and data lake data can be combined with a CDP.

Simply put, a CDP is a software that creates a comprehensive customer database that is accessible by other systems to analyze, track, and manage customer interactions. Creating a comprehensive customer database refers to CDP’s ability to gather all customer data from all touch points into a “single source of truth” view of the customer.

CDPs let you track how your (potential) customer behaves on your website, webstore and mobile apps, what they buy in physical locations and how they interact with your customer services - be it online (chats, etc.) or offline (phone calls, call centers, etc.). Without a CDP all this could not be tracked. Furthermore, all actionable data would be stored in multiple places.

Based on all of the data input, a CDP then merges and edits this information into a single and unified customer view, which gives you a 360 degree to your customer. The most important thing that you can do with this customer view is to personalize your marketing. That is, you can highly increase conversion by offering your customers tailored experiences.

Round two: Choose the right prizefighter to meet your marketing needs

CDPs and CRMs share a number of benefits and objectives or goals. That’s why they are sometimes difficult to tell apart. So difficult, in fact, that the Custobar Customer Data Platform has mistakenly been called a CRM at times.
They are, however, distinctly different. To help you get a better understanding of the differences, we have charted them for you.

A CRM system might still be sufficient for your company’s marketing needs today, especially if you are just looking for a place to manage your sales pipeline. Or, if you’re happy with the CRM reporting functionality, or your CRM integrates well with the business intelligence (BI) tools you like to use.

However, the marketing rings are definitely changing BIG again with Google’s announcement of phasing out third-party cookies by 2022. In practice, Facebook, Google Ads and other third parties will no longer get conversion data via third-party cookies. As our CEO Tatu Kuivalahti recently stated, the death of the third-party cookie has “vast, severe and immediate” implications for marketers. Advertising will become less effective while the cost of if will rise.

In time, CRMs will no doubt crack the challenges the death of the third-party cookie poses. While CRMs may be forced to pull to the ropes for the time being, CDPs have already sucker punched third-party cookies so far out they no longer even enjoy ringside seats to the upcoming matches.

To learn more about Customer Data Platforms,download our CDP whitepaper. You can also “reveal and reach the customer behind the data” by watching a demo of our customer data and marketing automation platform.