What is the difference between CDP, DMP & Data Lake?

Mar 01, 2022 | , ,

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Laura Bjerre Schwalbe

By Laura Bjerre Schwalbe

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Reading Time: 3 minutes

It has never been more difficult to become fully informed of the different types of CDPs.

The confusion is somewhat explained by the fact that, while new types of CDPs continue to hatch, their functionalities and value propositions remain a bit unclear.

A Forbes Insights study found that 44% of marketing leaders believed in the power of CDPs in driving customer loyalty. So, it's not that the business world is unaware of CDPs, the potential, and the popular Single Customer View. The challenge is rather to find the best match for your business out of so many suitors.

To make this jungle a little easier to navigate, here is our definition of the three most common data platforms out there: CDP, DMP, and Data Lakes (also known as the DIY CDP). This distinction might help you compare all the candidates lined up and ready to win your customer's data heart.
Check out Gartner's definition of four types of CDP here

First things first: If you want a more detailed run-down of CDP, you can get it right here. If you just want to cover the basics, read on...

OBS! Other look-a-like CDPs continue to hatch. Don't mistake this list to be exhaustive.

What is a Customer Data Platform?

The CDP is recognized as the most complex and advanced of the three, and it is a system that orchestrates marketing and personalization efforts from one single interface. Here, customer data based on behavioral, CRM, and transactional data are ingested into the platform to achieve a smarter segmentation process and advanced personalization capabilities.

A CDP is best defined by the quality of its functionalities – what does a CDP do best? The strengths and weaknesses range from unification logics, tracking, integration (both ingest and activation), and the ability to create dynamic audiences. It's also the strengths of these functionalities that vary between CDP vendors. Some are strongest in activation audiences, while others don't really exceed from collecting customer data.

Read about the 4 Key Benefits of a Customer Data Platform here

Depending on your chosen vendor, a CDP can be customized to your needs, so it can help you achieve whichever use case your organization has.

CDPs also vary immensely in overall technical demand, meaning that some CDPs are perfectly manageable for most marketing teams, while others are more technically taxing.

Get the Complete Guide to Customer Data Platform here

What is a Data Management Platform?

In some ways, a DMP (Data Management Platform) is similar to a CDP but without the element of profile unification.  

DMPs are closely tied to acquisition marketing, and they primarily use 2nd and 3rd party data to help marketers understand their audience to target their ads better. Facebook is a well-known example of a DMP: They collect data on their users and allow advertisers to use that data to target Facebook users with relevant content.

However, the platform cannot accept and store 1st party data, and it works almost exclusively with anonymous information like cookies, devices, and IP addresses. What's more, most DMPs create temporary profiles based on user data that is only retained for a couple of months tops. This makes the DMP able to develop a clear view of a specific audience, but it doesn't understand users on an individual level. 

In contrast, a CDP collects much more detailed customer data, which can be used in many different arenas for advertising and e-mail marketing, website personalization tools, CRMs, and many more. 

CDP vs DMP

CDPs work with both anonymous and known individuals, storing “personally identifiable information” such as names, postal addresses, email addresses, and phone numbers, while DMPs work almost exclusively with anonymous entities such as cookies, devices, and IP addresses. Indeed, anonymity is essential to the DMP’s role as a way to exchange information about audiences without violating personal privacy."

"But just adding personal identifiers doesn’t give a DMP the advanced identity matching and flexible data storage built into CDPs. So it will be hard for most DMPs to match full CDP functionality.

- CDP Institute

What is Data Lakes (The DIY CDP)?

A Data Lake is an information system capable of storing large volumes of data from any area of the company, not restricted to customer data.

It’s an empty lot you buy from data warehouses like BigQuery or Snowflake on which data unification logics are built from scratch. This makes the most apparent advantage of a Data Lake its unlimited customization and open-source format.

Organizations often choose to build their own data platform if they have extremely specific use cases that existing CDPs cannot fulfill. However, it also requires a lot of effort and resources on hand, meaning that the time-to-market with a DIY CDP is often longer because of the significant technological resources it demands.

 

Why would you build your own CDP?

You can find use-cases that benefit from building a CDP vs buying one. The argument for building a CDP from scratch often centers around the possibilities to add new features as new needs appear, giving the company more control than had they gone with an existing vendor. However, while that might be true in theory, the reality is often that few IT departments hold the resources to live out this promise. Building and maintaining a CDP is incredibly demanding in time and money, so having one for "potential" needs, might be an expensive solution after all.

There is also a high risk that the DIY-CDP project will fall to the ground by taking longer, costing more, and delivering weaker results than expected. It goes without saying that building something from scratch is a time-consuming endeavor and a priority that might make you miss the boat in the fast-changing tech market. Following this, it will also take longer before your organization reaps the benefits of a CDP as time-to-market delays.

However, if your organization can somehow elevate from those concerns then building a CDP from the ground-up might be attractive. In any case, choosing to build one should come down to specific use-cases, where professional consulting is recommended.

Check out CDP.com for a thorough distinction between the two CDP types.

 

What's next?

At this stage, you might be left more confused than relieved. Well, we hope not, but truth be told navigating different CDP solutions is quite complex.

The number of CDP vendors is exploding, and while almost anyone ingesting data from their channels or excel sheet can claim to have a CDP, few have the machinery to properly fuel their platform with enough data to benefit customers.

A Customer Data Platform should make life easier at all ends of your organization - so whichever vendor you choose, you should aim to achieve that.

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