CDP vs. CRM: 5 factors to consider before deciding how to solve your customer data management challenges

by | Aug 11, 2021

There’s often confusion about the difference between a Customer Data Platform (CDP) and Customer Relationship Management (CRM) software. That really shouldn’t be surprising because both solutions make the same customer data promise.

“CRM solutions were often proposed to tackle customer data management problems. The idea was that you could get ‘all of your data in one place’ to use for sales, marketing and customer service. The promise was they’d break down silos in enterprises and design a view of the customer that wasn’t specific to sales or marketing or customer service. That sounds familiar to the promise of CDPs, doesn’t it?”

— Lizzy Foo Kune, senior director analyst at Gartner

It’s precisely because CRMs didn’t quite deliver on this promise that we have CDPs. These two data technologies are highly effective at what they do. They just do very different things.

In this post, we’ll help clear up the confusion so you can make the strategic data management investment that’s right for your business.

Here are five factors we recommend you consider before choosing a CDP or CRM for your customer data management challenges.

Factor #1: What are CDPs and CRMs exactly?

What is a CDP?

The CDP Institute defines a CDP as: “Packaged software that creates a persistent, unified customer database that is accessible to other systems.” Additionally, a CDP must have the following capabilities:

  • Ingest data from any source
  • Capture full detail of ingested data
  • Store ingested data indefinitely (subject to privacy constraints)
  • Create unified profiles of identified individuals
  • Share data with any system that needs it

In a nutshell, a CDP’s job is to manage huge amounts of data from a multitude of customer touchpoints, and then, through a process called identity resolution, match, merge, and deduplicate this information into a single customer view. Each of these views can be segmented, analyzed, and otherwise sliced and diced to make data-driven recommendations for many aspects of your business, but especially marketing.

What is a CRM?

According to the Microsoft Dynamics 365 website: “CRM stands for customer relationship management. It’s a category of integrated, data-driven software solutions that improve how you interact and do business with your customers. CRM systems help you manage and maintain customer relationships, track sales leads, marketing, and pipeline, and deliver actionable data.”

In a nutshell, a CRM’s job is to help salespeople and customer service representatives manage customer relationships. They consolidate the information of known customers across specific touchpoints into a single database that provides historical transactional data to sales and service personnel and automated follow-up systems, such as email.

However, this effort can only be applied to known customers and contacts. Additionally, CRMs don’t cleanse, combine, standardize, or deduplicate the customer records, so they can’t create a “single customer view.” These limitations may hinder a business’ ability to fully understand their relationship with customers in all channels.

Factor #2: Who is the customer data for?

Most of these differences between CDPs and CRMs, ironically, reflect the two business silos they were developed to unite: marketing and sales. The differences boil down to the type of customer data each group needs and the means of collecting this data.

Marketing needs the customer data acquisition and management that CDPs provide to handle the high volume of customer data they receive to conduct their business tasks. CDPs consolidate and manage all customer data across all touchpoints to gain a single, unified view of the customer to help your business understand your customers and their behavior. The data inputs are complex, come from everywhere, and are gathered digitally.

Sales needs customer data to help manage the customer relationship. CRMs store historical data about customer interactions in order to inform future interactions. The data inputs are simple, straightforward, and usually done manually by sales (and service) people to track the progress of the relationship.

Factor #3: How do these data management tools collect customer data?

As discussed above, CDPs and CRMs serve different roles because each solves a different business problem. How they go about solving these problems is different too.

CDPs collect data automatically using integrations and code snippets embedded in digital touchpoints. This means you can gather customer data from websites, laptops, mobile devices, apps, and even CRMs into one place, clean it, and produce customer profiles that are available to those who need it.

The data CRMs collect is usually entered manually and its purpose is tightly focused on logging an interpersonal or transactional interaction — for example, notes from the latest sales call. Interpersonal descriptors are difficult to quantify, and each salesperson has their own way of taking notes, making these notes difficult to automate. These two factors make CRM data less shareable elsewhere within the business.

Factor #4: Is your need for a CDP or CRM urgent?

Over the last few years, CRMs have been innovating and evolving to function more and more like CDPs. So, if you can, it might be prudent to wait and/or choose vendors carefully. Gartner predicts that 70% of independent CDP vendors will be acquired by larger technology vendors or will diversify by 2023. “CRM systems have seen the competitive threat that CDPs brought to the table,” Gartner’s Foo Kune said. “As CRM technologies recognize that they need to update their aging databases to meet the needs of modern business functions, including marketing, augmenting your CRM with a CDP may be unnecessary.”

Factor #5: Finally, which do you choose? CDP or CRM? …Or both?

For most businesses, choosing between a CDP or CRM isn’t an easy decision, and business needs and opportunities are driving their solution timeline.

If your business primarily needs to have a broad view of who your customers are, how they engage with your business, and apply these insights across multiple business groups, you may opt for a CDP.

If your business primarily needs to manage customer relationships in a more detailed, efficient, and personalized way, you might choose a CRM.

And, if your business is broad and needs a little of both, you can choose both. “Companies seeking a new strategy to form personalized customer experiences through data will need a CDP as it offers the resources to create a comprehensive view of the customer across each platform they interact with in real-time — whether it’s social media, apps or mobile,” says Heidi Bullock of Tealium, a CDP provider. “CRMs, on the other hand, help manage sales-focused customer data rather than collecting data across different channels. Because of this, CDPs and CRMs can actually operate simultaneously, as they work to fulfill different business goals.”

While CDPs and CRMs offer two different marketing and sales data management solutions with differing strengths, you don’t necessarily have to choose between them. It’s possible to use a CRM as an input and output channel to a CDP. And, in turn, use a CDP to provide a 360° customer view data set within the CRM.

Choosing both a CDP and a CRM can deliver an amazing customer experience and tremendous business value: achieving high marks in customer satisfaction and providing integrated tracking and engagement.

Choosing a CDP or a CRM isn’t necessarily an either/or decision. It may be also/and. At Fusion, we’re here to help you define your data management strategy and identify a roadmap for your data solution investments into CDPs and/or CRMs that align with your business’s needs and strategic objectives. If you want to talk about your organization’s needs or its martech strategy, just let us know.

About the author

Fusion Alliance
Your digital transformation partner.

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