Find the most suitable data gathering platform – pros and cons of DMPs, CDPs, DWs and CRMs

Today’s digital ecosystem, with its proliferation of data sources, tons of information and rapid technological changes poses a host of challenges to make the most out of data. Accessing meaningful data is no easy feat, which is why organizations are turning to data aggregation to improve their performance.

Gathering data on customers and users delivers huge benefits to organizations across all sectors. It enables marketers and analysts to learn about customers’ interests, align content to their unique preferences, and ultimately to segment and target individual users.

However, as the market offers a variety of data gathering software like data management platforms (DMP), customer data platforms (CDP), customer relationship managements (CRM) and data warehouses (DW), you need to decide which ones best suit your organization.

Some of these terms might sound puzzling, so we’ve prepared this post to make it all clear and help you better understand the meaning behind these labels.

We’ll also explain what gains they offer along with their key pros and cons.

Data warehouse

A data warehouse serves as a central repository of integrated data which comes from various sources like transactional systems, relational databases, and many others.

What’s more, data warehousing can be performed on a specific subject area. So from a data warehouse you can create data marts, which are subsets of data stored for the distinct needs of certain teams, sections, or departments within an organization.

It’s crucial to plan data gathering so you can make the data more usable later on. But before the transactional data flows into a warehouse, it’s integrated and transformed. Once it’s stored to form a comprehensive database, it serves as a cornerstone for building reports, dashboards, analytics solutions, and other ad hoc queries.

Finally, business analysts, marketers, and other decision makers can access data through:

• Business intelligence tools
• SQL clientst
• Cther analytics software

to control business performance and make more informed decisions.

Pros of data warehouses

With a data warehouse you can unearth hidden patterns of data flows and process vast amounts of complex data more efficiently. The platform allows organizations to split analytical processes from operational ones, making both of them run smoother and faster. But that’s just the tip of the iceberg.

So let’s have a closer look at the advantages you can derive from this solution.

Custom analysis

• A data warehouse allows you to tailor your analytical practices to the specific needs of your organization. For instance, you can implement your own machine learning algorithms on a data set and conduct custom analysis. While this requires some additional work and IT skills, it’s worth the investment in order to benefit from more flexible analysis.

Enhanced data quality and consistency

• Data warehousing ensures that data is converted into a common standard format. In other words, even data from across the departments of an organization is standardized and consistent.Different teams, whether it’s marketing, sales, or anyone else, can use the same data repository for reporting and queries. This means that all processes are aligned within an organization.
• Because a DW unifies data, you can regarded it as a single source of truth for reporting to various stakeholders. Data records are combined and deduplicated, so that the data serves as a reliable source of the most up-to-date information for reporting.
• Before data is loaded to a warehouse it is cleansed, denormalized, and pre-calculated. Cleansing means that the warehouse spots all inconsistencies and fixes them on the spot.The denormalizing process serves to improve the data warehouse’s ability to read data. All these practices ensure you’re storing high-quality and consistent data for your analytics purposes.

Time savings

• Centralized data storage is time-saving and cost-effective because data gathered from multiple sources is ordered and stored in one place. This lets you provide a central view across the entire organization. Many stakeholders in the organization can access all the data in single place which saves a lot of time and consequently can reduce some costs.

Historical data storage

• A DW can store historical data, the sort of thing you’ve already deleted from other systems. With this data your organization can get a better view of trends that fluctuate over time. It allows you to keep track of data within multiple timeframes so you can make more informed decisions and better plan future initiatives.

Enhanced system and query performance

• DW is designed with a focus on retrieval of data and analysis. A data warehouse enables you to store vast amounts of data that you can query quickly. It’s built to speed up data retrieval and to aid reporting and analysis.

Cons of data warehouses

While there are significant benefits you can achieve through data warehouse implementation, there are some drawbacks as well. The process itself takes a lot of time, while the matter of data ownership and privacy also involves some issues. Let’s get into the details.

Technical expertise required

• Creating reports in a DW calls for writing queries, and understanding the schema of the data warehouse and BI tools (e.g. Tableau, Looker, Power BI, etc.). It means that teams need to be tech savvy to prepare reports and visualizations.

Time consuming

• Although one of the key tasks of a DW is to simplify your data, it turns out that a lot of the work on your side requires a hands-on approach. First, ETL process implementation has to be conducted. That entails retrieving data from data sources, performing all the transformations needed to match the data warehouse schema and requirements, then importing the data into the DW. Second, maintenance is done manually, especially considering that other systems’ APIs and data schemes evolve over the time. This means you may need to monitor and adjust the process of importing to your data warehouse, or you might even notice at some point that the import is broken.

Data ownership & security

• Data warehouses are a cause for concern about data ownership and security. As data is combined from multiple sources, including from third parties, the matter of ownership, rights, and safety of data becomes complex and tricky.Also, only certain staff members should have access to such information. This is another limitation on the capabilities of data warehouses.In some circumstances different departments may reluctantly share users’ personal data within the repository. Businesses must ensure that only trusted individuals can work on certain types of data.

If you want to learn more about why first-party data is the way to go for marketing, have a look at our post:
Why First-Party Data is the Most Valuable to Marketers.

Maintenance costs

• You can consistently update your data warehouse to get the latest features and functionalities. However, such upgrades are usually rather pricey. If you also take into account regular maintenance for your system, the overall costs might be a bit steep.

Requires considerable resources

• If you want to handle data from numerous sources, you need significant amounts of data resources, whether it be support from your IT team or an independent BI team. It all depends on the system you have in place and further deployments you want to execute. This could certainly entail additional costs for your organization.

Data rigidity

• Very often the type of data you incorporate into your data warehouse is comprised of static data sets. That means you have less flexibility to create more specific solutions and reports.

Customer data platform (CDP)

Customer data platforms are the newest player among the data platforms being discussed, and they’re one of the most powerful data gathering tools. For good reason CDPs are called the brain of the smart marketing stack. A CDP lets you unify massive volumes of data fragmented across multiple channels and sources.

Finally, your carefully-crafted data can be easily applied to create a single customer view and provide better customer experience.

CDP technology facilitates campaign automation, mapping the customer journey across all channels and touchpoints. It supports data analysis and helps marketers steer clear of data silos problems while managing all their initiatives without much help from the IT department.

So, let’s break down all the details of this solution.

Pros of customer data platforms

As we’ve already mentioned, a customer data platform is a powerful data gathering tool. It unifies data, offers a 360-degree customer profile and supports data-driven marketing. But what exactly makes the CDP such a star?

Driven by first-party data

• That’s quite an asset. It’s the most valuable information from the marketing perspective. This info is the most accurate and reliable you can get because it comes directly from your customers and contains personal information of real clients.
• With first-party data you can achieve better compliance with privacy regulations like the GDPR or ePrivacy. As the data is obtained directly from your customers, you own it and have full control over it.

Provides a single customer view

• Unlike with DMPs, all data gathered from multiple sources and merged into a single record gives you a complete view of your customer journey and connects the dots of on- and off-site touchpoints. When you add first-party data to the mix, you obtain a single customer view (SCV).

Makes data more actionable

• The capabilities of a CDP are not limited to collecting and reporting. You can apply it into a wide range of purposes like content personalization and recommendation, activating audiences, cross- and up-selling campaigns.

Easy to integrate

• Unlike a data warehouse, you can easily integrate a CDP with multiple platforms without the hassle of developing custom integrations.

CDPs, in contrast to DMPs, are the domain of marketers

• Because CDPs offers a pre-built marketing database it makes creation a much easier task. This means marketers can get down to business without much help from tech-savvy experts. Marketing professionals get more control over the database and nobody will get in the way of their work.

Cons of customer data platforms

In the real world there are no perfect solutions. That rule applies also to customer data platforms, which do have some disadvantages.

Limited data sets

• Considering that a CDP operates primarily on first-party data, it might turn out that you don’t have enough data. In contrast to a DMP, where you can buy data from third parties, your CDP’s data sets might be very limited and insufficient to run your marketing initiatives at full bore.

Unstructured data issues

• If you want to use some unstructured data, particularly in complex formats, you might encounter some problems with your CDP. It could be difficult to put data into use, or even upload it to the platform. This is unlike with a data warehouse, where you can upload all kinds of data and the IT team will take care of it.
• Another flaw of customer data platforms is that it’s hard to visualize unstructured data. That differentiates a CDP from a DW, where all kinds of data can be presented. However, if you integrate your CDP with a business intelligence tool you’ll be able to create custom visualizations of your data and conduct further analysis.

Data management platform (DMP)

A data management platform is another powerful data aggregation technology on our list. These platforms have established themselves as the most useful tool in digital marketing and advertising. Often compared to a simple database, but their capabilities go far beyond storing information.

A DMP allows marketers and advertisers to gather valuable information from a wide range of various sources, classify, analyze and finally segment in order to deliver it to advertisers, typically via their DSP. As a result, the platform lets advertisers serve customized messages to the right audience at the right time.

Pros of data management platforms

Because a data management platform processes and organizes all your gathered data, it provides you with a clear picture of your audience and helps you devise marketing strategies. Here are the essential benefits offered by a DMP.

Data unity

• Whatever data you collect, be it cookies, email addresses or other behavioral data, DMP helps you stitch these bits together and divide users into segments so you can employ it in all your marketing campaigns.

Data activation and monetization

• Data activation is one of the strongest points of a DMP. It’s what primarily distinguishes DMPs from other data management systems, like data warehouses. Once the data is unified and audience segments are created, you can put the data to use for purposes like media buying, personalization, and dynamic advertising. Moreover, you can sell activated data and audiences to data brokers.

Improved campaign optimization

• With a DMP you gain in-depth analytics of your campaigns’ performance and efficiency. This could be metrics like impressions served using the data, overall campaign cost, etc. And with detailed insights you can spot all the flaws that need improving before future campaigns.
• A distinct functionality offered by DMPs is that third-party data lets you perform look-alike modelling to expand your audiences with similar users. This improves your prospecting and can scale your marketing campaigns to reach more users.
• As a DMP gathers data from multiple sources to create audiences, it garners data on itself. The insights of campaigns conducted via a DMP could enhance your data sets applied to the creation of target audiences.

Cons of data management platforms

Though a DMP can be a powerful element in your marketing arsenal, you need to be aware of issues and challenges that can arise when using it. There are key drawbacks to this tool.

Privacy issues

• DMPs are powered primarily by third-party data. Such data helps to enhance users’ profiles and solves the problem of insufficient data, but it also entails privacy issues. As we’ve already mentioned, under GDPR you need to require users’ consent to collect and process their information This process is a real struggle when considering the consent flows between third-party vendors.

Data quality and completeness

• DMPs broaden audiences through mapping cookies to a predefined taxonomy that takes into account user activities and context. However, the taxonomy is fixed. In other words, it’s grounded in a stiff set of rules for data gathering, which can be the source of poor data quality. The data might be vague, lacking precise attributes that allow you to classify customers into the right audience.
  Also, when applying these taxonomies propelled by third-party data, you won’t get insights into the data sources, their quality and data freshness.

To get more details on taxonomy and how it works in DMPs, check out our post:
What is Taxonomy in a DMP?

• If the quality of the data being imported into the DMP is poor, then the results will be poor. One of the main issues most DMPs have is that they collect lots of third-party data whose quality isn’t great to begin with. For example, it’s hard to identify things like buyer intent with most third-party data because the data might be old (maybe the user isn’t interested in purchasing the product or service anymore, or may have already bought it).

Adoption

• Integrating a DMP into your organization’s current environment might be challenging. First, it would require the right technical and domain knowledge. Second, such data aggregation technology might turn out to be too complex for your employees. That would mean a steep learning curve associated with learning how to properly use it.

Customer relationship management (CRM) platform

A customer relationship management (CRM) tool is another data aggregation platform. It’s a technology that lets you collect and store information about your customers and prospects, handle interactions with customers, and automate processes for various marketing initiatives throughout the whole customer journey.

The tool is dedicated to aid sales initiatives and facilitate building lasting relations with customers. With a CRM system you can collect a wide range of data, from customer contact information, to a lead’s status and customer communication preferences, and much more.

The data can be automatically populated through various integrations with third-party sources. This significantly impacts your time management, leaving you more time for marketing strategies and other initiatives.

The primary focus of CRM is to foster good relationships and monitor the interactions of customers and prospects with your company. All these steps are vital in customer acquisition and retention.

Pros of customer relationship management platforms

A CRM helps you organize and automate your processes efficiently. You get extra time to focus on and develop other areas of your business. But what exactly can you achieve with a CRM?

Efficiency

• A CRM can automate many of your tasks, from completing and sending reports, creating leads from sign-up forms, and collecting all necessary data.
• All your data about your customers: contact information, emails, messages, notes from phone calls, is centralized, well organized and easily accessible to various teams. You can retrieve and share it with just a few clicks.
• As all teams within your organizations can share information about your customers, you can be sure that all data flows through the pipeline. Consequently, everyone involved is on the same page about closed deals, and gets updates on new products or services as well as other relevant information.

Improved customer service

• Thanks to a database full of information on your customers, including historical data, you can retrieve all key details concerning previous purchases, preferences, or any other facts that can help you resolve their issues faster.

Comprehensive data & improved reporting

• The digital ecosystem is fueled with data, and your CRM system is one of the tools that lets you gather this strategic asset. As it stores the most valuable data in one place you can better use it for analysis and reporting. You can integrate a CRM with external tools and plugins to gather even more data. The more – and more accurate – information you have, the better your reports and more informed your decision processes are.

Cons of customer relationship management platforms

However comprehensive the list of CRM benefits is, the software is not free from flaws and drawbacks. These include implementation costs and data security issues, some of the most troublesome. Let’s dive deep and explore the potential troubles you may experience with such a tool.

Limitations

• Gone are the days when a CRM system worked on its own as standalone software. Now, customers prefer to conduct research without relying on the vendor’s sales team. Modern CRMs require a tight integration with marketing automation and other platforms from your marketing arsenal, such as CDPs. Moreover, CRMs need a support team to capture the complete picture of all customer interactions with the brand, whether via your website, apps, social media, customer support, etc.

Privacy issues

• While part of the process of building relationships with your customers entails collecting their personal data, you might need their consent to do that. That’s the case if you gather and process data of European Union residents, which is a consequence of the newly-introduced GDPR privacy legislation.
• Most CRMs are cloud hosted, which means the there could be some issues concerning the security of your data.

Data aggregation technologies – final thoughts

As you can see, the presented data aggregation platforms vary in their functionalities and capabilities. There are no winners here, because each tool is designed for a specific purpose and has a different role to play, although some of their paths do cross. Moreover, all these solutions bring considerable benefits, albeit with a small number of flaws.

Hopefully, we’ve cleared up some of your confusion about these tools, but if you want to know a bit more about them don’t wait, just reach out to us!

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