CDPs for retail: Build vs. buy considerations

Picking a customer data platform is hard when you might still be wondering: What are CDPs?

It can be daunting to get started. So, what are CDPs?

A customer data platform, which is software engineered to collect, organize, and centralize customer data to build comprehensive unified customer profiles, provides a range of enterprise-wide benefits. The impact of the type of customer data a CDP can deliver is significant, allowing various departments to benefit from and act upon first party data in ways that improve the customer journey.

When it comes to CDPs for retail, during initial research brands often wonder if they should build the solution using internal talent or buy the solution from a vendor. Let’s break down the choices. 

In the race to deliver the shopping experiences customers love, retail companies are increasingly adopting omnichannel customer engagement strategies.

This makes good business sense, after all, 71% of consumers want a consistent experience across all channels, but only 29% say they actually get it. 

To make this strategy work, personalization is key – no matter the channel, uninspiring engagements ruin experiences.

Despite the critical nature of a great CX, delivering personalization is proving difficult for many retail brands. Case in point: 75% of online shoppers said they fail to regularly see product recommendations that interest them.

These trends have fostered retail’s renewed interest in customer data platforms (CDPs).

Why? A CDP software solution offers the following advantages: 

1. Unification of customer data from sources across the organization into robust customer profiles 
2. Discovery of rich customer insights at scale in real time 
3. Activation of trusted customer data to any other engagement solution in the tech stack 

Does this fit? General considerations around CDPs for retail 

In their initial research into customer data platforms (CDPs), retail brands often ask: Should we build the solution using our internal talent or buy the solution from a vendor? While assessing the options, 

Retail businesses need to identify their overall goals and objectives. 

Are you hoping to:

• Dramatically drive down marketing costs
• Increase messaging effectiveness
• Enhance the customer experience
• Improve operational excellence
• Drive greater efficiency across stores
• Boost digital sales and e-commerce
• Grow customer loyalty

Thanks to recent innovation in this space, CDPs have expanded their reach beyond marketing engagements to impact commerce, sales, and service interactions. They’ve also incorporated a strong data privacy and governance core, which means engagements will only be fueled by permission-based data. 

To help guide a build–versus–buy decision around CDPs for retail, ask some fundamental questions: 

1. How critical will the CDP be to the business? Competitive advantage? ROI? Operational efficiency? Risk Reduction? Product and operational decisions?  
2. What is your brand’s historical appetite toward building vs. buying new technologies? 
3. Are there available resources and is there a track record of technology development? 
4. Does your company push technical boundaries at a rate where a third party couldn’t match your pace of innovation?

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I’ll do it myself: Considerations for the build your own CDP argument 

Who will build the system? 

Building your own CDP allows you to learn about your customer base – as long as you have engineers to keep it running, talent to analyze the information for your specific business, and the vision to select which challenges you’ll act on first. 

In the war for talent, almost all organizations face challenges in hiring and retaining the type of data engineering, data science, security, and privacy staff needed to support personalization at scale.

Without the right combination of skills, you won’t be able to build, test, and measure the analytics required for accurate and effective personalization. This will limit the value created by your personalization efforts. 

How will you create integrations? 

In order to deliver personalization across channels, companies need to integrate a broad set of technologies. This can result in a complex and ever-expanding technology stack—and can be very hard to manage.

Admittedly, some companies have made substantial investments and have pockets of excellence in their technology ecosystems. But the lack of proper integration keeps most companies from delivering a seamless one-to-one customer experience across channels. 

How will you maintain the integrations? 

CDP value is derived from its ability to connect to other internal as well as external third-party systems. Since end-point systems are often updated, these connections must be maintained through APIs.  Will you have the capacity, knowledge base, and continuity to maintain these integrations over time?  

Who will use the CDP?  

Many stakeholders can use a CDP to improve business outcomes. Here are some main considerations for the primary users:

• IT teams leverage all their current technology infrastructure investments and operate within the bounds of their own data privacy governance.
• Analysts require a single intuitive interface to deploy their models and organize their data. They also need flexibility to create reports and dashboards as detailed or as high–level as they need. 
• Marketing teams require the ability to segment, manage, and operationalize data.

There other potential stakeholders as well (sales, marketing, logistics, product development, finance, fraud, and risk). As you look to build a CDP for retail, determining who will use it and what they need to be successful will help bolster its ultimate effectiveness. 

Benefits of building your own CDP:

1. Full ownership of the code 
2. In house options 
3. Features designed specific to organization’s vision 
4. No vendor/data lock-in  
5. Upfront costs may be less as the infrastructure is already in place 
6. Margins may be higher as there are no subscription fees involved 

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Treat yourself: Considerations for the buy a CDP argument 

All CDPs are not equal 

As the CDP market has grown, so has confusion about the solution. Vendors sometimes sell to their capabilities instead of actual customer need, and choices become increasingly complicated.  

Here are a few points about CDP vendors to consider: 

• Product: Key indicators include strength and robustness, core and extended functions, activation and partnerships, ease of use, and analytics and reporting. 
• Use cases: Be sure they understand your well-defined and identified list of use cases to help realize better business outcomes. 
• Deployment timeline: Look for quick deployment with initial, high value and priority use cases. 
• Vendor corporate profile: What’s the reputation, proven industry experience, financial strength, and unique capabilities of your vendors? 

Buying a CDP is a significantly faster go-to-market strategy where a given use case, depending on complexity, can be delivered in weeks versus the months/years it can take to build one.

No matter which direction you take, formulated use cases should drive any decision to realize the CDP promise of bringing all your customer information, from multiple channels, brands, and geographies into a single system for a unique customer view. 

Benefits of buying a CDP: 

1. Cloud native gives more flexibility
2. Vendor and Vendor’s customers contribute frequently to enhancements 
3. Subscription fees billed as incurred 
4. Many out-of-the-box data source and destination integrations in place now and many more being built  
5. Digital Identity and Business Intelligence capabilities built-in 

CDPs for retail: Breaking down build vs. buy considerations