Customer Data Platform
Ad targeting, audience segmentation, ROI — all the ways to benefit from a CDP and more

The Importance of CDPs for Retail

January 13, 2023 7 minute read
Don’t fall behind competitors who use CDPs to gain an advantage

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Customer Data Platform

Before we can explain why customer data platforms (CDPs) are so critical to retailers, we need to understand the role that customer data plays in business today.

For instance, each time you favorite a sweater, watch a how-to video, click a link from a newsletter, or purchase another T-shirt, that information gets logged. The data can be pulled together to create individual profiles of who you are and what your buying habits are or could be, as well as to identify the audience segments to which you belong. 

These profiles can then inform the products that companies decide to develop, as well as steer them to showcase items customers prefer. Customer data can also help businesses personalize their communications — thus nurturing the relationship between brand and consumer — as well as improve customer service, like speeding up the checkout process. Business decisions may be guided by customer data too, such as identifying which segments have churned, how to price certain SKUs, and where to target ad dollars.

So, while the benefits of customer data can be enjoyed by all manner of businesses, it can be especially helpful to the retail sector, where data can impact real-time sales. With customer data, merchants can ensure in-demand products are always in stock, calibrate prices on the fly, and deploy relevant and timely promotions. With the right strategies and technologies to implement them, retailers can respond to market conditions with remarkable (and profitable) agility.    

Why a CDP is key to retail strategy

Many retailers don’t have the best tools for realizing the promise that customer data offers, though. Their customer data may live in a hodgepodge of online and offline systems and tools. Or they may have outgrown the customer relationship management (CRM) and data management platforms (DMPs) they used to gather customer insights. Because, as powerful as both can be, CRMs and DMPs sometimes lack the specific data or functionality needed to support use cases for retailers who are looking to scale.

That’s why retailers have begun turning to customer data platforms instead. Enterprise software that collects and unifies data across channels and systems, CDPs act as a single source of truth for customer data. By compiling zero-, first-, and third-party data, CDPs build full 360° customer profiles that update in real time. These defining capabilities give retailers the business intelligence they need to achieve market agility.

Let’s dig a little deeper into the ways CDPs influence the retail sector and the strategic roadmap of B2C companies.

Improved business valuation

Investors prefer to back businesses that use their customer data strategically. Retailers that adopt intelligent CDPs create operational efficiencies, deliver better personalization at scale, improve their return on ad spend (ROAS), and enhance customer lifetime value and loyalty. The last two are especially important to business valuation, and businesses that improve those numbers demonstrate their expertise in drawing value from their data, thus securing confidence in their performance among board members and investors.

Assured compliance

As more and more governments pass legislation that seeks to protect consumer data, CDPs can help. Those with multi-tenant cloud architectures are especially key to global enterprises that want to use the same platform or service across the organization while keeping all their individual data as wholly separate entities. That means individual teams and business units can have their own accounts within the platform and store, process, and use their data without compromising other teams’ data. They can also customize configurations to meet the business needs of users in their region.

Relationship-building through personalization and marketing automation

The global retail community is well aware of the dramatic rise in online shopping that occurred during the COVID-19 pandemic, affecting consumer habits perhaps permanently. Merchants who may have relied on in-store or physical experiences, as well as face-to-face contact, to differentiate themselves from competitors realized they would have to increase or improve their digital presence.

By facilitating personalization and marketing automation, CDPs can help enhance a brand’s online presence. Based on consumer data, such as customers’ engagement with content and campaigns or where they are in the customer lifecycle, retailers can develop communications and serve content that’s relevant to a customer’s specific experience and needs. Automation can also support engagement at scale by automating customer journeys based on segmentation, events, or past customer interactions.

Real-time access to customer data and insights

The best CDPs feature advanced analytics, easy-to-use dashboards, and machine learning (ML). They have robust integrations with social media and mobile apps, CRMs, and more. Together, these features produce up-to-date customer data from a single source that teams throughout an organization can depend on. For instance, your business operations team may use it when weighing where to open new stores, while your sales team may use insights from the CDP to craft product recommendations that drive cross-sell and up-sell revenue.

The latter example highlights a particular strength of CDPs: how quickly they can produce insights from massive amounts of data. That feature in turn helps sales, e-commerce, and marketing teams be equally nimble, which is especially key during peak sales periods like the holidays, when merchants see web traffic and in-store visitors climb. CDPs with robust ML capabilities can rapidly surface unique attributes or specifications across the breadth of retailers’ data pipeline during such spikes, arming marketing and sales teams with the information they need to implement new tactics or to revise plans based on data that contradicts what they believed would most appeal to consumers during the holiday season. Pivoting from one approach to another shows that a retailer understands customers’ preferences and behaviors, supporting merchants’ goal of delivering meaningful and memorable experiences every time.

Predictive marketing support

A CDP’s machine learning capabilities give retailers a head start on future sales through predictive analytics that help retailers understand a customer’s likelihood to buy, convert, or engage. Businesses can then allocate their marketing budgets more effectively, fine-tune campaign investments, and adjust supply chains.

CDPs also give companies flexibility in how they handle predictive marketing. Some may not have data science teams, so a CDP with out-of-the-box machine learning configurations can empower non-data scientists to work with information purpose-built for retailers, such as product seasonality and customers’ preferred channels. CDPs built on an open framework also leave room for companies that do have data scientists who can bring their own pre-built configurations into the platform and use their expertise to create models that make sense for the business.

Solid ROI

Of course, the primary value that CDPs have for retailers is the effect they have on investment returns (or ROI, return on investment). I can only speak from Acquia’s experience, but the retailers who use our CDP experienced tremendous growth on a number of fronts

Email CTR Increase by 50%
Revenue per email sent Increase by 25%
Return on ad spend Increase by 150%
Call center conversion Increase by 100%
Total omnichannel customers Increase by 200%
Total loyalty members Increase by 200%
Customer lifetime value Increase by 300%
Business revenue Increase by 20%

Other CDP vendors worth their salt should be able to share similar figures, and you can review any and all of our retail case studies to get a better sense of the impact that a CDP can have on a B2C company like J.Crew.

Where to go from here

Now that you understand the significance of CDPs to the retail sector, you might want to consider purchasing one. Their benefits, which range from ROI growth to informed decision-making and compliance support, are clear and will affect teams across your organization.

Want to learn more about retail use cases? Download the free white paper from the Customer Data Platform Institute on CDPs for retail.

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