Customer Data Platform vs. Data Warehouse: what’s the difference and why you need both?

7 minute read

Team BlueVenn

When Customer Data Platforms (CDPs) first came on the scene in 2013, there was widespread confusion as to what a CDP actually is and whether businesses actually needed to add another system to their tech stack. Some of this confusion still exists today, and one of our most asked questions is ‘what’s the difference between a CDP and a Data Warehouse?’, with many businesses turning to their Data Warehouse to solve marketing-specific issues.

To eliminate any confusion, we’ll run through the two systems including their core competencies, shining a light on how a CDP and Data Warehouse actually work together, rather than being viewed as competitors.

Before we dive into it, let’s first take a look at the definition of a CDP and Data Warehouse.

What is a CDP?

According to the Customer Data Platform Institute (CDPI), a CDP is “packaged software that creates a persistent, unified customer database that is accessible to other systems.”

The three key elements of the definition are:

1. Packaged software

As a CDP is a software product, rather than coded scripts and load routines. This is an important definition because it separates CDPs from long-winded services projects that require constant maintenance and support from the agency that could build you a bespoke database.

2. Persistent, unified customer database

By matching, merging, and deduplicating data across operational systems, a CDP is breaking down siloes of data present within many organizations, which inhibits the marketing team’s potential to generate revenue and deliver targeted customer experiences. By making all the data available as unified customer profiles (AKA Single Customer View), marketers are able to track customers throughout their journey with complete historical persistence, removing questions around data reliability, integrity, and traceability.

3. Accessible to other systems

By making the structured and unified data accessible to other data driven systems a CDP is enabling that data to be used in email campaigns, multi-channel campaigns, for data analysis or any other marketing process. The CDP enables your business to choose from best of breed execution channels and operational systems, whilst allowing you to optimize the use of existing technology investments. Finally, the CDP is empowering your business to become truly customer centric by placing useable, trustworthy, shareable customer data at the heart of the organization.

data unification

What is a Data Warehouse?

A Data Warehouse, or Enterprise Data Warehouse (EDW) as they’re sometimes known, is a central storage architecture consisting of large amounts of data from various transactional, operational, and external systems. The aim of an EDW is to help the entire organization, not just marketing, to store and manage all types of data from across all aspects of the business, including marketing, sales, HR, and finance. Due to the nature of a Data Warehouse, they are often expensive projects that are managed by a business’ IT department.

How does a Data Warehouse differ to a Customer Data Platform?

A Data Warehouse can be a very useful source of data for a CDP and remove some complexity from a CDP implementation if the business has one already. However, a Data Warehouse does not provide the real-time needs that marketers have for them to be able to create triggers from the data and does not prioritize data quality (again, essential for personalized marketing). Moreover, there are two key differentiators between the two technologies.

Firstly, they are constructed to serve different purposes. An EDW is designed to conduct enterprise-wide data analysis, coordinate applications, and create a shared data architecture across the enterprise. On the contrary, a CDP is designed with marketers in mind. As the name suggests, a CDP focuses on customer data, not enterprise-wide data, and is, therefore, built for marketers.

Secondly, the capabilities between the two differ greatly. A CDP ingests, unifies, and standardizes data in real-time, enabling marketers to track buying behaviors and customer engagements with ease. It also allows for cross-channel identity resolution for the creation of a Single Customer View. On the other hand, due to the large volumes of data, an EDW generally uses batch processing and updates overnight and to access any marketing data requires a resource-intensive task.

omnidata

The benefits of having a CDP and an EDW

Many businesses have invested significantly in data warehouses, and rightly so, are concerned about that investment going to waste with the introduction of a CDP. However, the ability to access data in real-time can serve as a way to leverage your EDW investment as it can help activate your data. There are multiple use cases where CDPs and EDWs can work well together:

Marketing attribution: The primary function of a CDP is to unify all customer data from various touchpoints into a Single Customer View (SCV), which then acts as the single source of truth of how your customers interact with your business (including transaction, interactions, and personal details).

The sharing of marketing data is crucial for any customer-centric business, however, only 56% of US marketers said that the wider business has access to and uses the marketing data to inform business decisions. With the right technology in place, you can use this clean and de-duplicated SCV and push it back to your Data Warehouse for advanced reporting and analytics capabilities, improving your ability to maintain a competitive advantage.

Reduce reliance on technical teams: When businesses are powered solely by a Data Warehouse, marketing teams are heavily reliant on the IT department to perform even the simplest of tasks. In fact, 69% of the US marketers we surveyed earlier this year said their marketing team lacks the knowledge or skills to effectively analyze and segment customer data, demonstrating their dependence on external departments. Not only does this place unnecessary strain on data scientists and engineers, it also reduces the marketing team’s ability to be agile and competitive. It seems as though this has been recognized by US marketers, as 21% said that the biggest barrier enabling them to fully personalize the offer/content in a marketing message to an individual was the lack of data or access to the data they need. By combining the benefits of a CDP and EDW, you’ll empower your marketing team to carry out daily tasks, while your IT specialists will be free to focus on more impactful work for the business.

Improved data privacy and compliance

The introduction of data privacy regulations such as the CCPA and the VCDPA means that companies are now under greater pressure to ensure their handling and processing of personal data is compliant.

For companies using a Data Warehouse, compliance can be a complicated issue. Due to the nature of an EDW, with the pooled data owned by several different departments, it’s unclear whose responsibility it is to manage it. This often results in the laborious and administrative-intensive task falling on the shoulders of data scientists.

A Customer Data Platform, on the other hand, provides marketers with a single source of truth regarding each customer, and includes key information regarding data privacy such as opt-ins/opt-outs, preference centers, and usage tracking per channel. For example, if a customer has opted out of your direct mail and SMS communications, but has opted in to receive your emails, all members of the team will be able to see this information, mitigating the risk of breaching data regulations. Furthermore, having all data in one place makes the potential for generating subject access requests less resource intensive.

Rather than thinking of a Customer Data Platform in competition to one another, you should think of the two as a pair. A CDP and EDW can work in tandem to provide value to all aspects of the business and maximize your return on investment.

For more information on how CDPs differ to other data unification technologies, download our 2022 Marketer’s Guide to Customer Data Platforms. Or, to discuss how a CDP could benefit your Data Warehouse in further detail, book a demo today and one of our experts will be in touch.

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