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The customer relationship management (CRM) system has been a mainstay for sales, marketing, customer service, and billings teams since they were popularized in the mid-90s. It’s the kind of technology that has been essential to so many executives' day-to-day work, that it's almost impossible to imagine life without it.
Over time, CRM software has changed to accommodate new and emerging data types, but it simply wasn’t built to capture and make use of one essential data set — activity-based data.
Enter: the customer data platform (CDP). A system that fills the data collection, storage, and organizational gaps existing in the CRM and uses AI technology that can predict behaviors.
In this article, we’ll explore the difference between the CRM and the CDP in greater detail and explain why the CDP will replace the CRM’s role in your everyday work life (but it won’t replace the CRM itself… more on that later).
First up, a history lesson. CRM software as we know it got its start in the 1980s when the concept of ‘database marketing,’ a form of direct marketing that analyzed a customer database to identify which customers would be most likely to react to a marketing campaign, started to take off.
The first version of the automated CRM, a product resembling the modern CRM still used today, was ACT! (an acronym for Automated Contact Tracking). Naturally, there were many followers who launched similar products and, by the mid-90s, businesses had a wide range of CRM systems to choose from.
In 1999 things really started to progress when Salesforce launched its cloud offering, bringing greater access to the CRM. Since then, cloud products have dominated the CRM space and have shifted and changed with the rest of the digital world, adding social and mobile data to the mix.
Since its inception, the CRM has served as a system of record for customer and prospect contact information, accounts, leads, and sales opportunities. It’s done — and continues to do — a great job of supporting sales teams.
But a CRM is limited in its view of the customer lifecycle because it was built around an object-oriented data model instead of an activity-based model.
In an object-based model, data and relationships are contained in a single structure that represents a real-world entity. This results in different teams (sales, marketing, customer support) looking at different objects that relate to their role. For example, a marketing team may be looking primarily at leads, while sales look at qualified leads or opportunities.
This model creates departmental silos and prevents you from getting a single view of the customer journey. Without this end-to-end story, contextual marketing is near impossible and customer success teams will struggle to give your customers the support they expect in 2022 and beyond. In short, this model was not built for a world where customers expect you to deliver 1:1 personalization, predicting and responding to their actions minute-by-minute.
All this simply comes down to the fact that the CRM system was built using technology that has since become outdated. Firstly, CRMs use SQL which is limited in its storage capabilities. Plus, they were built during a time when there was no context-aware technology (like machine learning and artificial intelligence) available.
Today, thanks to AI-driven matching capabilities and data pipelines that can scale action-based systems of record, the role the CRM has played in our day-to-day work life is being filled by a newer platform: the customer data platform (CDP).
One of the key differences between the CDP and the CRM is the data collection and management process. And while it’s not essential for the average marketer to understand how the sausage is made, in this case, the difference in how data is collected informs the functional differences between the two.
A CRM usually collects data like email correspondence, sales notes, and customer information manually. Since it’s difficult to enforce a consistent style of note-taking, the data collected is not standardized, plus it is solely focused on the interactions the customer had with the sales team. Most CRMs do not have two-way data pipelines, meaning this manual information your sales team is spending hours inputting is difficult to get out of the platform when you are trying to align it with other data types from other departments. More often than not, a CRM will integrate with only other tools in its own family, making it difficult to choose best-in-class tools for your tech stack.
A CDP works differently. CDPs automatically gather data using a system of integrations and code snippets. With a CDP like Ortto, integrating data from your CRM, customer support platform, website analytics, Facebook and Google ads, ecommerce platform, and more is incredibly simple. After a data source is integrated, the CDP will filter, clean and organize all your data to give you a single source of truth, updated in real-time.
Many CDPs, including Ortto, allow data to run the other way, too. This means you can easily export audience segments to create lookalikes in Facebook or create Playbooks that ensure sales teams are alerted via Slack or email whenever a lead is qualified. With two-way data pipelines, anything is possible.
A CRM is best used to help a sales team or customer service team manage one-to-one interactions with their known customers. For example, a sales team member would use the CRM to look up a customer ahead of a meeting to find out who they’ve spoken to recently, what happened in the conversation, and get personal details like where in the organization this individual sits or whether they had a birthday recently. This context sets them up for a more personal conversation.
A CDP is useful to every department across the business and essentially unifies data from sales, marketing, product, customer support, and finance departments. Importantly, as we’ve mentioned, the CDP can also keep track of activities in real-time thanks to data pipelines that bring data from various sources into one platform.
Let’s consider the example above. If that same salesperson logs into a CDP ahead of a meeting, they will be able to see everything the CRM has tracked (because the CRM is integrated into the CDP) along with every action the individual has taken on the company’s website, advertising they’ve seen or reacted to, in-product usage behavior, points of transaction and more. Essentially, every step the customer has taken will be viewable.
The real power of the CDP, however, comes at a higher level. A CDP can consolidate and manage all customer data across every touchpoint, giving your business a single view of the customer journey. This enables marketing teams to identify which tactics and messages are driving revenue, product teams to see which actions lead to upgrades or increased engagement scores, customer service to identify the actions and engagements that lead to high customer satisfaction scores, and leadership to easily track every metric that matters to their business, from CAC to MRR to LTV.
It’s not really a case of this or that.
CRMs still have their place in managing contacts and customer relationships on a person-to-person level. This can help sales teams manage relationships and keep track of progress on leads.
A CDP unlocks another layer that gives marketers, product teams, leadership, customer support, and finance a far deeper understanding of the customer’s end-to-end journey. It is capable of storing, cleaning, and updating records and making it usable in real-time to enable automated, omnichannel marketing. With a CDP as a single “backend” for your business, every department can quickly and easily get the information they need to make data-driven decisions, and act on them.
When deciding on how your business will manage customer data today, it’s important to consider what the future looks like and how you can set your business up to succeed. With AI-enabled data pipelines in a CDP, you can leverage your data to make predictions about your customer’s behavior and can deliver the kind of 1:1 personalization customers have come to expect.
This is just the tip of the iceberg. As AI in marketing improves, the businesses that have unified and organized their data in a CDP will be in a far better position,as the AI has the data it needs to excel at its job.
If you’re ready to start working in a CDP, it’s simplest to get started with a platform like Ortto rather than trying to build one from scratch. Plus you’ll benefit from the wealth of data informing the AI and the years of experience that goes into building a best-in-class platform.
When you’re weighing up your options, look for a CDP that is underpinned with artificial intelligence and gives you flexibility and customizations. Use this checklist to guide your decision and ensure you’re getting a platform that does what you need it to:
Integrates with the tools I am already using in my business or allows for custom APIs and integrations
Powerful segmentation tools, allowing me to create custom audience segments and target them with omnichannel marketing
Offers support documentation and a customer success team to ensure I am making the most of my investment
Impressive analytics functionalities including dashboards and reports
Easy to use and will save my team time
Security features including GDPR and CCPA compliance
Proven results with positive reviews from businesses like mine on third-party platforms like G2
Transparent roadmap and the ability to request or upweight features or integrations
AI technology underpinning the product
Flexible and affordable plans
Ortto checks all these boxes and more, plus we have a range of plans including a free plan and a free trial of our paid features to give you an opportunity to experience the CDP difference first-hand. Head to our pricing page to find the right plan for your business.
In the future, the CRM will be a data layer that goes relatively untouched, while the CDP becomes the central place for marketing, sales, product, and customer service departments to perform their daily tasks, track progress, and make optimizations.
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