CRM, CDP or DMP? The 80/20 Rule for Keeping Your Most Valuable Members

Contents

1. CRM, CDP and DMP: what’s the difference, and which should you choose?
2. How does a CDP work?
3. What are the features and benefits of a CDP?

The 80/20 rule of member management, also known as the Pareto principle, is a marketing strategy. It holds that 80% of sales come from 20% of customers, and that some of those 20% are willing to spend 10 or even 100 times more, as long as you offer products or services of equal or greater value. This means a company or organization can achieve better results by focusing on this important 20% of customers and manage its member base more effectively.

“According to Bain & Company research by Frederick Reichheld, cited by US customer relationship experts, a 5% increase in repeat customers raises profits by 25%. Why? Over time, repeat customers tend to buy more. The more they buy, the lower the operating cost of serving loyal customers. Most importantly, repeat customers refer others to your company.”

In recent years, companies have faced low social media reach and weak ad performance because third-party data is going away. For privacy reasons, Apple has started blocking third-party tracking, the EU has tightened GDPR, and Google is about to stop supporting third-party cookies. All of this limits how third-party data can be obtained and used. As third-party data disappears and the easy gains from digital advertising fade, companies have begun focusing on member management and building up first-party data.

CRM, CDP and DMP: what’s the difference, and which should you choose?

As companies start to value customer data, the market is full of member management systems. You often hear about three different types of member data tools: CRM (customer relationship management), CDP (customer data platform) and DMP (data management platform). Companies often don’t know which to choose. Here is how they differ in purpose, function and use:

1. Different purposes

• CRM: Focuses on building and managing customer relationships, with an emphasis on sales, customer support and interactions. It usually includes sales opportunity management, a customer database and customer communications.
• CDP: Focuses on integrating and managing multiple data sources and collecting online browsing behavior to build a single, complete first-party customer profile. It is designed for marketing. Its main purpose is to provide deeper customer insight, support personalized marketing and improve the customer experience, so marketers can use the data to build targeted, personalized campaigns.
• DMP: Leans toward third-party data and is used for ad targeting and audience selection. It usually doesn’t handle personal identities; instead it focuses on the browsing behavior and interests of user groups.

2. Different data scope

• CRM: Usually includes basic information about known customers, such as contact details and past interaction data.
• CDP: Handles structured and unstructured data and can integrate information from multiple sources, including website behavior, social media activity and transaction records, to form a more complete customer profile.
• DMP: Mainly handles third-party data, such as data from ad networks and external data providers, for advertising purposes.

3. Different uses

• CRM: Mainly used for sales, customer service and customer interaction management, helping companies raise customer loyalty.
• DMP: Mainly used in advertising, helping advertisers choose target audiences and improve ad performance.
• CDP: Widely used in marketing and advertising, supporting personalized marketing, customer journey analysis and more precise marketing strategies.

CRM and CDP are different but complementary tools. CRM focuses on building and managing customer relationships, while a CDP focuses on integrating and analyzing data to deliver deeper insight and personalized experiences. Companies usually choose one or combine both, depending on their needs, to achieve more complete customer management and marketing strategies.

CDP and DMP differ clearly in data sources, purpose and use. CRM, CDP and DMP each have a different focus, functions and scope, so which tool to choose should depend on your organization’s specific needs and goals.

How does a CDP work?

Marketers inside a company use many tools, such as LINE, email newsletters, online and offline transactions, apps, CRM, text messages, and the Google and Meta ad platforms. These all run separately and don’t share data, so it is hard to see the full picture. Analyzing a single member’s behavior path, or knowing which marketing needs to focus on, is almost impossible. Very often, the same message goes out in bulk to every member. That makes for a poor member experience, and over time members block the company’s messages.

A CDP helps companies unify customer data from every channel, including transactions, behavior and profile data, and makes it available to other systems (such as analytics, marketing, advertising and customer engagement platforms). This enables a wide range of actions, including customer segmentation, personalized web recommendations, customer journey optimization, ad campaigns, product and service recommendations, and churn detection across the customer lifecycle.

What are the features and benefits of a CDP?

1. Data management: A CDP collects and consolidates all kinds of data, including member data, transaction records, website interactions, messaging apps and app behavior. It captures as much pre-purchase information as possible, giving a clearer and more accurate picture of each consumer.

2. User tagging: A CDP groups customers with tags, such as interests, purchases and browsing behavior, so companies can run marketing plans more accurately and quickly later.

3. Customer segmentation: With user tags in place, you can segment your customers and quickly find the right audience for each campaign or ad.

4. Marketing automation: A CDP connects with other programs and software, so marketing tools can be integrated and automated. You no longer have to redo the setup in every tool for each new campaign.

If your company collects data through multiple systems and channels and wants to create unified customer profiles and design personalized marketing experiences, using a CDP to build a single view of customer information is the best choice.

The 80/20 rule of member management applies across industries, including retail, services and online businesses. By understanding the needs, preferences and behavior of these key customers in depth, companies can better offer tailored services and products to members, raising customer loyalty and revenue.

In short, the rule stresses that management teams should prioritize the members who contribute most to the business and take steps to meet their needs to achieve better results.

Further reading:

• 7 steps to becoming a CDP power user: the CDP maturity model
• Big data drives decisions: how MarTech helps brands succeed in digital transformation