Feature
The Gist
- All about data. Data is the lifeblood of the modern business. Companies use this collection of information to better understand their customers and outperform the competition.
- CRM vs. CDP. A customer relationship management platform and customer data platform have overlap in terms of functionality. But marketers show a clear preference toward CDPs.
Editor's Note: This article has been updated on September 26, 2024 to include new data and information.
Customer relationship management (CRM) and customer data platforms (CDPs) are two of the major software systems that manage customer data. While they have elements in common, there are some significant differences.
Taking control over customer data isn't a hard-lined choice of CRM vs. CDP. However, it's worth exploring the differences if you're a marketer or someone charged with selecting tools to gather customer data and craft digital customer experiences. This is especially true when you consider the promises of each technology are similar, according to Lizzy Foo Kune, vp analyst at Gartner.
"CRM solutions were often proposed to tackle customer data management problems," Foo Kune said. "The idea was that you could get 'all of your data in one place' to use for sales, marketing and customer service. The promise was they'd break down silos in enterprises and design a view of the customer that wasn’t specific to sales or marketing or customer service. That sounds familiar to the promise of CDPs, doesn’t it?"
What Is a CDP?
A CDP, or customer data platform, is a data management system that, according to CMSWire's 2024 Customer Data Platforms Market Guide, “seeks to capture information about a customer from a wide variety of sources... [and] store and manage it in a central database.” At a high level it delivers four main capabilities:
- Data capture
- Data management
- Data analytics
- Data activation
CDPs ingest and integrate behavioral, transactional, structured and unstructured data from multiple sources into a single repository that not only breaks down data silos, but allows a business to build a unified profile around an individual customer.
Once customer data has been combined into a CDP, the ability to unify user profiles into a single record gives marketers the ability to form a 360-degree view of their customers. These customer profiles can then be segmented into groups to allow for better targeting of specific audience segments. These CDP capabilities tick the box for marketers keen to deliver everything from targeted marketing campaigns to improving customer experiences for high value audiences.
In 2023, the CDP industry reached an estimated $2.3 billion in revenue worldwide, up 15% from $2.0 billion in 2022.
Related Article: What Is a Customer Data Platform (CDP)?
What Is a CRM?
A customer relationship management (CRM) platform is a software solution that enables you to focus on your organization’s relationships with individual people and drive personalization.
Within a CRM platform, you can store customer and prospect data, such as contact information, customer behavior data, leads, sales opportunities, details of customer interactions and more, all in one location and, ideally, in the cloud.
Of course, a CRM is designed to deliver much more than just data collection and storage.
"The ultimate goal of CRM systems, technologies and software," Allen Bernard wrote for CMSWire, "is to personalize individual customer experiences at every point along their journey from prospect to repeat buyer."
When successful, he added, the CRM increases customer loyalty and the company's bottom line.
In 2021, the CRM industry reached approximately $53 billion in revenue worldwide, according to Statista, and is expected to grow to $57 billion by 2025. It's also an interesting market in that it's dominated by one company, Salesforce. In 2023, Salesforce.com held 22% market share, with rivals Microsoft, SAP and Oracle each only achieving between 3% and 5% market share.
CRM vs. CDP: What's the Difference?
A CRM and CDP have some overlap in terms of functionality, as they're both data management platforms that house valuable customer information. But generally, a CRM system is primarily to support sales, while a CDP delivers a more complete view of customer relationships beyond the sales cycle.
CRMs are also more limited in scope than CDPs, as they do not necessarily provide the development environment or integration flexibility to support the full customer experience cycle. CRM systems are more focused on managing customer behavior, business transactions and process management.
Who Are CRMs and CDPs For?
Sales and marketing teams both need solutions for managing customer data. But having one solution with unified data may not actually work for everyone.
CRMs Help Sales and Frontline Teams
A CRM system is generally focused on sales and service and is not intended to support real-time marketing, according to Foo Kune. This system allows sales teams to capture, track, manage and store data across the entire customer journey.
Think of it as a centralized location for new and historical data. And within it, you can organize that data, develop customer profiles, forecast sales and more. CRM software ultimately allows sales teams to optimize the lead generation and sales process and improve business outcomes.
CRMs Also Assist Marketers
Many marketers think of a CRM as a database with customer and sales contact information. But Gartner defines customer relationship management as both a business strategy and a technology, according to Foo Kune.
CRM application functionality can cut across a bunch of disciplines: sales, marketing, customer service, field service and digital commerce, she added. "And this is also why most organizations report that they have multiple CRM instances and no real unified customer database," Foo Kune said.
Still, it's not like marketers never touch a CRM or use CRM data.
Marketing activity comes through CRM platforms via data integrations with marketing automation platforms, or by capturing sales activity from sales reps and their tools. Transaction details are added from financial systems, and service activity is pulled from customer support systems, said Frank Moreno, chief marketing officer at Entersekt.
CDPs Allow Marketers to Free Restraints
Marketers look to CDPs to free themselves of the constraints of CRM.
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Most practitioners will say they have a lot of CRM databases, but they actually mean, "We have a bunch of relational databases or tables of names and contact information," said Foo Kune. "CDPs offer marketers a way to manage big, unstructured data, which is a modern way to meet their needs."
Heidi Bullock, chief marketing officer at Tealium, said companies seeking to form personalized customer experiences through data need a CDP, "as it offers the resources to create a comprehensive view of the customer across each platform they interact with in real-time — whether it's social media, apps or mobile."
CDPs Connect Data Strategies
Brands can best understand customers through their data. Whether customers are making a purchase or looking for technical support, brands need data to properly communicate and build those customer relationships, according to Bullock.
"Whether it’s data collected from a call center or engagements via email, a real-time, vendor-neutral customer data platform (CDP) can help promote high-quality experiences both in person or remotely," she said.
Through unified data, CDPs offer a holistic view of the customer. They collect, standardize, enrich, activate and govern data across various channels immediately. Without a CDP, organizations will face a disconnect in their data strategies as CDPs are essential in unifying data from multiple channels and sources, Bullock added.
Related Article: What Is a CRM Platform? And How They Add Value to Your Business
CRM vs. CDP: Which Is Right For You?
Of course, the answer to the CRM vs. CDP question may well depend on whether you sit in sales or marketing.
But your best-fit solution will also be influenced by multiple factors covering everything from how you currently collect data to privacy issues to your priorities relating to customer engagement.
- Are you trying to make sense of customer journeys from a comprehensive selection of first-party data? If so, a CDP is likely to be a better fit.
- Do you rely on third-party data, and your real focus is on generating leads for your salespeople? Then a CRM might suffice.
The ease of deployment will also impact solution choice. There’s the potential to get bogged down with complex migrations involving existing CRM data and records of past interactions with customers. This can also lead to data conflicts and issues with identity resolution in defining customer profiles within a CDP. Integrations with your existing martech stack including customer-facing solutions can also require significant technical resources.
But, considering the bleed in feature coverage between different types of system, as teams get into more and more detail around the individual features they want, the question of whether an individual solution is a CDP or CRM starts to become less important.
CRM and CDP Markets Overlap
Mark Beckner, owner and principal of Inotek Consulting Group, said the CRM space has expanded dramatically in the past several years. CRM overlaps with what was traditionally part of the CDP space.
Platforms such as Microsoft Dynamics 365 and Salesforce have solutions that manage traditional CRM as well as functionality that handles the integration and the bubbling up of disparate data points that make up the full picture of a customer and the customer life cycle.
Back in 2020, according to Foo Kune, Gartner predicted that by 2023, 70% of independent CDP vendors would be acquired by larger marketing technology vendors or would diversify through M&A of their own to enter adjacent categories, such as personalization, multichannel marketing, consent management and/or master data management (MDM) for customer data.
It is true that market consolidation, acquisition of niche players and diversification has impacted the CDP market as it has in other areas of the digital customer experience industry, and other platforms even beyond CRMs have assimilated CDP features. However, there is still a good level of choice of CDPs, including some offered by independent vendors.
Some CRM vendors have also actively expanded their feature set. "CRM systems have seen the competitive threat that CDPs brought to the table," Foo Kune said. "As CRM technologies recognize that they need to update their aging databases to meet the needs of modern business functions, including marketing, augmenting your CRM with a CDP may be unnecessary."
Related Article: CDP Evolution: Is the Hype Finally Over?
We've Been Here Before
Marketers have lofty expectations for CDP technology and may see it as a sort of saving grace to address customer data management issues, Foo Kune said. "If that sounds familiar, it’s because that’s what we all thought of CRM in the late '90s and early-to-mid ‘00s," she added.
Much like CRM — with databases that might have existed across multiple functions in the enterprise — CDPs are at risk of becoming a mess if deployed poorly. One common challenge martech teams face is that while CDPs are owned by marketing, many other business units seek unified customer data, ranging from sales and service to BI, finance and operations. The scope of data, and which workflows are supported, are key reasons that applications promising a “single view of the customer” often stall before reaching productivity, failing to bridge the data silos that persist.
"In reality, multiple views of the customer are often needed by an enterprise," Foo Kune said. "As a result, disparate business teams have applications that their own business users need, as well as data stores that are maintained and integrated by technical users. For many, solving one business unit’s application needs may serve as only a short-term remedy."
That doesn’t mean that CDPs are not a worthy investment, according to Foo Kune. "I’m hopeful that organizations will have learned from past failures of CRM. Organizations will certainly face obstacles in deploying a CDP, but the promise of a unified and central repository is a worthwhile endeavor — especially for marketing teams that are deliberate in how they plan and manage deployment and ongoing use."
