At Daasity, we are often asked about the differences between Customer Data Platforms and Analytics/BI Platforms (we'll call them Analytics Platforms in this article) and which platform provides the most actionable customer insights to grow an eCommerce business.
As an eCommerce merchant, you rightly value collecting and analyzing customer data because you care about your customers. We understand that you want to get to know your customers better and learn as much about them as possible to offer them the best products or experiences.
This article will break down each platform type and its different use cases for eCommerce merchants.
What is a Customer Data Platform?
A Customer Data Platform (often abbreviated as CDP) is a tool that collects and aggregates customer data to build detailed customer databases containing profiles for individual customers. Customer Data Platforms are known for having well-designed UI and seamless UX that makes it easy to create customer segments and push those segments onto marketing platforms.
Most Customer Data Platforms tend to aggregate the following types of data:
- Profile data: contact and sociodemographic data (sometimes acquired from third-party companies) such as income, job, and age.
- Event and behavioral data: customer actions (clicks and other activity) on a website, responses to surveys, email, and SMS engagement
- Order data: customer purchase history, purchase preferences, shipping information and preferences, and more
Who uses Customer Data Platforms? When are they used?
Customer Data Platforms help marketers create detailed customer segments using the various data types (profile, event, order) and understand how customers are interacting with your marketing content and, by extension, the potential or actual value of customers. They also help marketers with tracking marketing campaign details and answering questions, such as:
- How well did the campaign perform?
- What were the campaign costs?
- Which customer segments were targeted in the campaign?
Customer Data Platforms are also helpful from a customer acquisition standpoint. Marketers can pass that data into marketing platforms and find new potential customers using strategies like building Lookalike Audiences (LLAs) on Facebook.
What is an Analytics Platform?
Analytics Platforms allow users to bring raw and siloed data from Shopify (or other eCommerce platforms) and eCommerce tools together into one view and to provide powerful analytics, visualization, and reporting capabilities based on that data. They help an eCommerce brand make better spending decisions, uncover trends, and illuminate opportunities.
An Analytics Platform for eCommerce should connect to your brand’s:
- eCommerce platform and website
- Marketing channels, advertising platforms (Facebook, Google), affiliate program, retention tools (Email and SMS)
- Customer support tool
- Zero-party data tools, such as polling
- Rating/review tool
- Operations tools
- Shipping/fulfillment tools
- Loyalty program
Who uses an Analytics Platform? When are they used?
Anyone at an eCommerce brand can use an Analytics Platform: most often, larger companies hire analysts, but it can also mean marketers, CX team members, and anyone else who may want or need access to up-to-date company data in their particular department.
Often, a brand will bring in an Analytics Platform, and one team member will start using it. Then, as the business grows and teams’ needs grow more complex, they hire an analyst or data team to manage it continuously.
Other times, eCommerce brands begin using an Analytics Platform when the amount of data they need to track, analyze, and report on exceeds what the designated “data person” can manage in Excel or Google Sheets. An Analytics Platform will significantly reduce their workload by helping them out of “Excel Hell” and providing actionable insights that lead to improvements in all business areas.
This is because the analyst will spend more time analyzing the data instead of cleaning/organizing it. When data is no longer siloed and can be viewed in a single view, it’s easier to identify trends and opportunities that will accelerate a business's growth. Furthermore, weaknesses and cost centers can be identified and improved, and metrics such as AOV, LTV, Gross Margin, and Cost Per Acquisition (among numerous others) can be tracked and guide decision-making.
Weaknesses of Customer Data Platforms in eCommerce
Although Customer Data Platforms are well-designed tools with some robust marketing functionality, there are several reasons to think twice before investing in one for your eCommerce brand:
- Cost: Customer Data Platforms are costly. They usually cost between $100,000 to $300,000 per year. The only way an eCommerce Analytics tool would cost that much is if your brand attempts to build an entire analytics stack from scratch, which is expensive but highly complicated and time-consuming (we wrote a whole article about making an analytics stack to explain).
- Time to Implement + Specialized Training: In addition to their supersized price tags, Customer Data Platforms take a significant amount of time to implement: it can be anywhere from three months to a year before everything is ready.
On top of the set-up time, your team will have to be retrained on the platform to make the most of it because Customer Data platforms are designed to be the central command centers of a marketing team. This may seriously cost your brand because you are making an enormous investment of time and money; after all that, you won’t even know if it works.
An Analytics Platform, on the other hand, informs your business decisions and offers insights rather than taking over an entire department. You can also keep using all the eCommerce tools you know and love.
- Limited Functionality: Although Customer Data Platforms do their jobs well and are valuable tools for marketers, similar functionality already exists in Analytics Platforms, along with significantly more functionality that includes but goes far beyond aggregating customer data and marketing segmentation.
- Lack of customizability: Generally, Customer Data Platforms are “what you see is what you get” tools and do not allow for much if any, customization of their features. An Analytics Platform such as Daasity allows for complete customization of analytics, metrics, visualizations, and reporting.
- The changing marketing landscape: Personalization has been the keyword in marketing and eCommerce over the last five years, and it has only grown more important over time as customers expect better experiences among eCommerce companies. When it comes to marketing, this means that the right messaging to the right customers at the right moment is more important than ever. To accomplish this and optimize your marketing program, you need to break down the silos and gain a holistic understanding of your performance in addition to your customer relationships.
- The changing privacy and eCommerce landscape: Given the privacy enhancements in iOS 15, and the potential for other OS systems to follow suit, it will be increasingly important to understand and build your customer segments and lists. Customer Data Platforms heavily rely on third parties for customer data (e.g., purchasing data from data aggregators). In the last several years, Customer Data Platforms have been so appealing to marketers because you can blend your store’s purchasing data and enrich it with third-party data, which improves targeting. However, as an eCommerce business, you should rely on something other than third-party data because the privacy changes will likely make it more complicated (or even impossible) to come by in the coming years. Instead, first-party (i.e., transactional data or site behavior data) and, increasingly, zero-party data (data that customers have voluntarily supplied, such as survey/poll results, user preferences, and more) will become paramount.
To learn as much as you can about your customers and provide them with the best experiences possible—and, therefore, keep those customers coming back to buy more—you need the best data and the best way to analyze that data. Pure Customer Data Platforms are vital marketing tools. Still, their functionality does not match their cost and does not factor in all elements of your eCommerce brand, which a strong marketing strategy certainly should.
An Analytics tool is a better option, as you will gain deeper, varied, flexible, and customizable (and expanding) functionality for a fraction of the price to talk to an analytics expert and learn more, head here or watch a platform overview.