At Daasity, we often are asked about the differences between Customer Data Platforms and Analytics/BI Platforms (we’ll call them Analytics Platforms in this article) and which type of platform provides the most actionable customers insights to grow an eCommerce business. As an eCommerce merchant, you rightly place a high value on 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 you can in order to offer them the best products or experiences possible.
In this article, we’ll break down each type of platform, and their 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 in order to build detailed customer databases containing profiles for individual customers. Customer Data Platforms are known for having well-designed UI and seamless UX that make 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 data 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 useful 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 allows 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/or website
- Marketing channels, advertising platforms (Facebook, Google), affiliate program, retention tools (Email and SMS)
- Customer support tool
- Zero-party data tools, such as for polling
- Rating/review tool
- Operations tools
- Shipping/fulfillment tools
- Loyalty program
Who uses an Analytics Platform? When are they used?
An Analytics Platform can be used by anyone at an eCommerce brand: most often larger companies hire an 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, we find that 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 on an ongoing basis.
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 not only significantly reduce their workload by helping them out of “Excel Hell” but also provide actionable insights that lead to improvements in all areas of a business.
This is both because the analyst will spend more time analyzing the data instead of cleaning/organizing it, and because 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 businesses growth. Furthermore, weaknesses and cost centers can be identified and improved, metrics such as AOV, LTV, Gross Margin, Cost Per Acquisition (among numerous others) can be simply tracked and guide decision-making.
Weaknesses of Customer Data Platforms in eCommerce
Although Customer Data Platforms are well-designed tools with some strong marketing functionality, there are a number of reasons to think twice before investing in one for your eCommerce brand:
- Cost: Customer Data Platforms are extremely expensive. They usually cost between $100,000 to $300,000 per year. The only way that an eCommerce Analytics tool would cost that much is if your brand attempts to build an entire analytics stack from scratch, which is not only expensive, but highly complicated and time-consuming (we wrote a whole article about building 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 to go.
On top of the set-up time, your team will have to be retrained on the platform in order to make the most of it, because Customer Data platforms are designed to be the central command centers of a marketing team. This may end up seriously costing your brand, because you are making an enormous investment of time and money, and after all that, you won’t even know if it works in the end.
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 useful 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 key word 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. In order to accomplish this and optimize your marketing program, you need to be able 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 coming in iOS 15, and the potential for other OS systems to follow suit, it will be increasingly important to understand and build your own 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 the third-party data, which makes for improved targeting.
However, as an eCommerce business, you should no longer rely quite so heavily on third-party data, because the privacy changes will likely make it harder (or even impossible) to come by in the years to come. 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 of paramount importance.
In order 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 not only need the best data but the best way to analyze that data. Pure Customer Data Platforms are strong marketing tools, but their functionality does not match their cost, and they do 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 over here, or watch a platform overview here.