CDP, DMP and DXP: Which Data Platform Is Right for You?

A look at three of the most popular platforms marketers can use to boost the effectiveness of their campaigns.
Headshot of David Finkelstein
David Finkelstein
Expert Columnist
February 2, 2021
Updated: April 27, 2021
Headshot of David Finkelstein
David Finkelstein
Expert Columnist
February 2, 2021
Updated: April 27, 2021

Modern-day marketing is powered by consumer data. At least 76 percent of marketers use data to make informed strategies, according to a 2018 study by Gartner. Data-driven campaigns also have an average of five to eight times higher return on ad spend (ROAS). Further, 63 percent of consumers now expect ad personalization, according to a 2019 Harris Poll and RedPoint Global survey, and accurate consumer data is crucial for successful ad personalization.

The importance of consumer data for marketers is undeniable, but how marketers obtain and organize this information varies widely. The marketing technology industry is brimming with data solutions — over 8,000, to be more exact. As one can imagine, due to their sheer variety, these offerings can sometimes be confusing to differentiate.

With something as important as consumer data, it’s essential that marketers choose the solutions that best fit their needs. But before they can do that, they need to know the lay of the land. A good place to start is to differentiate between the three most common types of data platforms and why you may need them: consumer data platforms, data management platforms and data exchange platforms.

 

Consumer Data Platform (CDP)

A CDP is a software solution that unifies your first-party data from multiple sources and organizes it into a central system. This comprehensive platform can store a large volume of data and manage the flow of customer information. CDPs are designed for first-party data, which is data sourced internally by your company.

They are geared toward improving customer experiences and omnichannel marketing efforts, offering consumer profiling and identity resolution capabilities. Therefore, CDPs are usually most useful to marketers who rely primarily on their internal first-party data and are looking for ways to better leverage their audience insights to make data-informed campaign decisions.

The greatest benefit of CDPs is having smart databases that clean, organize and standardize your information, giving it structure to perform various analyses. Some CDPs cannot execute campaigns without third-party integrations, but there are highly sophisticated options on the market that feature marketing automation and other AI tools.

 

Data Management Platform (DMP)

Unlike CDPs, DMPs are designed for advertising purposes, and, therefore, mainly work with third-party, anonymized data. These platforms are usually used by digital advertisers to gather audience data, sourced from data providers that include media publishers, websites and mobile app developers.

DMPs help advertisers gain insights into potential customers, which are, in turn, used to better personalize ads for specific audiences. Using a DMP can help advertisers better allocate budget and determine the success of their campaigns.

Many companies employ both CDPs and DMPs, for their marketing and advertising efforts respectively. Information provided by both of these platforms can also be fed into a customer relationship management platform (CRM), which can then be utilized by sales professionals to generate and manage new leads.

 

Data Exchange Platform (DXP)

While CDPs and DMPs are used singularly for marketing and advertising purposes respectively, a DXP serves as a marketplace that companies use to buy and sell third-party data from multiple sources for both their marketing and advertising activities. DXPs offer an extensive pool of real-time consumer data points, so marketers can learn more about their consumers, find new audience segments and garner identity insights to best target them.

DXPs are unique in that they offer consumer identity and behavioral data from a wide range of sources, such as websites, TV, streaming services, social media and mobile phones. This allows marketers to build a comprehensive profile of their customers — filling in the gaps of information their first-party data couldn’t provide. Even better, marketers can use data points from DXPs to verify the data they already have, making their advertising efforts that much more cost effective.

DXPs are a great tool for sourcing information for your campaigns, but they are best utilized as ecosystems for buying and selling data, not for housing your data. This means marketers may need to utilize other solutions within their marketing technology stack to fully activate the data provided.

Modern-day marketing is powered by consumer data, so companies should treat it as a strategic asset. Whether you use just one of the aforementioned tools or use all of them in combination, it is important to understand their purpose, capabilities and limitations in order to best execute against your marketing and advertising strategies. Investing in the right data tools will keep your data current and accurate, increasing both the success of your campaigns and your bottom line.

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