Are Customer Data Platforms (CDPs) worth the investment? What are the business outcomes CDPs deliver? What is the Return on Investment (ROI)? These are the questions Marketing leaders must ask to prove the value of a CDP as an investment, just like a new product, new store, new capital equipment. And to do that, we need a business case. Like all business cases, our CDP business case should:
For today's Marketers, the adoption of a CDP reflects an environment where real-time data capture, AI, and a unified customer view are not just advantages but necessities. And yet, in some organizations, the concept of “marketing ROI” is still treated like an abstract concept rather than a tangible metric tied to customer data that fuels every marketing decision. This can raise questions from the CFO and other members of the C-suite, who work hard to ensure the company's resources are being directed to the initiatives with the highest impact.
At its core, a CDP is an integrated customer database that consolidates and manages customer data from various sources. It's designed to provide a comprehensive, unified profile for each customer. CDPs ingest and unify data from multiple touch points, like social media interactions, transaction histories, website browsing and even customer service experiences. In turn, CDPs then enable marketers to deliver highly personalized experiences in real-time while a customer is interacting with a brand.
CDPs enable teams to engage customers more effectively, orchestrate customer journeys, and optimize Marketing Communications (MarCom) by leveraging real-time insights and predictive analytics. That's a big promise; a fundamental shift towards truly customer-centric marketing.
Marketing leaders have to be clear on how they will deliver incremental value from a CDP investment. Marketing leaders borrow the term “use case” to demonstrate scenarios that demonstrate a measurable impact on business.
What are the use cases for CDPs? There are hundreds to choose from. A good starting point comes from the CDP Institute. From my experience, there are six marketing scenarios to create measurable impact and incremental value:
When used effectively, a CDP can have an incredible impact on the way you interact with your customers and how your brand is perceived in the marketplace. CPDs can deliver a measurable boost to your bottom line with incremental value that goes beyond the fundamental use cases.
What are your use cases? Where are your gaps? Which gaps do you want to close in what priority? While your use cases will be different, the process is the same.
Marketing leaders estimate the positive benefit of closing the gap against the level of effort (LOE). Marketing leaders can plot these on a roadmap - quick win versus long-term benefit. Not only can CDPs close gaps, but they quickly deliver business value that has short and long-term ROI. CDPs are about business outcomes more than MarCom and technology. And it leads to important questions such as do you have the internal capability, bandwidth and expertise to deliver? Our agency specializes in CDP readiness, CDP implementation and CDP operations to deliver long-term benefit. Show how the CDP can deliver incrementality over the long term. Here are the same six use cases, plotted in terms of margin delivered over 3 years:
To calculate incrementality consider:
Don’t guess at this. These estimates can come from:
My advice: be honest, show your assumptions then be open to adjusting as you go.
A strong business case positions your CDP as a critical investment when you are looking to optimize marketing efforts and drive long-term profitability. Your CDP business case should answer questions such as: How much does it cost to build a CDP? How will you make back the CDP investment? What is the ratio between the two - the Return on Marketing Investment (RoMI)?
If you want a real CDP business case template in Excel, click here...
When Marketing leaders work closely with Finance, good things happen. But it’s up to Marketing leaders to take the first step: Define success, show the incremental benefit you expect, and be accountable. My advice is to use Finance's templates and replicate their methodologies. You can determine the KPIs together, which will lead to (1) consensus, and (2) a sense of ownership on both sides. What do you think Finance leaders are thinking while you present your CDP business case:
Beyond the business case, plan on ongoing accountability. This means tracking (via executive dashboards), communication and continuous adjustment as you optimize in the market results. It boils down to trust. Does Finance trust your projections? Where do they come from? What is your track record? Have you done a pilot program? Likelihood survey? Trust but verify.
Marketing leaders also have strategic goals (e.g., defend against competitors, enter a new market, gain new customers, retain existing customers), but when presenting to Finance, stick to the tangible RoMI. Use their templates; use their formulas (e.g., setup costs are Capital Expenditures or CapEx; ongoing costs are Operational Expenditures or OpEx).
Marketers should be familiar with the concept of Net Present Value (NPV) or the discount applied to revenue received in the future, which is less valuable than cash in hand. This shows Finance your projections are conservative. In other words, you didn't underestimate the costs.
The potential of CDPs is fully realized when paired with the expertise of a specialized CDP Marketing Agency. Such an agency, particularly one with a deep understanding of digital marketing, can be the catalyst that ensures your CDP not only fits seamlessly within your marketing operations but also drives incremental value.
A proficient CDP Marketing Agency can help you navigate the complexities of CDP implementation, from data integration to experience orchestration, ensuring that every feature is tuned to resonate with your unique business needs and customer expectations. Their experience can translate into accelerated CDP adoption, more personalized customer journeys, and ultimately, a stronger bottom line.
Today, data is abundant, getting the most out if it is challenging. Partnering with a CDP Marketing Agency is not just about optimizing your CDP; it's about transforming your marketing efforts with personalized engagement and revenue generation.
Download our Business Case Template to get you started. And after that, book a call with one of our experts to learn how to extract the most value out of your CDP.