We recently published a blog looking at the relationship between Master Data Management (MDM) and Customer Data Platforms (CDP) and the never-ending journey toward data unification. Following that, we wanted to expand the conversation by discussing the relationship and the boundary between CDPs and Customer Relationship Management systems.

Since making their way into the MarTech industry within the last two decades, CDPs have become increasingly popular at the enterprise level for B2B and B2C businesses. Yet, for their growing prevalence as a marketing tool, many organizations have trouble implementing them to leverage their full potential. Either they don’t have the strategic plan to back their CDP and connect it across databases, or they use it as a sort of “fancy” CRM system. In fact, less than half of the companies leveraging a CDP in their marketing plan are using them in the right way — i.e., as a tool to connect data points and create encapsulating customer and prospective profiles.

Where is the confusion coming from? Understanding the difference between CRMs and CDPs might be the likely culprit and using one for the other’s intent only fuels the flame. However, although they aim to empower sales and marketing to attract and retain customers more effectively, their purpose and functions are very different.

The Difference Between CRM and CDP

A need for customer data escalation has primarily powered the popularity of CDPs in enterprise MarTech stacks — that is, going beyond the capacity of CRM data. For the most part, readers will be familiar with the basic design of a CRM: it serves to collect and allocate customer data to benefit sales and marketing teams. When customers interact with the brand via their website, email, social media, or phone call, the CRM platform pulls that data into a contact profile with a history of previous interactions.

With B2B, the CRM system equips sales teams with the tools to synthesize their customer pipelines, prospective clients, and build accurate forecasting. Conversely, when it comes to B2C — where the sales volume is greater and the prices are less significant — a CRM system is focused on collecting information on the customer experience and their contact with customer support/service. Think: calling Apple to see why you were charged for a certain application.

CRM Definition: In terms of software, CRM is a system, either cloud-based or on-premise, that improves customer relationships by assisting in customer acquisition and retention, providing significant sales growth. As an application, it’s designed to help organizations optimize their interactions with customers, suppliers, prospects, and employees via one or more touchpoints.

Rounding out the breadth of a CRM system shows a stark difference in data collection and CDP data consumption. While a CRM collects data from a couple of interaction points, CDP systems can ingest data from numerous sources (cookies, form fills, phone calls, online session IDs, digital profiles, emails, IP addresses, and loads more). It then takes all that information, unifies it into one cohesive profile, and can distribute these profiles to different platforms for company use (i.e., sales, marketing, customer service, etc.).

CDP Definition: A Customer Data Platform (CDP) leverages multiple applications and software to unify customer data in a single repository, which then distributes it to a network of systems. A CDP collects data from designated sources, distilled for quality, combined to create encompassing customer profiles, and then distributed to critical systems (esp. marketing and sales).

With a distinct network of data pipelines, a CDP delivers precision around inbound marketing strategies, robust segmentation, and customer targeting. Thus, while a CRM system enhances customer experience with sales teams, CDPs provide marketers with an outlet to drive interactions and build more comprehensive buyer personas. In other words, the CRM provides exceptional resources to fuel the interactions with current customers, while the CDP is more often a tool to expand on “unknown” or prospective clients.

Can A CDP be Used as a CRM?

In a way, yes, CDPs can be used as a CRM system — many enterprises that have implemented CDP technology have leveraged for that very purpose, according to a Gartner Report. However, as some have noted, this isn’t the best use of the technology. CDPs aren’t meant to be repositories of static information; when organizations use them like this, they lose the opportunity to increase sales with brand exposure or review customer experience related to products and services. It’s like having a swiss army knife, but only ever using one of the tools.

However, going beyond the CRM option opens the door to new data access opportunities: data integration, real-time online event tracking, data aggregation, customer analytics, and more.

While CRMs are the premier technology for sales teams to maintain their customer relationships, CDPs expand a business’s ability to develop new customer engagement and experience.

Has your business been experimenting with a CDP solution? Tell us about it in the comments below!

This post was originally published here.