DMP vs. CDP - Which is more effective

DMP vs. CDP: Which is more effective in managing customer data?

Both consumer data platforms (CDPs) and data management platforms (DMPs) are software solutions that organizations can use to collect and manage valuable customer data. Though these tools have similarities, they aren’t exactly the same. The challenge for business leaders is selecting the right tool for their organization’s current needs and future goals. 

In this article, we’ll explore the question of DMP vs. CDP: which should you choose? It will serve as a guide to the differences between these two tools and help you make the right decision for your business. 

What are Consumer Data Platforms?

Consumer data platforms collect first-party data about your customers from a variety of sources and unify that data in one centralized platform. Some data sources you may want to connect to a CDP include:

  • Your company website
  • Your mobile app(s)
  • Your social media accounts
  • Your customer relationship management (CRM) software
  • Your customer support software
  • Your email system. 

Often, these sources are subject to data silos, meaning the data that one source collects is isolated from other business areas in your company. An example of these silos is your sales team being unable to access data about a customer’s behavior on your website because access is limited to the marketing department. Consumer data platforms bring all this first-party together to create comprehensive, 360-degree view customer profiles. Your marketing team and other departments in your company can then use those customer profiles to discover actionable insights and create better strategies. 

What are Data Management Platforms?

Data management platforms are software tools made to consolidate large amounts of data from a variety of sources. In contrast to CDPs, DMPs deal mainly with third-party data to develop audiences, though they also manage first- and second-party audience data. 

Third-party data is information that comes from external sources — an organization without a direct relationship with the consumers is the one who collects the data. DMPs use cookies and tags to collect this third-party data, then store it for short periods for businesses to analyze and use. 

How Data Management Platforms Differ from Consumer Data Platforms

The focus on first-party data versus third-party data is just one example of the differences between consumer data platforms and data management platforms. Other key differences include:

No Personally Identifiable Information

Typically, the data that DMPs collect is anonymous, meaning it does not contain any personally identifiable information (PII). PII is any piece of data that someone could use to identify a particular individual such as an email address or Social Security number. As a result, companies can’t use DMPs to construct specific customer profiles. The application of DMPs is broader — to create audience segments useful for things like running digital ads. 

Consumer data platforms, on the other hand, thrive on personally identifiable information. They collect information specific to each person in your audience and build personalized customer profiles for them. That only works with information that identifies those customers individually. Collecting PII does carry extra responsibilities, however. It’s vital to ensure that your consumer data platform has excellent data security and that you’re collecting this PII ethically. 

Longer Data Retention

DMPs and CPDs also differ in the amount of time they typically retain data. In general, consumer data platforms are designed to allow companies to retain customer data over a long period. Part of the reason for this is that CPDs can offer more valuable insights as they accumulate additional data to work with. 

Say, for example, you want to offer a discount to customers who spent a certain amount or more this year on your products. How do you know which customers meet that threshold? You check the data stored in the CDP for transactions made by each customer over the last year. That would only be possible because consumer data platforms store data over the long term. 

DMPs don’t keep data for long and for good reason. When you’re working with anonymous third-party data, you want that information to be as up-to-date as possible. You’re not building a complete historical profile of individual consumers — you’re looking at broader audience segments for targeted marketing. As a result, DMPs generally only keep data for 90 days or less.

Compliance Risks

As governments pass new data privacy regulations like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), companies need to be careful about meeting the necessary data privacy standards. Compared to using a consumer data platform, using a DMP naturally comes with a higher risk of violating these regulations due to the focus on third-party data. When you gather third-party data, you have no way of guaranteeing that it was collected ethically or legally since you’re not directly connected to the data sources. You have to trust that the data collection company followed all relevant data privacy standards. 

The compliance risks of using a CDP are lower. CDPs focus primarily on first-party data, meaning it’s completely within your control to adhere to the applicable privacy rules and regulations. If you’re worried about staying in compliance with these laws, you may be better off with a CDP over a DMP. 

DMP vs. CDP: Which Should You Choose for Managing Customer Data?

If you’re not sure whether to choose a DMP vs. CDP, ask yourself the following questions:

  • Is your priority short-term leads? (DMP) Or longer-term engagement with your customers? (CMP)
  • Are you more focused on advertising? (DMP) Or marketing? (CMP)
  • Would you like to emphasize digital channels and segmentation? (DMP) Or offline interactions and customer experiences? (CMP)

The answers to these questions can point you in the right direction for choosing the best data solution for you. 

Key Takeaways

Whether you choose a customer data platform or a data management platform, it’s important to have tools that can capture and organize consumer data for your business. The key question isn’t “DMP vs. CDP: Which is better?” Instead, you should ask yourself which software solution best fits your business goals and desired applications. For some companies, a data management platform is the better investment while a consumer data platform is ideal for others. Consider a data streaming and analysis platform like Live Earth for your data needs. Contact our data experts to learn more about breaking down data silos and discovering fresh insights from your data.

Live Earth Application Form