The CFO’s guide to a Customer Data Platform

This article supports the #cfo in making decisions when met with investment in #customerdataplatform technology. It also supports the #cmo or #marketingleaders in building the case for investment.

Marketing has transformed significantly over the last few years. It has become more data driven, more tech focused and with a greater degree of scrutiny and a broader mandate. It is rightly seen as the engine for growth, as well as the bridge to the customer.?

This digitisation of marketing has meant that, for most, there is now a large overlap into company tech departments, crossing lines of services, functions, and budget centres. This also creates a matrix organisational structure, where gaps can appear in decision making and ownership without clearly defined roles and responsibilities.?

It is also becoming increasingly important that advertisers own and manage their customer data. In fact, owing to GDPR legislation, it is becoming a legal imperative to do so, with heavy financial repercussions if not managed correctly (even the most comfortable organisations would baulk at a fine of 4% of total annual turnover). This shift into the new data economy does have huge advantages, opening potential for greater customer understanding and experience, increased profitability, and revenue growth.

In the same way that I need the technical infrastructure (laptop) to use the editing software (Word) to write this content, customer data also requires a tech infrastructure to be captured, managed, and used in a privacy compliant manner. A sophisticated infrastructure will have various components that are carefully considered, and expertly engineered to work together. Broadly speaking, below demonstrates the various parts of that infrastructure

This shift has naturally brought with it new and predominantly cloud based technologies, so for the end user they are software-based solutions.?

Critical to these infrastructures are data lakes and data warehouses, that serve the central purpose of securely storing customer data. However, alone they are rarely capable of democratising and enabling the data for the modern marketer’s requirements and customer experience use-cases. This is where a Customer Data Platform (CDP) becomes critical in complementing?the overall data architecture, adding powerful capabilities with a greater focus on ease and speed of usability and use-case enablement.

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What is a CDP?

A Customer Data Platform (CDP) is cloud-based software that collects and unifies first- party customer data from multiple sources to build a single, coherent, and complete 360 degree view of every customer. Brands can segment their audiences, and then push their segmented audiences to digital marketing and media activation platforms to target their customers with the right message at the right time in the right place across channels.

Why should a CFO care

Ultimately, many CDP decisions will, at some point, need finance approval to ensure the significant investment required can be measured and show ROI. CDPs are enterprise level tech investments and are likely to require a high level of CAPEX and support cost investment.

The likelihood is that as a CFO, you may see CDP discussions and agendas coming from various parts of the business. This is because CDPs serve multiple functions and can be deployed in any part of the business where customer data exists, not just exclusively for marketing. Because CDPs ultimately help you manage customer data, you may find this discussion coming from sales, account management, your customer experience teams, data and insights teams, or product and legal (or wherever data governance exists in your business).

It is specifically because a CDP can add value into various parts of an enterprise that a CFO should look closely at the proposals being put forwards to justify these projects.

As the new data economy is still nascent, most organisations will not have a single place or department that manages data. As such, there is often a lack of data ownership and leadership that cuts across the business, meaning no single point of coordination. Combine this with the fact that large enterprise organisations tend to operate in business silos, a CDP business case will likely be brought forward by one area of the business, and often pitched as a requirement to fulfil a specific use case within that individual department.

However, this technology’s adoption will be dictated by the proficiency of those who manage it, so it could be that other areas of the business would also benefit from leveraging a CDP, as it can be made to work for various stakeholders simultaneously. You should already be sensing the potential for leveraging this across multiple teams and stakeholders to drive ROI on the investment.

We often see large organisations employ more than one CDP, in two or more siloed areas of the business, simply because the business case was not built across the entire organisation. This means incurring a double charge on technology that need only be deployed once, if managed well.

In short, ensuring a CDP investment is tackled at an enterprise level, could save millions of pounds in upfront implementation costs, and more importantly ensure you are fully leveraging the right platform across all the relevant business areas to show a significantly better ROI.

How to assess the business case

Your first port of call is to assign a lead that will support you in orchestrating the business use cases across the entire business.

Ideally, you will find a partner that has in-depth knowledge and experience of CDPs, what they are capable of, how they work, and how to scope the use cases across different lines of business. In most companies, this single point of ownership does not exist, so it may be that you can lean on your existing external technical partners or employ specialists for this role.

Cross-functional workshops will be key to engage senior execs within all parts of the business that rely on or use customer data and can leverage this type of product. Your objective here is to build a robust and thorough use case documentation, outlining current and future requirements, and demands of customer data from across the business.

Procurement will typically be involved in discussions, as they will likely be involved in building RFIs and assessing vendors. Again, an experienced data and martech expert is key in developing these in order to encompass the array of requirements from inside the business.

Once you have understood and documented these use cases, and a vendor shortlist is drawn up, it will be the role of the martech/data lead to explore these relationships, and challenge the vendors on their capabilities, requirements, pricing and service. Most vendors, of course, will omit details of their weaknesses and where they have gaps, so it’s important to know what to look for in those conversations. It can also be hugely valuable to know how they structure their commercials and pricing, as there are significant savings that can be made from negotiating in the right way, and on the right terms.

Remember that a CDP is a sophisticated and complex piece of software, and whereas the vendors will have technical knowledge to install these across your business, maintenance can be very expensive unless you have internal capability and capacity to install, trouble shoot, maintain, and expand the tech.

In fact, it is estimated that the split between hard technology costs and the intelligence resource to manage it is anything between 33:66 and 10:90 in favour of the cost of the people (put another way, your CAPEX investment will cost X3-9 OPEX to manage).

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How to measure success

Measuring the success of a CDP investment is as complex as the number of use cases it is brought in to service. As such, to understand the ROI of the investment, you will have to use a KPI framework that captures the different use cases being addressed by the platform, and what the relevant measurement is for each of these.

For instance, within marketing you could be measuring an increase in customer retention, or new customer acquisitions, whereas the media team may be tracking improvements in audience segment accuracy or media effectiveness. Having a clear and robust measurement framework will ensure you can identify improvements in key areas of the business.?

The most critical aspect to measuring ROI on a CDP is to ensure that your success horizon is sufficiently mapped out – you are unlikely to have all use cases going live at the same time and staggering these to ensure success per business unit is a smart approach. The reality is that most CDP projects are judged as failures too early, and at times abandoned on account of not allowing a realistic timeline per team for implementation and adoption. You should be prepared to put timelines to your measurements and expectations of ROI, such that a 6-12 month timeline per team with which to drive adoption of a CDP project, and significantly longer than that to recognise the bottom line returns of the investment.

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Your five point summary check list:

1.????Move the CDP conversation from a single department to a holistic cross team business case

2.????Partner with an expert, experienced in building use-cases and managing the tech

3.????Don’t forget to account for OPEX costs associated with these technologies

4.????Develop an encompassing and robust measurement framework

5.????Plan your ROI assessments over an appropriate time horizon per team