With increased privacy regulations and a greater need for personalized marketing, controlling your customer data is more important than ever.
But how to control that data is a whole other matter. Customer data platforms (CDPs) are often the answer, but organizations face a critical dilemma when it comes to implementation: should they build or buy a CDP?
The build vs. buy CDP discussion should include important considerations like cost, resources, and whether the solution is future-proof. Let’s dive into the debate and outline a few crucial pros and cons.
Option one: Buy a packaged CDP
Arriving like knights in shining armor, packaged customer data platforms promised the world with every bell and whistle. Do you want to personalize your website based on cookie tracking? Sure, they can do that. Do you want to create an audience for emails? They can do that, too.
Packaged CDPs compile customer data from owned online platforms like websites and mobile apps to rebuild a partial customer profile. Then, your marketing team uses this data to activate campaigns across ads, emails, CRM platforms, and other channel destinations.
While more than 150 CDPs are on the market today, common solutions include Salesforce Marketing Cloud, Adobe Marketing Cloud, mParticle, Segment, and others.
Pros of packaged CDPs
- Built for marketers - Packaged CDPs are designed with marketers in mind, which means they can generally execute campaigns without needing to lean on engineering or data teams.
- Supports various marketing destinations - As the number of available marketing channels increased, traditional marketing clouds had trouble keeping up. Packaged CDPs, however, were able to support this channel proliferation and allow marketers to launch campaigns across a wide range of channels using one source of customer data.
- Security - Although packaged CDPs usually require copying data into their platform, it’s generally secure once it’s there.
Cons of packaged CDPs
Although pre-packaged CDPs are built with marketers in mind, they have some drawbacks:
- Implementation time and resources - Packaged CDP implementation generally takes six to 12 months. Your data engineering team will also need to set up and maintain all your data pipelines from your various sources and data warehouse into the CDP. This can create long-term resourcing issues as data sources increase.
- Copied data on third party servers - A packaged CDP will store a copy of your customer data, rather than pulling from an organization-wide single source of truth. This can create gaps in customer data, as you’ll need to set up new data pipelines for each source. These data gaps and silos will ultimately affect marketing campaign performance.
- Cost - Packaged CDPs are often quite expensive and costs can increase as you add more data and data sources.
Option two: Build an in-house CDP
As the CDP build vs. buy debate continues, we come to the build option. If you need a custom customer data solution for your business, why not build a CDP yourself? This path leans heavily on engineering to develop a platform that uses a data warehouse as a single source of truth for customer data.
Pros of building an in-house CDP
- Single source of truth - All customer data is stored in one secure location: the cloud data warehouse. This gives teams more reliable and complete customer data. It also improves data security, as information isn’t spread across multiple third party platforms.
- Build to your use case - Your marketing, data, and engineering teams can work together to customize different channel destinations for your data. This means you can build cross-channel campaigns using best-of-breed platforms and channels that matter most to your customers.
- Built for marketers - Because your organization is building a platform from scratch, you can ensure it’s created with marketers in mind. However, it’s important to consider whether this approach will be easy to maintain and scale.
Cons of building an in-house CDP
While building an in-house solution can give you more control, it can come with a hefty price tag and a lengthy timeline. Often, building a CDP can take six to 12 months to complete. Other downsides to this route include:
- Hidden cost of employees - Building in-house can often be more expensive than CDPs. Why? The cost of your employees’ time. Say you’re paying a team of four engineers $175,000 (plus benefits) for a year to build an in-house CDP. That totals at least $700,000 — how does that development cost compare to the quote you received from the CDP vendor? And we all know that development doesn’t stop once it's built, as you’ll need to retain engineers for ongoing maintenance.
- Cost of ownership - By dedicating valuable engineering time to building a CDP, you’re giving up the chance to have them work on your core product. This is an opportunity cost for your business. Your differentiation in the market isn't building CDPs — it’s serving your customers and your market.
- Domain expertise - The average software or data engineer doesn’t know how to build a CDP and its functionality. So, you will have to introduce product managers and other experienced CDP builders to your organization to help lead the team. And with more individuals on board with this project, you’re spending more time and money that you could use elsewhere in your business.
- Fewer integrations - While you can start with an ideal use case and set of marketing channels, your marketing team will likely need to add more destinations as the number of marketing channels grows. Engineering managers often have to eat the cost of maintaining the CDP and continuing to build out additional features for years.
Option three: Buy a composable CDP
Here’s a twist: There are more options than just building or buying a packaged CDP. You can consider a hybrid approach that involves a composable customer data platform.
A composable CDP sits on top of your company’s cloud data warehouse. It gives your marketing team a self-serve (no code) interface to create and segment audiences on top of the data warehouse. Then, it allows marketers to activate those audiences in real time to channel destinations, such as CRMs, email marketing tools, and ad platforms.
Notably, composable CDPs do this without copying or transferring data.
Pros of a composable CDP
- Flexible structure - With a flexible model built on your cloud data warehouse, your marketing team can swap their tech stack based on their needs. Use the same CRM and email marketing tool you love, or add a new one as your team grows. Meanwhile, the source of data remains the same.
- Single source of truth - Because the composable CDP sits on top of the data warehouse, your company maintains the integrity of its unified customer profile. Marketers are able to access offline data sources that aren’t available in traditional CDPs. And data stays secure in one location instead of living across multiple third-party platforms.
- Time to value - Unlike packaged CDPs or in-house builds, a composable CDP doesn’t require a complex engineering setup and takes less than 30 days to implement. Some companies have been able to jump into their first use case within five minutes of onboarding.
- Built for marketers - Composable CDPs provide a no-code solution for marketers to create audiences and build cross-channel customer journeys — no need to learn SQL or tap data teams for support.
Cons of a composable CDP
While not everyone may see this as a negative, a composable CDP does require a cloud data warehouse. This requires some time and financial investment, but the benefits come in the form of more security and scalability.
If you don’t yet have your data in a warehouse, tools are available to expedite the data transfer process from your CRM or other data sources.
Build vs. buy CDP: Which option is right for you?
If you’re investigating whether to build or buy a CDP, the good news is that you’re on the right path toward more effective marketing and sales campaigns. Regardless of your choice, prioritizing more centralized customer data will result in better customer experiences.
However, the right option for your organization will depend on time, resources, and budget. Consider whether you have the engineering staff to support an in-house build and ongoing support. And if you’re leaning toward a packaged CDP option, weigh the risks of having your customer data live in a third party platform.
A hybrid approach doesn’t work for everyone — but it may be the best solution for your team, your bottom line, and your customer.
