Customer Data Platforms vs. Master Data Management: Features, Differences, and Which Is Better?

Highlights:

• While CDPs are built to help customer experience (CX) and marketing teams facilitate and improve customer experiences, MDMs are designed to help IT, and customer support teams create a master ID for individual customers.
• Employing a CDP and MDM together is desirable rather than deciding on one over the other.

Master Data Management (MDM) and Customer Data Platforms (CDPs) are solutions to solve persistent problems of poor-quality customer data. Both the technologies are designed to solve data problems and supply carefully curated, unified, and accurate corporate data with a reliable overall view of customer data to drive business innovation.

MDM is a set of processes designed to transform organization-wide data, while CDP is a packaged software product that delivers a unified view of the customer. Another differentiator between the two solutions is who stands to benefit from the use of MDM and CDP. .

But many organizations face the question of which one to go ahead with. Let’s first understand what these two are and the solid differences between them.

What is Master Data Management?

MDM consists of strategies, procedures, and tools for managing critical data within a business. Master data provided by MDM ensures reliability, accuracy, and consistency across all company data. MDM enables various business departments to collaborate in order to ensure that its master data assets can be shared throughout the organization, supplying specialists with the pertinent data to meet their business needs.

What is a Customer Data Platform?

CDPs are built exclusively for the management of customer data. More importantly, a CDP is packaged software built mainly for marketers who can leverage the data to connect to all customer-related systems. For example, CDP helps the marketing department to improve the personalization of marketing campaigns. In short, CDP helps a business to put together a coherent, reliable, and persistent record from various data sources. Unlike MDM, it does not require a team of engineers or IT professionals to manage it.

Other differences between CDPs and MDMs include:

The customer data applied by CDPs to marketing use cases can be limited due to poor quality. Whereas modern MDMs improve customer data quality.

CDPs collect and aggregate customer data from email addresses, phone numbers, and IP addresses. The matching techniques that CDPs generally adopt involve single-data point matching, such as tying a web search session to the customer transaction history using the email address used to log in. This is a relatively simple matching process, and due to the process’s simplicity, CDP’s core functions are often impacted if the customer data is partially complete or if customer record resolution is complex. Challenges for CDP arise when the same customer uses different names, the contact info is out of date, etc. It can therefore only be used to its full potential when customer data is consistently updated. For that, most CDPs have some form of customer entity resolution in place.

MDM addresses such challenges by using accurate entity resolution powered by Machine Learning (ML)combined with the ability to publish clean data to a wide range of analytical and operational destination applications.

The connection of external third-party sources can further enrich the clean and identifiable customer data.

CDP improves market function while MDMs focus on customer data quality across the organization

CDPs focus on enhancing marketing efforts and improving customer interaction; therefore, they are most in demand among the marketing teams. CDPs can integrate data from online interactions and data warehouses, enabling multi-channel marketing outreach. They can be regarded as a marketing tool that creates a new silo of aggregated customer data.

MDMs focus more broadly on creating a consistent data layer leverages across teams, in addition to marketing. MDM tools help solve business challenges with high-quality data and can be leveraged by sales, marketing, finance, and various other groups by connecting customer data to other applications. Rather than only making customer data suitable for the marketing team, MDM use cases are much more diverse. Its primary function is to ensure that data is clean, unified, and enriched in format to feed marketing tools and decision-making flexibly.

CDP focuses on customer data, while MDM focuses on various data entities

MDMs offer a holistic for the organization’s data layer. Customer data is the foundation for other data relevant to products, suppliers, delivery, and demand. A great example is the combination of mastered customer data and product data to improve the visibility of product assets.

CDPs deliver solid outcomes but only benefit the marketing function that analyzes and enhances demand. Using CDPs alone to handle the organization’s customer data cases may be insufficient.

Why the confusion between CDPs and MDMs?

Both technologies are sometimes viewed as interchangeable tools because they enable businesses to establish a master customer record. MDMs are a better option for maintaining customer identity at companies with a vast customer base that use a combination of traditional and internet channels and are highly susceptible to duplicating customer identities. For such businesses, CDPs may have some identity management limitations.

Customers frequently present themselves and their addresses in a variety of ways. The same is true for companies. Aside from that, typing mistakes are common. All these situations require a way to deduplicate customer records. While CDPs with deterministic and algorithmic matching capabilities can support this, they don’t enable manual splitting or merging profiles, steward profile data, employ infinite rule customization or manage contact-to-contact relationships.

CDP Vs. MDM: Which is better?

Identity management should always be given priority since precise client IDs are necessary for gaining insightful information and coordinating individualized customer experiences. However, MDM will not empower business teams to self-serve customer insights and use this data to orchestrate client experiences. Because of this, employing a CDP and MDM together is recommended rather than deciding on one over the other.