How customer data platforms can increase advertising ROI

Customer data platforms increase ROI shown by a knob with ROI written on it and set to high

For advertising to work, it needs to be accurately targeted. Good ads speak to customers about their personal needs and interests, which is why they generate sales. But accurate targeting is notoriously difficult and it's common to waste half a marketing budget on directing ads to people who simply aren't interested in the product or service on offer. Many marketers are now trying to overcome the challenge of targeting by using data marketing platforms (DMPs) to create look-alike audiences with limited understanding of their current customers. While DMPs are effective at providing aggregate-level data, they often fall short when it comes to improving targeting. They don't necessarily help marketers understand their customers across a lifecycle, including their first visit, research, purchase and post-purchase.

Programmatic advertising is another emerging industry with which marketers have been experimenting with varying degrees of success. Programmatic advertising helps buy ads in real-time and targets to specific individuals. While programmatic advertising can seem efficient, it's actually much more expensive. If you simply rely on DMP data on who to target, you're still making advertising decisions based on how a 3rd-party company (DMP) categorizes and defines the user persona. This can make it difficult for brands to understand exactly where their budgets are going and whom they're targeting.

Programmatic advertising and DMPs are both valuable tools for marketers, but a system that brings together all relevant data for targeting a known profile can lead to the best possible results.

How to achieve accurate targeting

There is a great opportunity for marketers to use big data to develop a better understanding of customers and improve targeting. The trouble is, most marketers lack the knowledge to do this effectively. Customer data platforms (CDPs) help marketers understand their customers by bringing together all relevant data already available within the organization to create a 360-degree customer profile. And unlike DMPs, which collect anonymous data, CDPs collect data that can be tied to an individual, making them extremely useful for marketers who want to target customers with personalized content. It's not surprising that an increasing number of brands recognize the benefits of CDPs. According to a report by the Customer Data Platform Institute, CDP vendors reported more than $300 million revenue in 2016, and the industry is expected to reach more than $1 billion by 2019.

Here's a closer look at how CDPs can be used to increase advertising ROI:

  • Bring Together Data from Various Systems. CDPs collect, collate and centralize all incoming data across several sources and channels, helping marketers ensure they are targeting the right audience. The ability to view such a broad set of data for a profile makes it easier to segment the audience based on whom you're targeting.
  • Target the Right Visitors. Audience data from the CDP is sent to a DMP to gather additional data points where possible and create a larger data set for the audience. This enables better targeting of the audiences. CDP data is then used for re-targeting ads in conjunction with programmatic advertising platforms and demand-side platforms (DSPs).
  • Target Look-Alike Audiences Using DMP. The targeted data set from CDP data is fed into a DMP to create a look-alike audience set. This audience is then targeted with advertising through integration with a DSP.
  • Feed CDP Data into Other Social Advertising Platforms. CDP data is used for highly accurate re-targeting on Facebook, Twitter, Instagram, YouTube, LinkedIn, and other social networks. CDP data is also used to generate look-alike models on these sites.

Taking customer targeting to the next level

CDPs fulfil the marketing industry's need for data-driven analytics while providing multi-channel integration that makes it much easier to provide customers with a seamless experience. CDPs consolidate all existing data, update it with the help of artificial intelligence, and apply real interactions so marketers can chart micro-decisions that can make the difference between gaining and losing a customer. CDPs also solve several issues that have plagued advertising for years, including outdated or fragmented data, incomplete or incorrect information, and a lack of customer behavior tracking. Marketers can now personalize their products and services with sophisticated algorithms supported by AI and machine learning—all thanks to CDPs. What's more, information can be continuously fed into a CDP, ensuring that customer profiles are constantly updated.

Additional Best Practice to Further Enhance Advertising ROI

Here are a few more best practices that can help improve Advertising ROI:

  • Keep experimenting with advertising segments; perform A/B testing.
  • Measure results for each experiment and act on them.
  • Look-alike audiences can be expensive, which is why marketers should experiment with a smaller data set first before trying out larger data sets.
  • Create a feedback loop to take the activity data from various ads and input it back into CDP. This enables continuous fine-tuning of ads.
  • Create multi-stage, in-depth, multi-channel campaigns and leverage CDP, DMP, programmatic advertising, data sciences to achieve the best possible ROI.

An infographic that explains the 4 Steps to increase advertising ROI using Customer Data Platforms

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