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Build or Buy: The Customer Data Platform Edition

The world of customer data is rapidly evolving, from the loss of third-party cookies to the ever-changing patchwork of consumer data privacy laws. Companies are looking for new ways to collect data easily and get the most out of it.

Choosing the right CDP vendor is never an easy task. Which is why, many retailers wonder if it’s better to build their own. Companies have to consider critical factors, such as the reasons and benefits the business will get out of a CDP, how difficult or easy integrations are to their other tools, the available resources and track record of technology development, as well as the time-to-market requirements. 

 Here are 6 key factors you should take into consideration when deciding whether to build or buy a Customer Data Platform:

1. Cost: Winner buy

The first and most important question when it comes to investing in something of this magnitude is money. Is it more expensive to build a CDP or buy one?

In both cases, acquiring a CDP requires an important investment. But without a doubt, building a CDP requires a huge capital investment and a massive expenditure of people for planning, design, coding, testing, and deployment. In terms of long-term maintenance and deployment of the platform, building your own will be more expensive down the road. According to Gartner, the cost to purchase a CDP can range from $100,000 to $300,000 annually, based on Gartner client and vendor conversations, while the labor costs to build and maintain a CDP in-house can be significantly more.

In conclusion, in both the short-term and the long-term, buying a Customer Data Platform is the most cost-effective option.

2. Ad-hoc solution: Both

If you have a very specific use case that you need a CDP for, you may think it’s better to build your own from scratch. However, it’s important to take into account the market is rapidly changing, meaning that you’ll need more resources to meet market expectations in the future. There is also a huge probability there’s something similar to what you need out there or can be adapted to your specific needs.

In fact, some CDPs are incredibly adaptable for a number of use cases, and more and more we will find CDP’s specialized for an industry, it’s just a matter of finding the right one that fits your business needs. 

3. Data security: Both

A Customer Data Platform works by sharing customer databases with other systems. Customers are increasingly concerned about the integrity of the data they give to companies, and they’re scared about the idea of getting a CDP that exchanges personal data easily with other companies.

With a CDP built in-house, companies can control not only all their own data but they also manage the way it is shared with other companies. But If you decide to buy a CDP, you gain the help of a company that has more experience than you with data protection. Nowadays CDPs are built to help brands accelerate compliance with GDPR, CCPA, and more, by setting rules to proactively block and route sensitive data.

4. Time-to-market: Winner buy

One of the biggest benefits of buying a CDP is the speed at which you can have your CDP up and running.

According to the Customer Data Platform Institute, Even if you do have deep domain expertise in building customer data infrastructure, developing a Customer Data Platform in-house is at best a 6-12 month project, and without domain expertise, it could take 12-18 months or even more.

Working with the right CDP vendor, that has great support service and knows its way around integrations, can allow you to get up and running in a shorter amount of time. The product should be ready to integrate data and orchestrate customer insights to execute your business strategies in no time.

5. Innovation risks: Winner buy

What if the CDP isn’t able to do what it’s designed for? Building a CDP on your own comes with a high risk of becoming obsolete in a very short time unless you spend a lot of time and effort to keep it updated. But will it be worth it?

These are common concerns, and the truth is that risks can be reduced by using a Customer Data Platform already built. For example, If a retailer builds its own CDP with the goal of collecting data, but then realizes that it can be much more efficient if this data is activated through the launch of personalized promotions, audience building, and personalized communication? definitely, the risk of building a CDP exceeds the benefits it can provide.

6. Human & Tech Resources: Winner buy

The final thing to consider is the implementation difficulty and the level of expertise and technological resources you will need. 

To integrate an already built CDP solution, you will need an internal IT department. On the other hand, to build a CDP in-house, you will need IT, Development, Operations, and Maintenance teams to make it work.

How to determine the right path

For the vast majority of businesses, the risks and costs that come with building a CDP in-house outweigh those of buying an existing one. That’s because the effort of creating and maintaining a tool in-house takes away time, energy, and development resources from improving your core product and serving your customers.

Loyal Guru’s retail-specific CDP is built to collect customer data from both online and offline channels to create a single customer view of their transactions. Retailers can leverage this data by personalizing communications, automating their business operations, launching loyalty programs, building audiences, all in one place. 

Interested in learning more about how a Customer Data Platform is built? contact us for a demo.

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