What Is Master Data Management? + Why CDPs Are a Better Option

Kelly Kirwan on January 6th 2022

It's widely accepted that marketers need to take a "data-driven" approach to their strategies. But the tangible business value of the data you collect heavily depends on one thing: how you plan to use it.

This is a crucial question to answer if you want to use data to unlock more growth for your business. Once you’ve identified your goals, you’ll be in a better position to identify the approach and tools you need to accomplish them. Two popular solutions for companies leveraging data include master data management (MDM) and customer data platforms (CDPs). These approaches are similar, but they have a few differences that, once you’re aware of them, can protect you from lots of wasted time, energy, and money. That’s why, in this post, we’ll look at:

  • What is master data management (MDM)?

  • What is a customer data platform (CDP)?

  • Is MDM the right approach for your organization?

  • Why CDPs are a better tool for building profitable customer journeys

By the end of this article, you’ll understand how MDM is useful as a discipline for gathering enterprise data and why CDPs are better suited for agile marketing teams.

What is master data management?

Master data management (MDM) is a process in which you create a single dataset for all of your business operations, including customers, products, and suppliers. It takes data from multiple sources and gives it a unified structure, so you can create smoother systems for every aspect of your business.

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For example, your organization probably collects data differently for people who join your email list, customers who purchase a product, your warehouse inventory, and shipping processes. An MDM solution brings all of that data to one destination while preserving data quality. Then it cleans, de-duplicates, and restructures that information into a single cohesive dataset. This process leads to something called “master data.”

Master data is a singular set of identifiers that can be used across multiple IT systems. This helps companies create cross-departmental systems or lines of communications for more operational efficiency. That way, internal tools can “speak” to each other without creating costly data silos.

There are three important factors to keep in mind if you’re considering MDM.

MDMs focus on general data across your entire business. That means you’ll have data that can be used for customers as well as data relating to shipping records, finances, supplier information, or any other business operation you actively track.

For large organizations with massive amounts of data, that might be a good thing. For companies hoping to gather data for fast implementation and higher conversions, an MDM approach might leave more data on your plate than you can effectively chew.

MDM is a discipline with multiple tools

Since MDM is such a broad approach to managing your data, it typically requires multiple tools to clean, process, and store data from different sources. You’ll also need to have (or hire) an in-house developer to test and verify any movement of critical data for your data consolidations, migrations, integrations, transformations, and warehousing efforts.

There are “all-in-one” MDM platforms and tools that can handle the bulk of your data management for you. But as data sources can be so different from business to business, most organizations will mix and match tools to find the right solution for their unique needs.

MDM is an expensive process

The more data you’re working with, the more expensive the process becomes. Not only will you need to invest in specific tools and/or hire an internal software engineer, but you’ll also need to invest in the right infrastructure to build and maintain that list.

This makes MDM hard for some companies to justify, especially when it’s unclear how this data will be used to improve their bottom lines.

Is MDM the right step for your organization?

The question of whether or not MDM is right for your organization is one that only you can answer. That said, you should be clear on your goals for the metrics you’re collecting.

Master data management is a good option if you want to improve cross-departmental systems, business processes, or internal communications for your organization as a whole (and have a large budget to fund the project). It’s certainly a discipline that has helped large companies manage and unify data models to get a clearer vision of their global performance.

On the other hand, most companies have a practical objective for the data assets they collect: improve conversions and sales. MDM might be overkill if you want to collect customer-focused data to streamline implementation and build smarter marketing initiatives. In many cases, investing in an MDM would be like paying for an entire toolset when all you really needed was the hammer.

Another tool for managing data that has a more direct impact on sales would be a customer data platform.

A customer data platform (CDP) is a “piece of software that combines data from multiple tools to create a single centralized customer database containing data on all touch-points and interactions with your product or service.” It allows you to ethically collect, organize, and store customer data in a way that marketing teams and stakeholders can use for faster decision-making and more profitable strategies.

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When implemented correctly, these data-based insights can bring better leads, more sales, and a higher rate of customer retention.

Why CDPs are a superior tool for managing customer data

It can be difficult to understand the differences between CDPs and MDMs, let alone determine which workflow would be best for your organization. Here’s a simplistic breakdown of what distinguishes these two strategies:

  • Master data management organizes, cleans, and unifies data from every department in your business. Processes like data integrations, migrations, or transformations under MDM require multiple tools and technical specialists. The end goal of MDM will be different for every organization.

  • Customer data platforms organize, clean, and unify customer-related data in real time. CDPs are prepackaged tools that provide you with a single view of your customer master data. The end goal for CDPs is to better understand your customers for more personalized messaging, higher conversions, and lower churn.

Ultimately, only you will be able to decide if you need an MDM or a CDP for your data governance. That said, customer data platforms offer several advantages over MDM. Here are the top three reasons why CDPs can be a superior tool for managing customer data.

1. CDPs are easier to implement than MDMs

Customer data platforms are incredibly easy to implement and don’t require a lot of time-intensive or costly setup. Instead, CDPs are prepacked tools that typically require you to change a small bit of code. They also have a friendly user interface (UI) that even non-technical employees can operate. From there, the right CDP will do the rest of the heavy lifting for you.

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Retool, a company that helps businesses build internal apps, experienced this firsthand when they scaled from 7–100 employees. They needed to hire new roles, switch business intelligence (BI) tools, and build out a new CRM for sales. They ended up using Segment to successfully accomplish everything while saving thousands of hours in labor costs.

And Retool was able to do everything by changing just 5–10 lines of code.

2. CDPs sync seamlessly with your marketing tech stack

CDPs are designed out-of-the-box to integrate data from thousands of apps and sources. So it should be no surprise that a modern CDP already fits into most existing marketing tech stacks.

This is what Cazoo, an online car vendor, learned when they needed a powerful, flexible, and compliant tech stack and didn’t have a lot of time to build it. In just a few months, Cazoo crafted the perfect marketing stack with Segment to address their unique marketing needs. Plus, they only needed a small team of engineers and data analysts, which greatly reduced the cost of the overall project.

As Cazoo’s director of data engineering said, “It’s difficult to overstate the impact that Segment had on our ability to get to market quickly. We built a high-performing tech stack, with full integration and tracking set-up, in just a few months, and we’ve not looked back since.”

3. CDPs help you improve the customer journey

One of the biggest advantages to using a CDP over an MDM is that CDPs have a targeted goal: learn more about your customers to ultimately improve the customer experience and drive more sales. This is important for your company’s growth because once you understand what resonates with your audience, you can deliver even more targeted marketing campaigns to them. That leads to the following cycle:

  • You collect data about your customers.

  • You then use that data to give the customer a better experience with your business.

  • Your brand’s reputation increases, leading to even more customers.

  • Your existing customers enjoy a lifecycle with less friction, so they churn less.

  • You see higher profits as you continuously and automatically collect even more data-based insights.

For example, Allergan relaunched a customer loyalty program, Allē, getting their customer insights from Segment. As a result, they were able to personalize their marketing campaigns and generate $400 million in revenue for 2021 (YTD).

Get a single source of truth for all customer interactions with Segment

Master data management solutions can certainly be useful for modern businesses dealing with large amounts of data. It is, however, a multi-tool process that requires at least one in-house specialist, a data steward, and larger infrastructures. That makes MDM a tedious and costly solution for companies struggling to make sense of their data.

Alternatively, customer data platforms offer businesses an easier solution for managing customer data in a way that leads to tangible results. Modern CDPs like Segment don’t require years of technical training to operate, they come with powerful automation capabilities, and they have a proven track record for driving real results.

Not sure if an MDM or CDP is the right data strategy for you? Learn more about Segment to see if CDPs are the right solution to unlock your company’s growth.

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