How to Decode Customer Data Platform Pricing

How to Decode Customer Data Platform Pricing

Confused by CDP pricing models? This article explores how a CDP’s origin story and your business needs impact cost. Learn how to develop use cases to make informed decisions for your marketing strategy.

If you’re one of those shoppers who looks at the price first, deciphering customer data platform (CDP) pricing will frustrate you. 

CDP pricing is complicated for two reasons. 

  • CDPs do different sorts of things. 
  • CDPs have different “origin stories,” and their pricing is often a relic of what they used to be and do. 

A CDP that started as an email service provider might base its price on events, like emails sent, page views, clicks, etc. A CDP that originated as an analytics platform might base its price on total web traffic, while a CDP that used to be a data warehouse might set its price by how many profiles are under management. 

There are many other price models, including:

  • Profiles of “known” individuals. 
  • The number of user records in the database.
  • API calls and the volume of incoming data.
  • The components used are the data clean room and the built-in ESP.  

You will have to get a custom quote from each vendor you’re considering, but the quote won’t tell the whole story. 

Why the Customer Data Platform’s origin story matters

MarTech defines a CDP as “a marketer-managed system designed to collect customer data from all sources, normalize it, and build unique, unified profiles of each customer. The result is a persistent, unified customer database that shares data with other marketing technology systems.”

Most CDPs started as something else and added or acquired functionality to become full-fledged CDPs. Knowing a CDP’s origin story gives you insight into:

  • How the application is priced.
  • The company’s culture and biases.
  • How they’re likely to view their work.
  • Their services.

If there’s a conflict, it can become a hidden cost in added development time and workarounds. A good fit can be better than a good price. Vendors specializing in a CDP tailored for your business and industry may be ideal in the long run. 

Also Read: How CDP Delivers the Coveted “Single View” to Marketers

The ‘best-of-breed’ decision

If you’re in the market for a CDP, you probably have solutions for some of what CDPs offer. For example, you might already have a service to manage a paywall, which most CDPs can do. 

Early on, it would be best to make the best-of-breed vs. Swiss Army knife choice.  

Some CDPs stick to a narrow focus. They provide a consistent, single view of the customer (which is a myth — but never mind that for now). These best-of-breed CDPs rely on other applications to send emails, cleanse data, create interactions on the website, build forms, provide content recommendations, and so on. They position themselves as “best-of-breed” in their narrow focus and expect you to use other solutions for other tasks. 

Swiss Army knife CDPs incorporate some or all of the abovementioned functions into their solutions. The drawback? You may use functionality provided by your CDP vendor when a solution offered by another vendor dedicated exclusively to providing that function or service would be a better choice. Let’s face it: the can opener on a Swiss Army knife isn’t best-of-breed, but it will get the job done when it’s the one you have in your pocket!  

There’s no simple solution to this choice. It’s tempting to think using best-of-breed solutions for every function is wise. But, aside from the fact that “good enough” is often good enough, that can be impractical. 

  • There’s no guarantee all these services will integrate seamlessly. 
  • Contracting with multiple vendors may be prohibitively expensive. 
  • There’s no guarantee these other companies won’t merge, change their focus, or go out of business. 
  • What’s best-of-breed today may not be best-of-breed tomorrow. 

All of this is relevant to pricing because the cost of the CDP isn’t only what you’re quoted. You must also consider what you can save by eliminating duplicative services (provided you can get out of the contract) or what you might have to add to get all the functionality you’re searching for.  

Here are two examples. CDPs that send emails might save you the money you spend on an ESP. However, a CDP that doesn’t have a clean integration with an essential service might result in development or middleware costs. 

Start with use cases

These and many other factors add complexity to CDP pricing. It depends on your size and the services you’re looking for, so you must start the process by developing use cases. What will you do with a CDP, and what return on investment are you hoping to get? Documenting these cases will help you list all the functions you require. 

With use cases in hand, you can add and subtract costs from a CDP bid based on what current services you can discard and what additional services you’ll need. 

Also Read: Understanding Composable Tech Stack

Enough already! What’s a Customer Data Platform going to cost? 

The minimum investment for a CDP is about $5,000 per month. It will go up from there based on volume and so on. It’s quite easy to get into multiples of six figures annually or more, so you should only invest in a CDP if your use cases will likely result in substantial savings or additional revenue. 

If the price tag scares you, don’t let that stop you from investigating. You might not need a full CDP. By working on your use cases and considering what functions are required to make them happen, you might discover things you can build yourself — or some “not quite CDP” solutions that solve your requirements. 

The best thing about considering a CDP is that it requires you to consider what you’re doing, why, and what benefits those current or potential activities would bring to your company and your customers. That exercise can sharpen your focus, and you might discover revenue opportunities that make the price sting a little less.