The Customer Data Platform (CDP) market is undergoing a seismic shift.
Legacy players such as mParticle, ActionIQ, and Lytics have faced major shakeups, with acquisitions marking the end of an era for traditional CDPs. Outdated architectures, sluggish onboarding cycles, and questionable ROI have resulted in these platforms struggling to keep up with the evolving demands of modern data management.
Looking to step into this void is the Composable CDP. Agile, scalable, and designed for the modern data stack, Composable CDPs are reshaping the industry narrative and attracting the attention of investors who see them as the future of customer data management.
Hightouch Co-CEO Tejas Manohar sees his company at the center of this shift, thriving in an environment that pushed others toward exit deals. In a recent interview with Demand Gen Report, Manohar details how the CDP market is evolving, why legacy players are struggling, and why investors are betting on Composable CDPs as the future.
Demand Gen Report (DGR): How would you describe the state of the CDP industry? Is it growing, consolidating, evolving?
Tejas Manohar: We think the CDP industry is growing. The demand to collect, process, and activate data for marketing is urgent and only getting more so with AI.
With that need, we’re seeing a few trends take place. First and most important is the emergence of cloud data warehouses as the center of gravity for customer data in every enterprise. We recognized this early when we pioneered the idea of a “Composable CDP.” This is when a company turns their existing cloud data warehouse into a customer data platform. This approach offers a flexible and secure implementation with quick deployment of use cases for personalization and targeting. The success of this approach is why Hightouch is growing so quickly, and it’s the reason pretty much every CDP vendor is now using the buzzword “composable” — even if they cannot really operate from a company’s cloud data warehouse.
The second-order effect of this trend is that the original wave of “traditional” CDPs is getting acquired or has stopped growing. The idea of a CDP as a second data store has all kinds of fundamental problems that prevent it from delivering value. These range from rigid data requirements and long implementation times, to limited use cases and significant security concerns. These problems are making it very difficult for “traditional” CDPs to survive as standalone businesses.
In short, CDP demand remains strong, but that demand is shifting from traditional to Composable faster than most CDPs can adapt.
DGR: How are these changes impacting the end-users of CDP platforms?
Manohar: A widely circulated statistic states that 90% of marketers are dissatisfied with their CDP. Put simply, end users have endured 12+–month implementation cycles and massive costs for technology that didn’t let them achieve their personalization and targeting goals. This changes when marketers embrace the Composable CDP because it’s built on top of the cloud data warehouse they already have; even huge enterprises can have use cases live and driving ROI in a matter of months.
A good example is Accor Hotels. Their team attempted to implement traditional CDPs for years but found that their global multi-brand business couldn’t operate within such a rigid structure. Getting accurate data available in a complex business was just too difficult. But it was easy with a Composable CDP. Within two months of adopting Hightouch, they had dozens of global teams across multiple brands executing personalized marketing campaigns.
DGR: What are B2B organizations now demanding from their CDP vendors? Are there any specific features, capabilities, or functionality?
Manohar: B2B organizations have always needed a CDP that can adapt to their unique data structure. They need the data flexibility to handle the relationships between individual buyers, the accounts they work at, and the internal dynamics of sales teams, territories, and product lines. Most “traditional” CDPs were invented to service simple B2C businesses with an E-commerce revenue model, so they really struggle to adapt to these requirements.
The good news is that a Composable CDP has none of those problems. A B2B company doesn’t have to pretend that they’re a simple B2C business, they can execute marketing tactics at the account level, at the contact level, at the product line level, at the territory level etc. without changing a single thing. This flexibility is just a fundamental property of a cloud data warehouse that the Composable CDP inherits by association.
The B2B companies we work with also expanded their user base for CDPs beyond just “marketing.” For example, we have RevOps and Sales teams that use Hightouch to populate their CRMs, and Customer Success teams that populate tools like Pendo, Gainsight, and ZenDesk. Working from the data warehouse means that we have all of the data needed for any B2B group, not just the silo of data that strictly supports marketing.
DGR: What differentiates a “composable” CDP from legacy players? What’s the ultimate value for end-users?
Manohar: The short answer is that the Composable CDP operates entirely from a company’s data warehouse. This lets businesses move faster, use all their data to unlock new use cases, and power real personalization across all their tools with trusted data.
The long answer is that there are a few key characteristics of a truly Composable CDP, which you can use to easily distinguish between CDPs that are just using “composable” as marketing fluff vs. the ones that are actually doing the work to support their customers:
- The Composable CDP runs on your data infrastructure, it does not store a separate copy of your data. Your organization already has data storage (such as a data warehouse), which should be the underlying storage layer that powers your CDP use cases.
- The Composable CDP is schema-agnostic. Unlike CRMs that revolve around contact lists or CDPs that revolve around web events, the data warehouse and, thus, Composable CDPs have no limitations or opinions on how data should look. You can orient and activate around anything—households, pets, bank accounts. Just use whatever makes sense to your business.
- The Composable CDP is modular and interoperable. Every enterprise has some data infrastructure (such as event collection, ETL, dashboards, etc.) before deciding to buy a CDP. The Composable CDP works with what you already have and then fills in any gaps in capability that you need. You shouldn’t have to tear down and rebuild your entire house just because you want to renovate the kitchen. As you evolve, this same flexibility lets you swap out components over time, reducing the risk of vendor lock-in.
- The Composable CDP has unbundled pricing. You only need to pay for the capabilities you’ll use—not the shelfware that comes with the platform.
DGR: Can you share examples of clients and the benefits they’ve seen using your CDP?
Manohar: We’ve seen success across a wide range of industries. WeightWatchers boosted new member growth by 52% by using Hightouch to power paid media. PetSmart increased loyalty program engagement by triple digits by using Hightouch to power personalized emails. The Zebra, an insurance marketplace, boosted ad match rates by 170%, increased the click-through rate on key email campaigns by 70%, and lowered unsubscribes by 50%.
The common thread in all of these stories is that owned first-party data can be incredibly powerful, when marketers can readily access and use it. We’ve got plenty more stories like this on our website.
DGR: What does the onboarding process look like? What is the path to ROI?
Manohar: Because we operate directly in a customer’s existing data warehouse, onboarding can be very fast. We advocate for incremental onboarding: Pick the most impactful use cases and implement them one-by-one. In practice, this means that companies can start seeing results within their first week of using Hightouch.
For larger enterprises with lots of data to organize and lots of team members to train, a full rollout might still take two months — but that’s lightning-fast compared to traditional CDPs.
DGR: What are some unknown or overlooked factors of selecting a CDP?
Manohar: Implementation is the number one killer for CDP success. How will the CDP actually get access to the data it needs? And what happens if you need to add more data later on? This is what makes or breaks marketers’ access to data.
Together with that is data governance. If your data privacy team isn’t comfortable with marketers accessing certain data, and a CDP doesn’t provide strong enough controls, marketing use cases will be hamstrung. You need to find a CDP that can meet your regulatory needs, such as supporting multi-regional and multi-brand companies, partitioning data between different user groups, and automatically enforcing consented marketing.
DGR: When is it time for an organization to assess and possibly switch their CDP?
Manohar: If your marketers are increasingly struggling to access and activate customer data using their existing CDP, that’s an obvious red flag. There’s real value you can get by leveraging your first-party data, and the opportunity cost you face by sticking with a failed vendor is too big to ignore. You might run into similar roadblocks when you want to add new data sources, such as machine learning models your data team builds, into your CDP: This shouldn’t be hard, but for many “traditional” CDPs, it is.
There are other occasions that might make it particularly timely to re-evaluate your CDP strategy. If your organization is implementing a cloud data warehouse for the first time, or investing more in your owned data infrastructure, that should trigger you to consider how you can power your marketing and other key operations from that data infrastructure.
With a Composable CDP, it’s absolutely possible to crawl-walk-run into an implementation. We’ve worked with many enterprises who had a CDP, but were blocked for one reason or another on a certain use case. They used us to solve that use case. And when they found how much easier and more effective that approach was, they then rolled more fully from their other CDP to us. In short, you should always prioritize value to your end customer and keep looking for a vendor that can deliver that value.
DGR: Do you have any closing advice for readers either considering to implement a CDP for the first time or looking to switch? How can they ensure they find the right partner?
Manohar: Knowing what you want your CDP to accomplish is the most important. If you come into an evaluation with a clear sense of your use cases, it will be much easier to cut through the noise. This approach makes it no longer about “what can your CDP do for me,” but instead “how can your CDP help me do this one thing?” You’ll get out of the marketing talk, and into the nitty gritty that ultimately determines whether or not that CDP can succeed for you.
