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Why Twilio Bought Segment … and Why You Should Care

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Twilio this week completed its acquisition of customer data platform (CDP) provider Segment for a whopping $3.2 billion, evidence of the strategic value the company places on gaining access to the $17 billion CDP market.
 
Nonetheless, the acquisition raised many eyebrows. After all, CDPs are fairly new and, so far, mostly used by marketing. But CDPs are poised to play a critical role for contact centers and customer engagement. Let me explain.
 
What Segment Does
Segment was founded in 2011. Its first product, Analytics.js, was an open-source library unifying web data collection. What many people don’t appreciate is that marketing uses many applications, including Google analytics, marketing automation, A/B testing, and web personalization, to track how customers and prospects are interacting with brands online. Each uses its own method to collect data, and results are difficult to connect. The problem compounds when adding in mobile, e-commerce, or other sources of customer data. This is the problem Segment has been tackling by gathering customer activities in a single repository that multiple applications can use.
 
Over the years, Segment kept on adding data sources and interaction channels. Today, its website lists over 300 integrations. Eventually, it created unified customer profiles and segments to support a broader set of use cases, such as website personalization, A/B testing, or personalized product experiences.
 
If you remove the marketing mentions from the previous paragraphs and re-read them, you have the description of an enduring customer service issue: how to assemble a unified customer context. Think of a contact center using a virtual customer assistant, quality management, and speech analytics software. The contact center software itself plus these additional three applications each track calls. The information needs to be combined, enriched with other data elements such as conversation outcomes and history, so it can be leveraged for recommendations on how to improve the customer experience (CX).
 
Indeed, Twilio described the acquisition of Segment as the catalyst needed to transform itself from an API company into a customer engagement one.
 
Ingesting and Sharing Data
As in the case of any hot category, many players have been quick to proclaim their software as CDP. The CDP Institute offers a simple definition: A CDP is packaged software that creates a persistent, unified customer database accessible to other systems. I would add that a CDP provides data to create more relevant and personalized experiences.
 
The cloud has created a proliferation of applications. For marketing alone, there are an estimated 8,000 apps. Most enterprises use tens if not hundreds of them. To get an appreciation of the app diversity, visit the Stakie Awards, an annual contest in which enterprises share their marketing stack on a single slide. If you add sales, e-commerce, service, and collections, you end up in extreme app fragmentation along the customer journey. Each application only has visibility into the sliver of the customer interactions it handles and/or tracks.
 
At its core, a CDP ingests data from multiple sources and gathers all the “breadcrumbs” of customer activities across applications. It includes a complete “onboarding” process for cleaning, verifying, and de-duplicating data, and then assembling unified customer profiles that can be shared with other applications.
 
Assembling Data
For many years, CRM strived to provide a single customer profile. This approach hinges on having every customer transaction and interaction be recorded into a system of reference. The blossoming of new application categories such as marketing automation or customer success management has challenged this model, with each becoming a system of record for the segment of the customer journey they manage.
 
These apps need to be connected. The need drove Salesforce to its 2018 acquisition of app integration platform provider MuleSoft and the introduction of its Customer 360 platform for bridging its sales, service, marketing, and e-commerce applications. But it’s not enough. Each application is generating large amounts of data. In particular, customer-facing software creates loads of unstructured data. These volumes of data require specific repositories such as data warehouses or data lakes.
 
The number of apps to handle leads us to another attribute of a CDP. It correlates customer identities across systems. For marketing applications such as personalizing the web experience or serving ads, this requires dealing with anonymized personally identifiable information. For engagement applications, it requires handling compliance checks against a growing number of privacy laws. CDPs may also have to merge first-party data, data the enterprise has about its prospects and customers, with second and third-party data. Second-party data comes from other enterprises sharing their first-party data and third-party data comes from commercial databases and the open Internet.
 
Intelligence Fueling Great Experiences
A CDP’s ultimate goal is to deliver better experiences. It requires building analytics, predictive models, and applications to drive customer engagements. Data consultancy firm DataEM has put together a CDP “periodic table” that provides a comprehensive list of the components of a CDP together with the analytics and engagement applications it can support.
 
While some vendors offer integrated analytics and engagement applications, there is no such thing as a universal CDP. Instead, CDPs are becoming more specialized and enterprises will likely use more than one — one for digital advertisement, one for online experience, one for contact center, one for engagement, and so on. CPDs will also coexist with the data lakes that many businesses are putting together to build their AI models and predictions.
 
Today, the two prominent use cases for CDP are personalizing the web and mobile experiences and serving ads. Emerging applications include contact centers and customer engagement. CDPs are ideally suited to orchestrate omnichannel experiences, recommend the next best actions, and provide agents with a unified customer profile.
 
Data has become central to define great experiences. It drove Twilio to acquire Segment and will drive more vendors to build and/or integrate with CDPs. A few years ago, we touted communications-enabled business processes (CEBP) as the next frontier for communications. In a similar vein, you can think of CDPs as data-enabling customer experiences. This is why they are so important for customer interaction and engagement and must be on your radar.

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This post is written on behalf of BCStrategies, an industry resource for enterprises, vendors, system integrators, and anyone interested in the growing business communications arena. A supplier of objective information on business communications, BCStrategies is supported by an alliance of leading communication industry advisors, analysts, and consultants who have worked in the various segments of the dynamic business communications market.

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