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September 24, 2014 // 8:00 AM

What Is a Data Management Platform (DMP) and When Do You Need One?

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data-management-platformBig data has hitting the ad tech sphere as a topic of conversation, speculation, and confusion.

Some debate its merits, some argue that it’s always existed, and others are still puzzled as to what it actually means, in regards to both its definition and impact on the business and advertising world.

Big data — in one sentence — is an incomprehensively large amount of data from on and offline sources that can be acquired both inside and outside of your company.

This has led to the creation of ad tech analytics meant to power a business's marketing campaign or real-time bidding strategy. To analyze this big data, data management platforms have emerged.

What is DMP?

In technical terms, a data management platform (DMP) is a centralized platform that aggregates first- and third-party audience data from your cross-channel marketing efforts. However, that explanation is a bit jargon-y, so let’s break it down:

  • First-party data is information generated from your website, social platforms, and mobile web or apps about your own customers. It typically consists of your audience’s personal information (names, emails, addresses, phone numbers), demographic information (gender, age, race), and limited behavioral data (site interaction, purchase history, interests). Typically stored in a CRM or web analytics system, you (as the exclusive owner of this data) can obtain your first-party audience information for free.
  • Third-party data is information generated from internet interactions and other websites. This data is used to round out your data information by giving you deeper insight about your audience, such as individual demographics (income level, marital status) and household attributes (number of children). It is often used to build consumer segments for more targeted ads. It’s collected and licensed by third-party providers that have no direct relationship with your customers. You must purchase this data to access it.
  • Cross-channel marketing is marketing to your audience using multiple channels, which can include website, PPC, email, social, mobile, and offline (direct mail, retail store, TV, radio). Cross-channel marketing exposes an audience to a business in different mediums, thus providing a company with multiple avenues of conversion. It can be referred to as “cross-channel,” “multi-channel,” or “cross-device.”

When we put all this together, a DMP is simply a marketing tool that collects comprehensive demographic, psychographic, and behavioral data about your target audience from a variety of sources, all in one unifying platform.

Why They Are Important

The logic behind a DMP is to give you detailed information about your customers to create hyper-targeted ads, which result in higher conversion rates, ROI and customer retention.

Imagine you’re marketing for a home design and remodeling company, and your goal is to find high-quality leads. Naturally, you’d probably create an ad targeting new homeowners around the company’s radius. However, that ad may not convert well because new homeowners aren't usually looking for a renovation.

But what if you knew that within your company’s radius, there is an audience segment that loves to cook, has downloaded a cooking mobile app, and browses kitchen designs and kitchen remodeling pictures? What if you also knew their household income and the websites they visit to research and purchase a new product or service?

Instead of creating a general ad targeting homeowners, you can use the data a DMP collects to craft an ad message that specifically targets this segment’s interest in kitchen projects. You can estimate the consumers' budget based on their income to craft a relevant remodeling plan, and serve the ad on the sites they frequent to expose them to your brand at the proper sale points.

The Right Time

With all this technical language, it can be difficult to know if you need a DMP to better serve your clients:

  • You want to research and collect data on your audience so that you can better segment your marketing efforts.
  • You often purchase media placements and/or third-party data.
  • You are running multiple, cross-channel marketing campaigns and would like a deeper level of understanding of your first- and third-party audience.
  • You want to create hyper-targeted advertising campaigns to improve your brand engagement and conversion rates.
  • You want to spend your ad budget more wisely in order to improve your ROI.

Regardless of what you think about third-party data or DMPs, you can’t deny that more information about your consumers can significantly impact your marketing strategy. It's all about how you use this data to better serve and inform your audience.

Tell us about your experiences with using DMPs in the comments below!

Topics: Marketing & Advertising

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