Zuora, the subscription billing and payments company and the Financial Times of London announced a deal today in which the Times will use Zuora to help manage its subscription business. Two interesting paragraphs from an article in Computerworld UK stand out:
“The organisation has invested heavily in its digital strategy in recent years amidst a declining print market, helping increase total circulation 13 percent year on year to 677,000 during 2014, two thirds of which are online subscribers. It has also seen growth in mobile, accounting for 50 percent of overall traffic.
According to FT chief technology officer, John O’Donovan, the software as a service (Saas) system has helped provide flexibility in terms of pricing and bundling of subscription products, enabling the company to concentrate on where its 126-year old business can add value – the creation of content.
I am impressed by everything about this deal — the preponderance of digital subscribers; the use of Zuora not simply for billing but also for managing the business in a more fundamental way; and the company itself. The Times is a 126 year-old company coming into the digital and subscription age. Good on them, I say, and good on Zuora for making this happen. It’s got to be worth at least one touchdown in the race for supremacy in the subscription billing race.
This helps to validate (though Zuora is a long way from needing validation) the subscription management idea, which started with billing and payments but is more complex than this today. The data given off by digital customers through their subscriptions is significant and can tell a vendor quite a bit about tastes, needs, preferences, and much more — all of the things that a vendor needs to make a better mousetrap — or as the CTO in the article says to make content that customers want.
So when I see an article like this, I am happy for both parties because it means the vendor is also adopting the ways of digital marketing that make it possible to understand customers even if its people aren’t in direct communication daily. Does this mean that the billing and payments system should be part of CRM these days? Perhaps, but more fundamentally it can also mean that the traditional CRM silos of Sales, Marketing, and Service are crumbling and being replaced by data, analytics, and specific process-oriented apps that address customer moments of truth. There is nothing more fundamental to the relationship than getting the billing right and offering the right product mix. Doing those two things enable subscription companies to win the battle today and earn the right to do it all over again tomorrow.
Last week I attended Salesforce’s Marketing Cloud customer event put on by ExactTarget. The theme of the conference was “The journey is its own reward” and I think that offers proof for what I am arguing because the journey involves collecting and analyzing customer data so that the vendor can stay relevant to the customer. So, not to get too far afield, this is an important announcement and I am glad I found it.
I read two things recently that go together like peanut butter and jelly and they make for an interesting exercise. The first is a new report, “2014 State of Marketing” from ExactTarget, one of the Marketing Cloud components of Salesforce.com. The other is The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, by Erik Brynjolfsson and Andrew McAfee, two economics researchers from the MIT Sloan School.
This is the second effort by Brynjolfsson and McAfee in as many years and this book follows up with more detail last year’s effort: Race Against The Machine: How the Digital Revolution is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy. While the first book hints at the benefits of the digital age, the new effort is a cautionary tale about the downside of automation as machines replace people at routine tasks (and some that are not routine). But really the two should be considered one big volume.
The central metaphor is the chessboard and exponential growth, which the authors boil down to the notion that the future evolution of technology builds on past experience but with an exponential twist. For example, if you place a grain of rice on square one of a chessboard and double the prior amount on each subsequent square, very soon the pile is mind bogglingly large. By the time you reach the second half of the board there isn’t enough rice in the world to do the doubling.
Such is the power of exponential growth that it is hard to imagine the downstream effects once doubling begins and that is the point of other exponential effects in our lives such as Moore’s Law. Let’s save the truth squad’s report for another time, you know, Moore’s Law is not a “law” like gravity or anything close or that each time Moore’s Law bumps up against the ceiling, someone comes along to rewrite it and provide more head space. True laws don’t require rescue.
What started as a prediction about doubling the number of transistors on a silicon chip every 18 months has been transformed into a more general statement about the power of layering invention on top of invention, technology on technology in a very short time until you have something unrecognizable to the original generation of technologists.
In the world of digital data and automation driven by Moore’s Law, the second half of the chess board becomes a wonderland full of amazing machines doing smart things — cars that drive themselves is a favorite example. But the second half is also full of pitfalls. Machines can drive themselves, prepare tax returns autonomously, fabricate products, win Jeopardy!, and many more miraculous tasks that make us obsolete. But machines are terrible (still) at doing the simple things any 2 year old does not to mention complex communication, social-motor-cognitive things and other jobs that might only require a high school diploma. Teach a computer to tie your shoes and you will really have something.
The authors’ solution is not to fight the machines but to find ways to win with them. In a kind of 1 + 1 = 3 approach they make the interesting suggestion that a weak human with a good computer and a good process usually beats a really fast computer alone or even the computer plus a smart human. This might be the most important point in the book and it drives us right into the report and my point about marketing automation in general.
Applying it to marketing
The “2014 State of Marketing” document represents information gleaned from a survey of more than 2,500 marketers and covers future plans and approaches to marketing. What caught my eye is that in so many areas of marketing the demand for marketing technologies is saturating rather quickly. To a large extent companies have surrounded themselves with outbound social marketing tools and many are disillusioned for predictable reasons.
A summary page shows data about current and future use of specific marketing automation technologies. Many of them already have high participation rates like 88% say they use Email Marketing, and 81% say they already use Data and Analytics while 78% use Social Media Marketing, 64% use Display/Banner Ads, and 75% use Landing Pages. Indeed, it seems like the majority of outbound marketing tools have high adoption rates overall.
If I had to evaluate the state of marketing in line with this data and the MIT scholars, I’d have to say that we’re only at the 1 + 1 = 2 stage. We’ve got great machines and smart people using the combination of marketing hardware and software but I’d say that we still lack process. That’s because process is one of those things that comes along rather late in adopting new technologies.
The most natural way we adopt technology is to attach it to old processes. So we see from the report that organizations are sending out well over a million of emails per year — about half send less and half send way more. This says that the processes used in marketing have not changed much from the days of sending offers through the mail. Back in the day you sent mail because it was a cheap way to see what would stick. Today sending out massive numbers of offers isn’t just cheap, it is virtually free but it makes you wonder about all the discussion of how new technologies would enable us to hit the bull’s eye rather than relying on making random and rather poorly defined offers.
The processes now being used by many marketers are scarcely different from the old spray and pray approaches of broadcast media days. The whole point of adding a social element is to figure out which customers to invest marketing effort in but the cost of using social in broadcast mode is so low that few of us are bothering to think differently about our processes yet, or so it seems.
It all comes back to the hype cycle and the realization that there seems to always be a gap between introducing a new technology and having it achieve its greatest utility. The reason for the gap, which you can infer from Brynjolfsson and McAfee, is that it takes time for complementary technologies and processes to evolve once the primary innovation has occurred. In our experience those things come from ecosystems of other vendors who develop things and processes that optimally utilize the original innovation.
If you look at the data from the report you can clearly see that marketers have adopted modern outbound technologies sure enough but old processes are being maintained while inbound strategies play catch up. A telltale sign from the report is that only 37% of the respondents use lead scoring and while 30% say they’ll try it this year, a full third say they don’t plan to use it.
But lead scoring could easily be the poster child for process, for getting from old school broadcast marketing to the future. And who wouldn’t want that? Consider this. Your leads, even from a well-structured nurturing campaign, are a dog’s breakfast of potential deals that will never close and some that will if a sales rep picks up a phone. Wouldn’t you like to know which is which? Of course you would because leads are a perishable commodity just like the bananas in a grocery store. A lead doesn’t rot like a banana but it goes away because someone else is going to approach it first and that’s what lead scoring helps with.
This is all in line with other bits of data that I have collected suggesting that even with the analytics capabilities marketers now possess we still don’t collect enough of the right stuff. Specifically, we let sales off the hook too often by not demanding feedback on the quality of marketing qualified leads. How do you improve without it?
Also, we still don’t collect enough data about our marketing processes and this goes right to the heart of the 1 + 1 = 3 argument. By default we collect data about our programs such as costs and what’s harvested, i.e. leads, dollars, products. But what we fail to collect is data about our processes, specifically time. We often don’t timestamp marketing processes and without that simple extra data collection we give up knowing how long marketing opportunities stay in various states. Absent this basic data and the information derived from it we can’t easily know which programs work best and a whole array of other stuff.
This is getting long so let me net this out. We’re mid-way through the social revolution according to the data. But according to the book we haven’t yet figured out how best to use the stuff that we have. That knowledge is on the second half of the chessboard and it is only when we get to that point that we’ll see the big marketing benefits we’ve always been promised. You can call it a hype cycle if you want but from now on I’m going to call it the creativity gap.
Note: This blog was cross posted at the Lattice Engines blog.