Marketing Automation’s Next Gig
If you aren’t sold on marketing automation yet, there’s another reason to consider it before you end up down two touchdowns with three minutes to play. We usually think of marketing in its traditional role of new customer outreach, which is good but no longer enough. Depending on a business, as much as 80 percent of revenue might come from the existing customer base, however, the marketing budget usually goes in the opposite direction. It’s good to keep in mind that in today’s zero-sum markets, your competition has not stopped marketing to your customers, so why should you?
It is certainly true that the outreach you should make to customers is different from what you do for prospects. Customers have already bought your basic value proposition but the mission with them is to ensure they maximize their return which will conveniently set up a cross-sell, up-sell, or renewal, and who doesn’t want that? So, a marketing program aimed at customers might just as easily focus on delivering a piece of useful information, such as a best practice, as it focuses on setting up the next sale. In fact, it should.
This is cool because at base level, it’s all about using marketing automation technology to deliver a message and that’s standard marketing. But you also know a lot more about customers than you know about prospects so you ought to be able to leverage that knowledge in your outreach.
The same marketing automation technologies and analytics you use to promote products and services can be used to support customer nurturing. Before these technologies existed it was hard to capture enough information to make these programs effective and some vendors discovered that their attempts through generic email or direct mail, only aggravated customers. Also businesses relied more on customer service to provide some nurturing but waiting until there is a reason to call for service limits your ability to offer other products and services. Finally, in a self-service world, the opportunities for contact are diminishing. So in a sense, marketing automation has given us a new avenue to the existing customer.
You should start by collecting financial and use data about customers from other departments, and you have a good idea of your customer lifecycle then you have the elements you need to discover which customers might be happy and which might need some form of assistance or which could benefit from new information. With that you can tailor nurturing programs to different populations.
So, for example, you should be able to pull up a list of customers that are nearing the end of a lifecycle or who need to renew or who could benefit from some new information about best practices. Also, you might ideally start a nurturing campaign well in advance of asking for the renewal so that the customer has time to have several positive experiences. That will make the renewal process an assumed close rather than a long negotiation.
If you already have marketing automation and analytics it’s really just a matter of developing some meaningful campaigns and content. If you don’t yet have marketing automation, it’s another reason to look into it. Customer nurturing can help turn more marketing programs into revenue generators. And with analytics it’s easy to track the results and prove the value.
Subscription companies are pros at this because their survival is tied to it. Subscribers have the ability to go to another vendor any time and for any reason. So they invest heavily in capturing customer feedback — even if it’s indirect — and developing responses. They’re naturally attuned to listening to customers and to generating programs that help customers improve ROI and ultimately buy more or renew. It’s a good lesson for any business.
Marketo Marketing Nation 2014
Day one of the Marketo Marketing Summit 2014 was highlighted by a speech by possible presidential candidate Hillary Clinton who spoke about the intersection of social media and the Internet during her tenure as Secretary of State. Clinton is no technological light weight and gave example after example not only of how the State Department adopted modern communication methods, but she also showed where we collectively as a technological society need to go in not only communicating but in leveraging technology. As a speaker she graciously stayed on the topic, innovation as applied to marketing. Perhaps that’s not her sweet spot but she stuck with it and it impressed the audience.
Marketo CEO Phil Fernandez was happy to serve up a mix of hardball and softball questions in a discussion after Clinton’s speech, which she handled with good humor, even the inevitable are you running for president question. Here I thought Fernandez got further than most professional journalists whose questions have been successfully parried by the non-candidate and Democratic front-runner. Answering Fernandez Clinton said she was “Thinking about it.” Such is the stuff of reading political tealeaves.
If you ever doubted Clinton’s appeal you should have been in the mostly female audience for whom Clinton is something of a hero and a role model. Her comments were designed to appeal to the audience of mostly center left people and women. For instance, when asked about immigration and jobs her response was a measured, let’s form public-private partnerships. And although that’s a good idea, it skirts somewhat the larger issue of getting the economy moving again. I would have liked a response like that but then again that’s the kind of thing a candidate proposes, not a private citizen. Alternatively, perhaps that makes me somewhat left of left. I dunno.
Day two starts shortly and I expect to get more detail on Marketo’s many announcements.
The Creativity Gap
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.
Exponential growth
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.
Process conundrum
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.
Siebel at 20
Siebel saved my life. Not really but sort of. By the early 1990’s I had been selling software for what seemed like a lifetime and dealing with the typical frustrations of life in sales. There weren’t enough leads and there was always more work to do than you could squeeze into a day. I kept records on legal pads and file folders and I had a Rolodex that I would never update because it was way too much work. And then there was forecasting.
Fortunately, I was young and gifted with a great memory so I could remember everything that was relevant in a deal. Beginning in the 1980’s I had worked for a succession of DEC partners and I found that I could memorize whole catalogs — VAX and PDP-11 were separate — without trying.
But, yes, Siebel saved my life because by the early 1990s I was burned out — the mini-computer boom was fizzling, the dotcom boom had not yet started, and there was a recession which made everyone skittish about installing systems on PC networks because they were also skittish about network operating systems.
Finding leads was hard. No one would spend much on marketing and bingo card leads were of such low quality that it was easy to return them to marketing with a heavy dose of scorn. Cold calling was a way of life. There was no Internet to speak of and researching prospects was tedious. The early market euphoria in which every company was a prospect had given way much too quickly to a war of attrition.
I was not a Siebel user but it nevertheless saved my professional life because it showed there was a better way to sell that didn’t involve dialing till you dropped, unmanageable paper records, and monthly forecasts — little fictions whose greatest quantitative attribute was that they were rendered in spreadsheets. Siebel wasn’t even the first tool of its kind. ACT! and Goldmine were already on the market but Siebel took what had been a single user experience and made it germane to selling in the enterprise.
It would still be many years after Siebel’s founding before we would see integrated marketing and customer service but true to form Siebel was one of the leaders in consolidating the CRM suite at a time when public companies would buy other companies in simple swaps using their stocks like cash.
Siebel also hired aggressively. EVP David Schmaier would routinely visit his alma mater, Harvard Business School, each spring and round up its best and brightest for export to San Mateo. As a strategy it worked reasonably well and the company was always awash with smart, talented people, not just the Harvards by the way. Many of them are still in The Valley, populating other companies including Oracle where some settled after the buyout. Today having Siebel on your resume is akin to having Oracle or HP back in their heydays. It says you were first, you were prescient, you’re a survivor
The company was never loved, in my estimate, and that is a key lesson for all those who come after. They played by a script that was pure Geoffrey Moore. Not that Moore is like that, I don’t know him. But in “Crossing the Chasm,” Moore set down some absolute truths about how paradigms shift and how the eventual winners conduct themselves. Early markets are take-no-prisoner ground acquisition games. Capture as much territory as you can to deny it to your competitors; deal in a general-purpose product and accept customization ideas with great reluctance and great cost; expect the customer to figure it out and provide adequate but no frills support because most of your energy is dedicated to capturing more, more, more.
It was a brilliant strategy that some might say was invented at Oracle so it was only commonsense that Tom Siebel and several other titans of today’s software landscape would come out of that culture. But the strategy has a down side too. As I say, Siebel may have been respected for its execution but I doubt if it was ever loved in the way that Apple was loved, for instance.
The lack of love made it easier to accept the assertions of an upstart analyst firm at the time that Siebel’s marquee customers could not show an ROI. A scandal erupted that took a good deal of wind out of the company’s sails. Then, too, a Gartner analyst famously forecasted in off the cuff remarks that half of all CRM efforts would fail. Many people grasped at these factoids like they were drowning.
If all you read are the headlines, then your world is rather black and white but if you delve just a bit deeper you understand that the world is rather gray and this situation was no exception. Frustrated by the charges that the company believed were bogus, they hired me to evaluate not the charges but their customer base. My partner at the time was fellow Aberdeen analyst Harry Watkins who happened to hold a Ph.D. in Marketing and also taught at the university level.
Our work was clean. We were separated from Siebel by three thousand miles and given broad latitude to question their customers. What we discovered in many cases was exactly what Geoffrey Moore might have predicted. Major corporations had bought Siebel because it was the market leader and because they didn’t want to lose a step to a competitor. They were early adopters after all. The result, our research showed, was that a whopping half of the customers never bothered to conduct even a rudimentary needs analysis before or after purchase. Many could not quote an ROI because they had no relevant starting point to compare with.
Also, in a great bit of statistical analysis, Watkins discovered that some of the companies that were reporting ROI numbers were among those who failed to perform that needs analysis. When he compared this group with those who had actually performed needs analyses, he found that in aggregate the faux reporters had lower ROI to report. Our conclusion was that without a valid starting point for ROI the faux reporters either developed amnesia about how bad things had been prior to implementation or they’d downplayed their results so as not to contradict the evident truth of the herd and the headlines.
When we published the results, a few people in the industry, whom we had thought of as friends, demanded our heads on platters. It was all good fun. But that’s not the whole story. In direct follow up interviews with some customers we discovered additional truths. Siebel really was hard to use, especially for people who had never followed organized business processes and organizing sales people of that era was like rustling cats. Its client-server architecture, the most advanced for the times, required a great deal of handholding. One major company I spoke with had three teams of technologists dedicated to Siebel — one each for the last release, the current release, and for the next one. They were tired but curiously not angry.
Siebel had the lifecycle of a meteor — a bright youth and an ignominious end. In subsequent years, relative newcomer, Anthony Lye would do much to integrate Siebel into Oracle and flesh out the product line with a SaaS architecture and many auxiliary functions — other free standing companies bought with Oracle cash to fill out the very complete suite we see today.
Siebel got started in 1993, which means this is the twentieth anniversary year of its founding. A lot has happened in the interim. Siebel is no longer a standalone entity having been acquired in a greater version of stock market brinkmanship than even it had participated in during its growth phase. But in many ways, Siebel still is the market. Go into a Global 2000 company and you will see a Siebel system; today Salesforce users might flank that system’s users too. For many of these companies Siebel is a workhorse system that has been through some of the wars and continues to be serviceable.
But markets and vendors are changing. Oracle has Fusion and is slowly merging it with Siebel while Salesforce continues to be the juggernaut that prematurely challenged Siebel in a joust of jests. If you follow Bruce Daley’s recent survey work the customer base is in good shape so you might wonder what’s next. Customers seem to genuinely like Siebel these days, a good omen for sure. But current mainframers still love their big iron too. For all that, however, we aren’t building and selling mainframes very much and the installed base is shrinking if only because COBOL/CICS programmers want to retire and kids in school today don’t want to be big iron museum docents.
So where is Siebel at twenty? Somewhere in middle age. There might be a Siebel named product twenty years from now but it will be very different from what we have today, which s very different from what we had ten years ago. By and large, that’s a good thing. So, happy birthday Siebel.
Two Questions and Some Answers
There are two questions that emerging companies in the CRM space field when they face the analysts — when are you going public and why don’t you build out a full CRM capability?
The first question is easily and deftly handled by most executives and it must be. An IPO has its own cadence and the Securities and Exchange Commission is very keen to protect its turf even in an age when congress keeps tight control on regulators’ budgets. It takes almost no effort to fine an over exuberant executive for making statements about things that are not in the official filing or during the quiet period. So, smart executives stay very far away from those questions.
The second question is, or at least can be, a quagmire. There are many marketing software vendors who have necessarily built functionality that spills out of the pure marketing definition and that’s enough to keep some people wondering. A customer database is a good starting point. The argument goes like this: you already have a customer DB so how hard can it be to blow out another wall and add sales functionality and then, Voila! CRM.
That logic misses the point by a country mile and a decent customer service function, yet it doesn’t go away. But there’s more to it than even raw functionality. Why would any sane CEO of a fast growing marketing automation company decide to blow the budget and slow growth to build out sales and service in a market where the CRM niche is rather full?
My advice goes like this. Don’t do it. Don’t build CRM, there is absolutely no reason for anybody to build another CRM system. The niche is covered so move on. Take as an example the last decade-full of successful software vendors. Siebel didn’t build ERP and the reasons are the same. ERP was full, it was better for Siebel to focus on building out its CRM functionality and that’s what it did. Late in the game, before the acquisition, the company was working on master data management and making its client server solutions at home on the web. Siebel didn’t build ERP though many people asked why not, because the company was looking for the next big thing not the last.
Siebel got acquired and its independent plans were sidelined. But look at Salesforce and you see a similar pattern. Financial Force, Intacct, Zuora and many other companies sprung up to provide financial functionality to the fast selling CRM but Salesforce CEO, Marc Benioff, has been adamant about not pursuing ERP. He’s focused on building out a new interpretation of the front office that’s social, mobile, and customer experience focused. That’s called a Blue Ocean Strategy and I have written about it before.
The rest of the big players — SAP, Oracle, Microsoft — all have pretty good CRM and they all trail Salesforce according to Gartner’s recent rankings. Generally, while their products are good, they trail Salesforce by about a generation when it comes to leading edge front office ideas like collaboration, customer journey, and the like. They aren’t innovating so much as trying to be fast followers.
I think any marketing automation company that tries to build out CRM functionality would also be a fast follower. They’d trade in what they’re very good at to regress to the mean, the middle of the pack. Instead, here’s a question that they could profitably answer. How are economic and demographic changes affecting how people and companies buy and how does marketing fit into that changed environment?
People and companies have become comfortable and adept at shopping online and making decisions without the assistance of traditional sales people. At a minimum this suggests a winnowing role for traditional SFA. But it also suggests a rising opportunity for marketing automation defined as nurturing customers on their buying journeys.
It also suggests an expanding role for the call center, which might get smaller in the next decade while changing at least part of its mission. I don’t think today’s marketing automation has yet tapped all the possibilities inherent in that one observation, nor do I think that the incumbent CRM vendors have embraced the idea.
So, when I hear talk about new companies entering the CRM market, I cringe. CRM is robust and thriving but it is also consolidating. There won’t be five major CRM vendors ten years form now. The availability of good, fast, standards-based integration is high and products are getting better all the time. The next move in the front office is best of breed, not tightly integrated solution sets. The front office platform might be stabilizing but the apps that play on it continues to expand and they work increasingly well together.
The move for fast growing companies in the front office is in furthering the embrace of the customer through advanced tools and techniques that include social media and inbound marketing. No traditional ERP for sure and no CRM either and that’s becoming increasingly obvious.
