Campaign Influence: Another Metric You Need
This is the story of technical advance: do something, do it right, and then do it fast. Too often in our world we stop paying attention after the first phase and the history of technical advance is told in a series of do-its.
You see this happening in marketing today. It’s a discipline undergoing a great deal of change and as recent IPOs and acquisitions can attest, marketing is a happening thing. One of the biggest changes has been in taking marketing from a practice that concerned itself with brochures, press releases, and slide decks, to one that has become much more quantitative.
Being quantitative means doing things with data — capturing it, analyzing it and developing measures, metrics and ultimately KPIs. Many companies have resisted simply capturing data and wondering what to do about it. They’ve progressed to analysis, to producing information that savvy marketers transform into knowledge used in decision-making. But if a little knowledge is a good thing, more is more better.
So consider this. Marketers got smart and developed some metrics to gauge how well their programs work. Let’s focus on campaign ROI, a classic measurement that many people use in many ways to compare what was spent on a business activity and what revenue or profit was generated. So far so good, but I think you need to delve deeper.
Classic ROI on a marketing program or campaign tells you something about the revenues generated by a campaign and if everything was that simple, all of the revenue attributed to a campaign would provide a clear understanding of its effectiveness. This would mean that a revenue dollar came directly from the campaign and no other factors influenced that spend. Would that this was true.
In reality we all know that marketing campaigns are leaky and that is a very good thing. A campaign might generate revenue immediately but more often than not, the campaign influences the deal because it prepares the prospect to take advantage of an offer from a follow-on campaign. You can see this more clearly with baseball.
If you have two really good hitters, a good strategy is to make them numbers three and four in the batting order. Often a pitcher might elect to walk, i.e. avoid, a good hitter in the hope of getting to the next guy who may be an easier out. But in this case if you walk number 3 you have to pitch to number 4 otherwise you are just walking the bases loaded and then you have real problems. So the presence of number four gives number three more chances and, being a good hitter, number three will respond with more hits. This is a tough situation for the pitcher who therefore has to be on his game for both batters. Ok, back to marketing.
Marketing campaigns are like the batting order to a degree. One can influence the next one down the line. If you are a manager over the course of a season you can run A-B tests to see the effects of the batting order strategy. To get really concrete, when David Ortiz batted third and Manny Ramirez hit cleanup the Red Sox won two World Series titles.
Ok, but the idea of campaign ROI misses all this. To get an apples to apples comparison in marketing you need to develop the idea of campaign influence. How much downstream influence can we attribute to a campaign beyond its ROI? Campaign influence is a metric that I think falls into the “do it right” bucket alluded to at the start. You can say that ROI is the big picture, highly granular measurement, and that campaign influence is more fine grained and I think you’d be right.
But here’s the important point to consider. Nothing remains stagnant, especially in the fast moving front office. Campaign ROI was a great idea, it still is. It got us to think differently about marketing and how to quantify what was almost purely qualitative. However, it already isn’t enough. It’s just a do-it today.
When we are able to attribute influence to different campaigns we can more clearly see that some campaigns are more effective with specific products, offers and customers. And once that happens we can tailor campaigns for better results. The A-B test is no longer this or that but this or that in which circumstances? Under what conditions?
This turns us from gathering data to massage into information to using information to produce knowledge about customers inside of a sales process. Campaign influence might tell you, for instance, that prospects that have been exposed to certain campaigns close faster, a valuable thing to know in the middle of a quarter when you need more revenue.
It’s like when we had David at bat, Manny on deck and a runner on second. Odds were good that the runner would be crossing home plate soon. I just love baseball, err, I mean, marketing.
Old Possum’s Book of Practical Big Data
Ok, the title’s a cheap paraphrase of the T.S. Elliot book that inspired “Cats.” You have to start somewhere and that’s as good a place as any. But stay with me, this goes places. A big group of cats is called a clowder. What if we could access a clowder of big data?
Big Data has been taking up a big part of my conscious life lately what with all the analytics vendors out there and so many companies trying to figure it all out. There are at least three issues that converge when you discuss big data, two that we know and one that we don’t pay a lot of attention to just yet.
The two devils we know are physical storage and analytics and many people stop there. Storage has largely been taken care of with dirt-cheap spindles, the cloud, and other advances. Analytics is an old story that’s gotten better year in and year out. Huskier processors, bigger spindles, and in memory databases have made real time slicing and dicing easy. The other day I spoke with Alan Trefler, CEO of Pegasystems who told me that software and hardware have advanced in equal measure over the years to the point that today we can do quite a bit of analysis in very little time.
Batch pattern analysis gave us the input we needed to get predictive, to assign probabilities to situations based on prior experience and that has given us the ability to stack rank ideas, offers, and generally to be able to say this is the next best thing to do or offer — not always but — in this particular situation. It gives us the ability to (sort of) be in the moment with customers.
Predictive modeling has been a great way to enable companies to better understand customers and their needs. Based on company-gathered and maintained big data we can confidently deploy systems that suggest to employees what to do next. In case after case that I listened to in Orlando during Pega’s user meeting, Pegaworld, I heard of huge improvements in business process results, in part due to leveraging analytics and big data, so good for them.
But please pay attention! In these last few paragraphs we’ve traversed the long path from data to information. Did you catch it? Maybe not. Analytics turns data into information and people (usually) turn information into knowledge. Our systems serve up information but our people, our employees apply that information in customer facing situations to make decisions that achieve desired outcomes. There’s nothing more important that good decisions in business today which is why we are fixated on big data and analytics. But we can’t stop there.
It’s time to think bigger. What would it be like if we could amass more data than a single company typically captures for its analysis? Naturally, this assumes all the data is relevant to a set of business processes. It’s very hard to do something like this. Some vendors I’ve spoken with about this say that the data lives in many places and consolidating it is not necessarily quick or easy.
One place where it might be easier to accomplish this kind of Major Big Data consolidation — can we start calling it Major Knowledge? — might be in SaaS applications. Of course not just any software as a service but those systems that operate on multitenant storage might have an important leg up. A company like Salesforce, NetSuite, or Xactly might be a good place to look. In a recent conversation I had with Chris Cabrera, CEO of Xactly, I heard they were thinking about what that would look like.
You may recall that Xactly focuses on incentive compensation management. Xactly collects data that focuses on sales people, deals, credit (for partial deals), compensation, and much more. If properly scrubbed so that all identifying data is removed, this database would be capable of revealing all the best practices information in sales by examining the way that people are compensated, no small accomplishment. In the right hands, that information can become powerful knowledge. I know some of you are saying why not look at other data like revenue or stack ranking the reps or any of a thousand things.
The answer is simple. Other data won’t give you the answer. Incentive compensation is an art at the moment (unless you already use a system like Xactly) and relying on a single data set might only reinforce bad practice. Capturing data from a wide body of knowledgeable sources is, after all, one of the hallmarks of crowd sourcing.
People do their jobs and they get compensated and someone is the top rep and someone else is at the bottom. But these rankings don’t say anything about whether the incentive compensation was really an incentive, whether or not it caused people to modify behavior.
So what, you might add. But wouldn’t it be nice to know if the incentive is both effective and in the right proportion? What do others do? Effectively, what’s the best practice? Those are questions you can’t answer if all you’re looking at is your own data.
Sales comp is a big hairy issue. It’s estimated that in the United States alone companies spend $800 billion per year supporting sales based incentive compensation.
It’s messy and full of 25% credit for this deal and 65% credit for that; it also has accelerators and clawbacks so how do you get it right? For example, Xactly found that 75% of its customers are crediting five or less individuals on a deal, but some outliers credited up to 161 individuals on a single deal. Splitting a deal 161 ways can hardly be motivating. Many are the stories of sales people who left a job because they felt under appreciated (i.e. compensated) or just thought they could get a better deal elsewhere. Having access to information based on such a huge volume of data might give every sales manager and HR or- finance department the concrete information they need to do a job they are largely guessing at right now.
Sales compensation is not the only area worth exploring with this approach either. The same techniques can be applied to every job category and if you’ve looked lately you will have seen that many jobs are coming to have incentive compensation as a part of the package. In fact, an estimated 84% of companies today are now using some kind of incentive compensation outside the sales function. If you ask me, there’s never been a greater need for the kind of data resource pooling and analysis I am proposing here and it’s easily within our reach. We just have to think a bit different about the challenge at hand — how to attract and retain the best talent — because business today is less about your widgets and more about the quality of people you have representing them.
No Fault Divorce?
How many euphemisms are there for divorce? We’re still good friends. It was mutual. Time to move on. Whatever. It happens all the time.
In business, relationships form and dissolve faster than last week’s nuptials in Vegas. Companies do what’s best for them and their shareholders and that’s the way it is. But we don’t do business in only three dimensions. Reality has a fourth dimension that we frequently forget about, time. We live and work in time and at some point we fall out of time and that’s known as the big siesta, Dylan Thomas’s long good night. The fourth dimension isn’t simply a small house at the end of a long road, it is the road and how you get to that house.
I have been musing about time recently as I noticed that Marketo is no longer mentioned on the AppExchange though they were once a poster child. At the AppExchange you can search on Marketo and get a lot of marketing automation vendors but not that one. It is curious and conspicuous by its absence.
The disappearance reminds me of a coffee table book, “The Commissar Vanishes,” which is a collection of before and after photos of Soviet era officials. When someone fell out of like with Stalin, the party would crop or airbrush the individual from the photo in an effort to remove him from history.
Now to be fair, this is an invidious comparison. Salesforce is not like that and removing Marketo from the AppExchange is just what you do in business when partners become competitors. But the change of relationship is still one way if you accept what Phil Fernandez, CEO of Marketo, wrote after the Salesforce Exact Target acquisition. Here’s an extensive quote from his email to industry influencers:
“Importantly, for those of you that are also Salesforce.com customers, there will be no change in our strategy and support for our best in class integration with Salesforce.com’s CRM platform. As recently as this year, Salesforce.com customers have rated Marketo as the best marketing solution, continuing a five-year streak of similar affirmation from the Salesforce.com customer base. We see no reason that the recent news should change our leadership position among Salesforce.com customers or in the marketplace at large. Our integration is built using Salesforce.com’s public web-services API’s and open Force.com interfaces. Salesforce.com – as all modern cloud companies must be – is committed to maintaining an open platform, for us, for their AppExchange partners, and most importantly for you their end customers. Marketo is deeply committed to ongoing support and continued innovation of our products for Salesforce.com customers.
As a business decision, taking Marketo out of the AppExchange makes sense but only tactically for Salesforce’s CRM business. For its platform business, it makes no sense at all. If Marketo was the only example then it might not be such a big deal, but try finding Yammer on the AppExchange, as another example. You can Google Yammer and Salesforce or Marketo and Salesforce and see plenty of hits for the two together but not on the AppExchange.
To the extent that Salesforce wants to be the go-to platform for application development and social business process enablement it doesn’t make any sense that they would bar competitors to their marketing products on their platform’s marketing site.
Taking down Marketo or Yammer or any of the other products that compete with its own products is a warning sign that the platform side of the house is not agnostic. You might say that there are plenty of alternatives to Salesforce’s marketing solutions and they are still represented in the AppExchange but that only makes singling out Marketo seem more out of focus, not less. As Salesforce is still in the process of building up the utility computing market, this seems like an unnecessary and self-inflicted wound.
Perhaps the two companies are still friends but it doesn’t look like this divorce was mutual.
A Question of Granularity
There is a long simmering issue coming back to the front burner these days. It’s the question of best of breed software vs. a single system. I’ve been giving it a lot of thought and realized something.
The old discussion says that best of breed opens up application areas to greater competition from more vendors. This competition drives normalization so that everyone can build to the same open standards rather than proprietary architectures. This approach worked for the relational database and SQL, PCs and servers, and standardized programming languages just to name a few things.
Alternatively, those supporting the solo idea say that for complex processing having a single throat to choke is a valuable asset. Who is right? Can the answer depend on a tiebreaker of sorts? I think the answer is beyond this question and ultimately comes down to a question of granularity.
In the software business we’ve seen the industry veer from one extreme to another. Early in a lifecycle, it seems, vendors merge and integrate systems to produce that single solution but it may be highly proprietary. Those proprietary systems are an emerging vendor’s best defense against a copy cat coming in and taking over.
Often best of breed solutions pop up when developers see opportunities to improve a process or even a sub-process to optimize it. The best of breed approach basically says that the monolithic solution can’t be great at everything and that customers deserve great. That’s true but the idea has a half-life because the longer a suite is in market the better it gets and at some point a critical mass of customers won’t even consider the alternative.
Today we see vendors like Oracle leading the charge for the single vendor idea saying that its products are engineered to work together. That would be the argument for the sole source. NetSuite argues from the same premise. But we also see companies like Salesforce with a massive ecosystem of partner applications that offer specialized apps that the company does not provide. Salesforce does deliver a very good development platform in Force.com and API that its partners use to develop their solutions. In this case I’d say that the Salesforce solutions involve such new processes that they are functioning like the early market vendor with a high walled garden while still offering aspects of best of breed.
This is a bit different from conventional best of breed in that the Salesforce partners more or less pre-integrate their solutions via the platform so that the only difference between a Salesforce application and a partner application is often whose fingers did the work. That’s why I would suggest that Salesforce’s approach is more like the single provider than the best of breed approach from just a few years ago.
So to me the question is not one of single vendor vs. best of breed. I think that’s a false dichotomy. Whether or not we realize it we’re all in a best of breed era and the only question is at what level of granularity? I don’t know anyone who seriously thinks that some level of best of breed is NOT a requirement today — there are simply too many demands and options to expect a single provider to do it all unless all the software companies of the planet merge.
The best of the best of breed solutions will arrive at an appropriate level of granularity that optimizes internal lines of communication within the system while incorporating external best of breed solutions at the periphery.
That dichotomy will be different from system to system. For example, CRM has done a good job of integrating several generations of applications including whole systems like call center and social media as well as specialized hardware like IVR gear to produce good solutions.
ERP seems to be different because the back office is a bigger thing that needs to coordinate many more moving parts. Frankly, I think the critical mass of application solutions is just bigger in the back office than in the front office. So the discussion of best of breed has to be qualified by which part of the business we’re referencing.
In ERP I don’t think you gain anything if you suddenly offer best of breed GL and AR distinct from accounts payable or some of the manufacturing systems like supply chain, product lifecycle management and similar things that need to be tightly integrated. On the other hand, HR was never that tightly integrated with the back office and it was more of a traditional offering that went with the back office because it paid people and the back office was where the money is. But these days with a proliferation of human capital management systems, training, hiring and things like them, the ties are less strong which has opened HR up to best of breed offerings for these newer functions.
Billing and payments is another area that has recently come up for best of breed renovation. When those functions were associated exclusively with manufacturing it all made sense. But today the proliferation of the subscription model has placed new demands on back office billing that it was not designed to handle. Subscription billing and payments has become a satellite of conventional ERP and truth be told companies like Zuora, Aria and all the others in this niche, do a better job of managing subscriptions than old style ERP can. So, again, we are seeing an area open up to best of breed approaches.
For me, you need to ask about the level of granularity at which you are viewing the business problem in order to determine the answer to the bigger question. Then, too, we haven’t even looked at the new business processes that are being glued onto the front office through social techniques. It seems like the majority of new business processes are going to the front office and the back office is largely settled business. Even subscription billing is looking more like a branch of customer service than part of ERP. So, the issue isn’t best of breed vs. an integrated solution, it’s more about how much best of breed can you handle before you have too many balls in the air. I think the answer is it depends.
At Pegaworld
Pegasystems held Pegaworld in Pegorlando this week and a good show it was. I have always wondered about the difference between CRM (social and otherwise) and BPM or business process management so I was happy to attend.
Both CRM and BPM deal with the interaction between the vendor and customer and each is involved in doing the right things that make customers come back. Both use some of the same tools like the Net Promoter Score (NPS) and focus on metrics like customer retention, churn, and maximizing revenue.
But I have devised a simple test of whether you have/need BPM (and I feel a bit like Jeff Foxworthy when I say it): If you’ve ever said our system won’t let us do that, you just might need BPM. I have to add that, this is not a definitive test, it has to be combined with a business that is at least somewhat regulated either by government or by the discipline of practice and markets such as banking, telco, healthcare, big technology, insurance and similar industries.
In those industries, companies are large, in part, because they are old and many smaller competitors have been absorbed or driven out. These big companies work on large volumes and razor thin margins. They make billions but service many millions and many are global with the result that personal attention is somewhat hard to come by at times. In those corporations, if you can’t automate a process, you can’t do it or if you haven’t automated it yet the process might take weeks.
That’s the situation many of Pega’s customers find themselves in and it doesn’t help that many of the companies in finance, insurance, banking and related industries, are just emerging from a nuclear winter caused by the economic meltdown in 2008.
But wait, there’s more. Customers have evolved too. We know all this — globalization, emerging markets, the Internet, personal computing, social media, mobile computing have trained a couple generations of customers to demand more. Customers, vendors, and employees all want systems that work like the apps on their handheld devices.
We’ve heard all this before but Pegaworld seemed to be a coming out party for BPM meets predictive analytics meets the consumerization of IT meets the big corporations emerging from that nuclear winter. To be sure some of the messaging felt like 2007 but it was completely relevant. We saw use stories from some very large companies like AIG, Lloyds Banking Group, Cisco and many others.
The sheer scope of what they are now doing is breathtaking. For instance, Lloyds embarked on an ambitious program to make more than 400 improvements in its customer-facing processes a year and a half ago. The program had a three-year time frame and they’ve completed 200 initiatives so far. For example, the bank found that it could take weeks for a customer and the bank to close an account because the process crossed many back office boundaries and involved some very manual practices. Lloyds automated using Pega and brought the process down to a few minutes. So what? Well, the largest bank in England closes four million accounts per year and that’s a number too big to let take weeks. By the way, I was reliably informed that this is not people going away from the bank just the normal process of consolidating personal finances and closing dormant accounts that people need to do from time to time.
Lloyds is just one example. AIG was a case study of a very large insurance company doing business in 90 countries with each country running as a semi-autonomous group down to having its own data center. It was necessary to work this way, in a federated model, because this old company got started a long time before computing and the Internet would make it possible to consolidate. Moreover, local rules, laws and customs make it necessary to organize at the local level. But local custom and law don’t automatically equate to local IT any more. According to AIG, with Pega they’ve been able to reduce their data centers to about eight.
It’s all about the agile, adaptive enterprise and while it’s not completely different from what other CRM vendors are saying, the scale it has to happen at for very large companies represents a Herculean task and a great opportunity not just for Pega but for any vendor and its customers who can see that the world is changing rapidly and fundamentally.
Listening to this made me think that the financial industry meltdown was at least in part a symptom of many old systems unable to keep up with volumes like the volume of distressed mortgages. I wonder if the crash would have been less ruinous if, as one speaker from Bank of America said, the mortgage departments weren’t running on many old mainframes and AS400’s. Seems like many big corporations are getting an overdue refresh and it looks like Pega with its BPM and predictive analytics focus might be in the catbird seat.
