The market for marketing software

Everyone knows how much is spent on marketing, but no-one is entirely certain how much value they derived from that spending. But wasn't marketing resource management supposed to have solved this issue? Stuart Lauchlan investigates the marketing software sector.

By Stuart Lauchlan, news and analysis editor

“One half of my advertising budget is wasted. The trouble is, I don’t know which half!” That was the celebrated comment made by John Wanamaker, the 'father' of the first US department store. But it might as well have been made about marketing, for all the accountability that the discipline has demonstrated over the years.

An inherent problem has been that while CEOs and CFOs can see the value of paying their sales teams based on returns on that investment in terms of increased sales (or otherwise), marketing is a far more nebulous practice. For marketing departments this is a problem, especially in recessionary times. If there's no quantifiable return then how do they demonstrate the value of marketing? If they can't demonstrate that, then their budgets are likely to be on the frontline when looking for cuts and savings...

It's partly marketing's own fault of course. Everyone knows how much is spent on marketing, but noone is entirely certain how much value they derived from that spending, other than in a loose, touchy-feely sort of way. Indeed, expecting marketing to provide demonstrable results, statistics, ROI analysis and so on, is often seen as either not appropriate or as something that would stifle creativity on the part of the marketing team.

This is a major issue in a business climate where companies are consistently expected to do more with less. Figures from research firm International Data Corporation suggest that the global top 1,000 spend in excess of $100 billion a year on marketing and advertising with a typical expenditure on marketing being around 4% of total revenues. That is a significant sum to be spent with little or no capabilities of measuring its effectiveness.

Of course, this is what marketing resource management was supposed to solve, wasn't it? But that never really came to pass in the way it should have done – or at least the way it was supposed to according to its original definition. So what went wrong? Or indeed did it go wrong at all? Did it simply evolve in a different way to that which the analyst firms predicted?

One issue might be that there is some truth in the old adage that marketing is the last bastion resisting the charms of technology. Most functions have been automated, runs the argument, including finance, human resources and sales. But marketing remains stubbornly manual-based. Yet there are plenty of MRM solutions available and the term itself retains more currency than some would argue CRM itself has. According to Gartner Dataquest, by 2011, the marketing technology software market will be worth more than $3 billion, with a compound annual growth rate of 17 percent for overall software revenue.

Incomplete suites?

“Marketers agree that they need a more comprehensive marketing suite to increase their effectiveness,” notes Suresh Vittal, senior analyst at Forrester Research and co-author of The Forrester Wave: Enterprise Marketing Platforms, Q1 2008. “And why not? A suite that integrates activities across the full marketing life cycle would help increase relevance, improve customer experiences, increase transparency and enable marketers to collaborate more effectively.

"Unfortunately, such a suite doesn't exist. Although a handful of vendors espouse the vision of enterprise marketing management, current suites are incomplete and the broader marketing software landscape is highly fragmented. Marketers seeking a comprehensive suite must work closely with technology partners and look for vendors that offer a framework to manage comprehensive marketing metadata, provide strong data access capabilities, support integrated analytics and measurement, and leverage standards-based architectures to deliver business functionality quickly.

“Today, marketers must work with many disparate applications to analyse, plan, execute and measure their activities. This web of applications creates silos of information that decrease marketing efficiency and make it difficult for marketing leaders to get a complete view of all marketing activities — and even harder to measure results. These challenges, along with the crucial need to improve customer experience and integrate customer communications across channels, are fuelling the growth of the emerging enterprise marketing platform (EMP).

"We project that the EMP market will grow at nearly 20 percent through 2013. Today, campaign management and analytic applications account for the bulk of the market, but less mature applications like interaction management, marketing asset management (MAM), and marketing resource management (MRM) are growing at a faster pace. By 2010, newly emerging software-as-a-service (SaaS) options will also play a major role in accelerating market growth.”

This investment trend is backed up by findings by marketing software firm Alterian in its Annual Marketing Survey. It found that 45% of marketers are now spending over £250,000 on online marketing, compared with only 37% in 2006 with 67% of marketers stating that database and analytics are the most sought after skill sets.

A journey that has just begun

Alterian's survey also found that the CRM 'holy grail' of the single view of the customer is still elusive. The industry is still spending huge amounts of time updating different applications with seven out of ten - 69% - respondents using more than three marketing applications everyday to do their job while a staggering one in five - 20% - marketers use more than seven separate applications to store and analyse marketing and campaign data

“Despite the current economic situation receiving much coverage on both sides of the Atlantic, investment in marketing - specifically online marketing, be it outsourced to agencies or in-house - continues to grow, with only 7% of our respondents citing no planned resource increases,” said David Eldridge, CEO, Alterian. “The focus of this year’s survey is clearly on making that first step on the journey to customer-centricity, whatever that starting point might be for your company. Marketing that is led by an integrated database and analytical foundation will continue to drive online programs, and increased spending in this area will continue to improve the customer experience.”

But it is still clearly a journey that has only just begun. A recent Forrester survey of 73 marketers and technologists reveals that more than 40% of respondents struggle with campaign design, offer management and customer segmentation. Nearly 60% of respondents lack the ability to manage marketing processes and resources and coordinate interaction management across channels. Forrester argues that this suggests that although organisations are investing heavily in marketing technologies, user adoption and organisational acceptance are “lukewarm”.

But what's the alternative? Do nothing? Not really acceptable. How about handing the process over to someone else? Analyst firm Datamonitor sees a significant market opportunity for marketing services providers (MSPs) in the UK. MSPs differ from conventional outsourcing providers. An MSP combines a range of services spanning marketing technology - applications and databases - data provision and analysis and a range of fulfilment services, such as online and call centres.

“Understanding the needs of your organisation is key to selecting the right marketing approach,” says Tom Pringle, senior analyst at Datamonitor. “Some will have considerable in-house resources to call upon, and may wish to use an MSP to augment its own capacity. Others may require a very specific campaign which is outside of their usual experience and requires specialist knowledge. Others may look toward an MSP to help with a strategic realignment of their marketing functions. However your organisation is currently resourced, selecting the right approach and the right MSP means assessing your marketing needs and matching them with the right resources and providers to execute effectively.”

According to Forrester, this is an option that many firms are taking a keen interest in. “More than 80% of the marketers we spoke with rely on a marketing service provider or consulting organisation to help them build or manage their database and perform campaign design and segmentation tasks,” notes Vittall. “Marketers turn to service providers to limit IT’s involvement, augment existing staff, and reduce time to market. Not surprisingly, the service providers influence the technology selection process, and are often responsible for bringing individual vendors to the table.”

So MRM and MSPs are a reality of 21st marketing activities. The software and the services are there to give marketers the infrastructure they need, if they choose to use it. "Marketers today face increasing complexity and rising executive pressure to deliver more return on customer relationships, and MRM tools have become a requirement to help marketers do all that is demanded of them," says Dr Mark Jeffery, clinical associate professor at the Kellogg School of Management and managing partner, Agile Insights. "Gone are the days where marketing operates as a funding black hole.”

Other articles in this focus report:

• The secrets to successful emarketing


• Web 2.0: A mixed blessing for marketing?


• If you aren't using analytics, you’re not really marketing


• Marketing software in action


• Marketing software vendors