Marketing automation: The risks and rewards of software's hottest market

For a technology that not so long ago was dismissed as a failure, marketing automation sure knows how to stage a dramatic comeback.

Typically encompassing the likes of integrated marketing campaign management, lead/demand generation, lead management and marketing analytics, the field of marketing automation – or marketing resource planning as it was sometimes called – seemed to fizzle out during the 2000s.

Never the most tech-savvy of teams, marketing departments found themselves struggling with unfriendly UIs, and turning to the IT team for support meant that processes slowed to a crawl – completely undermining the point of automation.

Compounded by the fact that marketers were uncomfortable with the idea of being measured, marketing automation appeared unpopular and under-used.

But how things have changed.

In recent months major marketing automation vendors have secured hundreds of millions in additional venture capital funding while industry giants such as Adobe, Salesforce.com and Oracle have swooped to make significant acquisitions in the sector. All of a sudden, marketing automation is the hottest space around.

So what went right?

Turned upside down

Certainly the proliferation of the Cloud delivery model has meant that the hefty commitment that was previously required to explore marketing automation has gone away, while UIs have significantly simplified, with Web 2.0-style interfaces allowing marketers to use drag and drop functionality. All of which means the IT department can now be circumnavigated.

But outside of the technology changes, there are a host of other factors that are causing a swift uptick in marketing automation’s fortunes, not least the dramatic changes taking place in the world of marketing itself.

Chris Fletcher, research director for enterprise applications at Gartner, explains: “There are so many more tools and capabilities that are ‘digital marketing’ today – it’s much easier and more engaging to reach out to the consumer, whether you’re using a mobile device, website or broader communications capabilities and there’s a whole world of marketing that’s been turned upside down. This means there’s a lot of tentative demand that’s going after this new world of digital marketing.

“At an executive level we’re also seeing that CXOs are also focused on the same core three issues, regardless of their position: customer acquisitions, retention, revenue and profitability. Those are consistently always at the top. So they're all focused on investing in ways that they can achieve these goals - no big surprise then that marketing automation is growing.”

Related to this last point, Fletcher notes that executives are now also less reluctant to invest in marketing because it is much easier to quantify results in the online world than in the days of print or radio advertising. And he also adds that marketing automation has received an additional boost from business investment in other tools.

“Most companies have made heavy investments in sales force automation or other internal organisational tools for promoting business, such as opportunity management. So with that investment in sales-facing tools, we’re finding that our clients are now investing in the marketing part of the equation to make sure that that pipeline is always full and they're leveraging 100% of their investment that they made in the sales-facing tech.”

No longer a risk

The combination of these factors is driving strong sector growth, with revenues for B2B marketing automation systems predicted to grow 50% in 2013 to reach $750 million this year, according to Raab Associates’ B2B Marketing Automation Vendor Selection Tool (VEST). It’s a remarkable turnaround in fortunes for the technology – and one that has led some experts, such as Gerry Brown, senior digital marketing analyst at Ovum, to suggest that we are witnessing a “critical mass” of investment in marketing automation, as internal pressures to automate marketing and fears of competitive disadvantage grow.

“Traditionally, marketing is incredibly manual and inefficient – you’re trying to pull together spreadsheets and pictures and so on to pull together campaigns, and you need to check whether you have the rights for the pictures, for instance, and whether you have the brand right. So it ends up with the decision to just get it out of the door and fingers crossed it works,” explains Brown. “Therefore, you end up doing a lot of volume with not a lot of focus with a lot of the emphasis on just executing and getting something completed.

“Marketing automation really radically changes that – it takes away all those manual bits and pieces to make sure you have a single data repository where you can access the right pieces of information so that you can send something interesting and relevant, and it will help you collect together the pictures and content and the format to make the proposition compelling. So it reduces costs – as it is less labour-intensive – and it increases accuracy as you have the data to be more precise and can segment audiences better in more personalised messages. Everything is quicker. It enables you to segment , prioritise, focus, position better, rather than get the stuff out the door.”

Sam Davies, the lead consultant and training course developer at Zoober Digital Training, flags up another reason it is so attractive: “Organisations of all sizes are still finding it incredibly challenging in converting website visitors into customers. Businesses want a solution to be able to manage the process whereby you take a website visitor from prospect all the way through the funnel – so the prospect becomes a lead where they download additional content and submit their email address or other information, and then you have the ability to nurture them through the buying cycle until they eventually become a customer. And doing this is incredibly clunky unless you use marketing automation.”

The upshot of these advantages, says Brown, is that in order to be competitive, your organisation can simply no longer afford to ignore marketing automation.

“You have to do it,” he says. “It has just reached a certain critical point that a lot of technologies reach, whereby everybody accepts they have to do it. The price point has come down. The products have become better. The sales pitches from the vendors have got better and they have fine-tuned their propositions to make them more attractive to customers. It has reached that level of market maturity where it is no longer a risky thing – it is becoming a business imperative to invest.”

Not for the faint hearted

But while businesses may have been flocking to marketing automation, what most have discovered very quickly is that – in the words of Brown – “it’s not for the faint hearted”. And if they aren’t prepared to adjust corporate structures, replace traditional hierarchies with more collaborative models, and dedicate sustained resources to the initiative, then they will fall far short of exploiting the opportunities offered by marketing automation.

 “It is really challenging to get marketing automation to work effectively within any company, whether that is a five man manufacturing company in the West Midlands, or a huge professional services company in 150 countries,” highlights Davies. “The same issues crop up, and if you don’t have the right technology and infrastructure internally, you’re going to start hitting barriers. So you have to make sure that the company is set up effectively from a technological and a skills point of view, particularly looking at CRM, CMS and the web development stuff going on within the organisation.”

The area of data management is of particular significance.

“Getting all you data clean, aligned, and integrated is a big task,” says Brown. “Once you’ve got your marketing automation system you need the data, and finance have some stuff and the customer service guys have got some stuff and it’s all in different systems in different formats. So cleaning it up and getting it into a place where it is homogenised usable data that you can slice and dice and segment and use as a flexible resource is challenging – and once you start the process it never stops. Typically business contact data degrades by something like 30% a year, so there is a big maintenance job just getting the right quality of data.

“Furthermore, controls and data management within marketing automation platforms are often lacking in comparison with more mature finance and ERP apps, for example. So it’s easy for an inexperienced user with the best intentions to compromise data integrity with some uninformed actions. Therefore, usage and data management needs to be tightly controlled. Centralisation is what you need, because rolling it out to a wide population of users (as you would with Salesforce CRM for example) is risky. You cannot treat access lightly considering the risks involved.”

Sam Davies adds: “Data is the biggest driver to good quality marketing and even more so with marketing automation. It’s hugely determined by the CRM the company is using and the CMS they are using. It is absolutely critical that your CRM and your marketing automation tools speak to one another and there is a clear structure where a lead comes in through your website and goes through to the marketing automation software and then gets embedded in the CRM so you can pick it up in sales. So you need the right infrastructure internally to be able to do that.

“However, the problem we find with a lot of organisations is that they buy in pieces – they decide they need a piece of marketing automation software and will buy it and then try to fit it into the technology they already have afterwards. We always recommend that you almost pre-qualify what you need from the software vendor and then when start looking for a solution/vendor you can ensure that it can fit with your CRM. Otherwise you are facing a huge battle between marketing, IT and the web development team to make sure that they are all singing from the same hymn sheet, with a streamlined process, rather than something disjointed and mismanaged. You’ll just create another piece of software for somebody to manage alongside the CRM and the CMS and all the other bits and pieces.”

Market changes

This is certainly where the consolidation in the marketing automation vendor marketplace benefits buyers. With the likes of Neolane being acquired by Adobe and ExactTarget by Salesforce.com, the industry is swinging away from best-of-breed towards more integration in the enterprise stack. But consolidation isn’t all good news.

“In the short-term it can create some disruption,” explains Fletcher. “Particularly if, for instance, you’re a Salesforce.com user that has invested in Eloqua and then Eloqua is acquired by Oracle – a company might not want to be an Oracle customer, which is why they bought Salesforce.com. And likewise if you’re a Neolane customer using Microsoft Dynamics CRM and then Neolane is acquired by Adobe.”

In the medium-term and beyond – from 12-18 months onwards – Fletcher believes that while the smaller marketing vendors will have more resources as a result of being acquired, allowing the likes of Marketo and Neolane to get more of a sales and support presence outside of America and Europe respectively, the danger is that consolidation could damage innovation.

He adds: “The caution, other than short-term disruption, is that these companies prosper partly because they are smaller and more nimble and aggressive in the market. But this market is starting to mature, which usually means a slowdown in the pace of innovation and free-thinking and more of an aligning of software corporate objectives.”

Davies believes that the swallowing up of marketing automation vendors by the big CRM players is a natural progression because marketing automation and CRM “essentially just fit together”. And he sees similarities between the way that the CRM market has evolved and the recent maturing of the marketing automation space.

“When we looked at marketing automation vendors historically, you had Hubspot that was particularly good at top of the funnel marketing automation, and then Marketo that were good at lead nurturing and lead scoring, and so on. So for each individual discipline of marketing automation, there was a vendor that had a particular strength in that area. What we’ve found in the last two of three years is that marketing automation vendors have strengthened where they were weak, so that now there isn’t that much difference between then in terms of huge strengths or weaknesses related to various stages of the buying process. They are becoming increasingly similar in terms of their effectiveness for businesses. It’s going the way that CRM has gone, and there is going to be four or five huge vendors out there and the small nuances between them will be determined by the needs of the customer.”

Marketing peril

But not everything has changed in the world of marketing automation. And one of the obstacles it can still face remains the marketing department’s objections to being measured – although even this is being eroded by the passage of time and the changing marketing landscape.

“Sometimes marketing teams are still very reluctant or resistant to marketing automation because they are going to be held accountable,” notes Davies. “But these days marketing is now an accountable team within the organisation. Traditionally sales was very accountable - for converting a lead into a sale - but marketing wasn’t accountable. They were given a chunk of money and told to run a series of campaigns and as long as they were seen doing that they were doing their job.

“But now marketing is accountable for the quality of the leads, ensuring they are the right person, ensuring they are downloading the right content that is relevant to them, and then ensuring that you are producing a sales process that is pulling them through the funnel and almost converting them from a marketing-ready lead to a marketing-qualified lead and then to a sales-ready lead. Marketing is changing and moving and becoming a lot more accountable within all organisations. And I think that is a good thing.”

Ultimately, the changes taking place within marketing are leading to an inexorable drive towards marketing automation. And alongside factors such as lower cost Cloud-based models and more user-friendly technology, it is little surprise that the software has had such a resurgence.

As marketing has increasingly carved out a role as a driver of demand, rather than sales, so the efficiencies offered by marketing automation are making it more than merely a competitive advantage, but a necessity.

“MA is starting to reach widespread adoption and if your competitor has it and you don’t, they will be able to do more and better and faster marketing at lower cost, which leaves you at a competitive disadvantage. In addition, standards of customer service will rise – and yours won’t – which means you will cease to be the preferred supplier of choice, and will be subject to customer defection and inability to attract new customers,” says Brown.

“Marketing professionals that ignore the significance of automation in the face of stakeholder pressure to be accountable, measurable and transparent do so at their own peril.”