The Total Economic Impact Of Ensighten For Enterprise Data And Tag Management

Transcription

1 A Forrester Total Economic Impact Study Project Director: Dean Davison Commissioned By Ensighten January 2014 The Total Economic Impact Of Ensighten For Enterprise Data And Tag Management

2 Table Of Contents Executive Summary... 1 Disclosures... 2 TEI Framework And Methodology... 3 Analysis... 4 Financial Summary Ensighten: Overview Appendix A: Total Economic Impact Overview Appendix B: Glossary ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to

3 1 Executive Summary In January 2014, Ensighten commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying Ensighten s Agile Marketing Platform. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of the Ensighten solution set on their organizations. Ensighten Enterprise Data and Tag Management enable marketers to drive incremental revenue by: Tracking and optimizing campaigns so that open rates exceed 50%. Developing predictive analytics and creating To better understand the benefits, costs, and risks associated business rules to change how the company with Ensighten, Forrester interviewed four Fortune 500 engages with high-probability buyers. companies who are current Ensighten customers. The four companies use Ensighten to manage tags HTML and Avoiding the backlog for web development JavaScript snippets on website pages, mobile apps, and other and staging releases every 10 days. connected environments as well as to collect, own, and use on-site, off-site, and offline data. With such enterprise data and tag management capabilities in place, marketers can optimize their digital touchpoints and personalize the experiences of individual consumers with minimal involvement of code developers or the IT organization generally. The director of analytics in one enterprise told Forrester, Before Ensighten, implementing and troubleshooting tags was a nightmare. Analytics was never a high priority with developers and it took at least one month to fix simple problems. Ensighten provided us with agility. At all the companies that Forrester interviewed, marketers used Ensighten to significantly shorten the time-to-market for campaigns, enabling them to stage releases every 10 days and reduce analytics cycles down to an of average two weeks. ENSIGHTEN OPTIMIZES MARKETING TO DRIVE INCREMENTAL REVENUE Our interviews with four existing customers and subsequent financial analysis found that a composite organization based on these companies experienced the risk-adjusted ROI, benefits, and costs shown in Figure 1. Forrester s analysis of the composite organization shows benefits of $2,993,360 versus costs of $465,000, resulting in a net present value (NPV) benefit of $2,022,257. Enabling marketers to take control of data and tags improved the results of existing marketing programs including retargeting, campaigns, A/B testing, and personalization resulting in additional revenue of $34,360,000 over three years. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: Total costs: Total benefits: Incremental value 525% $465,000 $2,993,360 $34,360,000

4 2 Benefits. The composite organization experienced the following risk-adjusted benefits that represent those experienced by the companies that Forrester interviewed: Optimized all marketing activities. By effectively managing data and tags, the composite company optimized retargeting, streamlined campaigns, and introduced personalized content. Over three years, the composite company realized additional revenue of more than $34 million that provided more than $2.4 million in profit. Reduced cost of developers. The composite company reduced the need for three full-time developers to create and troubleshoot JavaScript code on web pages, resulting in an avoided cost more than $1 million over three years. Costs. The composite organization experienced the following risk-adjusted costs: Subscription fees for Ensighten. The composite company paid fees that are based on the number of server calls commonly referred to as page views or hits to pages that use Ensighten tags. For a company with 2 billion server calls annually, the cost for Ensighten is $155,000 per year for a total of $465,000 over three years. Disclosures The reader should be aware of the following: The study is commissioned by Ensighten and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis. Forrester makes no assumptions as to the potential return on investment that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Ensighten. Ensighten reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester s findings or obscure the meaning of the study. The customer names for the interviews were provided by Ensighten. Ensighten did not participate in customer interviews.

5 3 TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester constructed a Total Economic Impact (TEI) framework for those organizations considering implementing Ensighten. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that Ensighten can have on an organization (see Figure 2). Specifically, Forrester: Interviewed Ensighten marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to Ensighten and the marketplace for tag management. Interviewed four organizations currently using Ensighten to obtain data with respect to costs, benefits, and risks. Designed a composite organization based on characteristics of the interviewed organizations (see Appendix A). Constructed a financial model representative of the interviews using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interviews as applied to the composite organization. Risk adjustment is a key part of the TEI methodology. While interviewed organizations provided cost and benefit estimates, some categories included a broad range of responses or had a number of outside forces that might have impacted it higher or lower. For that reason, some cost and benefit totals have been risk-adjusted, and are detailed in each relevant section. Forrester employed four fundamental elements of TEI in modeling Ensighten: benefits, costs, flexibility, and risks. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology. FIGURE 2 TEI Approach Perform due diligence Conduct customer interviews Design composite organization Construct financial model using TEI framework Write case study

6 4 Analysis COMPOSITE ORGANIZATION For this study, Forrester conducted a total of four interviews with representatives from the following Ensighten customers: A technology engineering Fortune 500 company. A consumer electronics Fortune 500 company. A US-based, national Fortune 500 retailer. A Fortune 500 airline company. Based on the interviews, Forrester constructed a TEI framework, a composite company, and an associated ROI analysis that illustrates the areas financially affected. The composite organization that Forrester synthesized from these results represents an organization with the following characteristics: Retails high-end goods to consumers with 40% of sales online and 60% from brick-and-mortar stores across North America. Receives 2 billion server calls annually. Spends 30% of advertising and placed ads on branding. Runs an average of 16 campaigns each year. In 2010, the composite company found that its digital analytics couldn t keep up with business demand, so the analytics team began researching tag management solutions. The purchase process was as much research into the marketplace as about buying a solution. At the time, tag management was nascent and unproven. We had to find a way to bypass the typical IT cycle to enable our business to run properly. ~Director, global analytics and testing Using Ensighten the composite company: Tracked and optimized campaigns so that open rates exceed 50%. Tailored site experience based on search metadata stored in Ensighten data layer. Avoided the backlog for web development and staging releases every 10 days. Retired previous products because Ensighten eliminated the need for hardcoding. Realized agility by being able to deploy or modify tags without involving developers. Eliminated the lag time required for the IT organization to fit tagging into web development priorities. Reduced the time required to troubleshoot tracking codes that always seem to break.

7 5 INTERVIEW HIGHLIGHTS The companies that Forrester interviewed shared common problems that led them to adopt Ensighten and realize significant results from effective tag management. Situation Before adopting Ensighten, the composite organization was experiencing the following obstacles. The organization: Distributed tags organically using a variety of tools. Maintained multiple domains and digital channels. Used different types of tags for measurement and acquisition technologies. Inserted code on each page, requiring time for planning, deployment, testing, integration, and troubleshooting. Tagging is important, but it s never viewed as critical to web development teams. A new site can launch without tagging and not impact the customer experience. ~Director, customer analytics Maintained a database of personally identifiable information (PII) about customers that is intermittently compromised. Solution The companies interviewed told Forrester that they didn t have a marketing methodology and relied on simple attribution metrics first touch, last touch, and simple channel tracking data. The Director of Customer Analytics at one firm told Forrester, Ensighten gave us clarity into the purchase path for our customers. We built a stack of metrics that measures touchpoints, the time between touches, and the ability to correctly attribute server calls to affiliates and partners. Results The interviews revealed that companies are able to: Track and optimize campaigns. With Ensighten tags, marketers can run campaigns and track data by segment, link, banner type, or any other type of variable. One company told Forrester, Our open rates are now over 50% and click rates are close to 25%. Tailor site experience based on site search metadata stored in Ensighten data layer. In our case, even when taking displacement costs into account, the increased revenue from just this one change amounted to over $25 million in revenue per year, the director of analytics told Forrester. Reduce the need for JavaScript developers. On average, among the companies that Forrester interviewed, the companies reduced the need for one developer per 750 million website server calls. Ensighten is such a powerful tool and gives us so much flexibility that the cost is nothing compared to the value that we are getting. ~Manager, customer intelligence Avoid falling into the backlog for web development. Companies told Forrester that tagging gets pushed way down the priority list because it s less obvious. A new website can launch without tagging and not impact customers. Tagging is important, but never viewed as critical to the web development teams.

8 6 BENEFITS The composite organization experienced two quantified benefits in this case study: Optimized results from marketing activities. Reduced cost of JavaScript developers. Optimized Results From Marketing Activities The marketing activities across the composite organization show significant improvement activating the data and performing analysis from effective data and tag management. To quantify this benefit, Forrester uses results from companies interviewed and normalizes the values to fit the composite organization s profile. The marketing activities that are shown in Table 3 are: Prioritized and managed retargeting. Ensighten tags allowed the composite organization to keep retargeting partners from competing against each other. By prioritizing retargeting actions throughout the purchase process from clickthrough to shopping carts. The financial impact was a 4x increase in retargeting. Improved the success of opens and click rates. Ensighten changed the perception of how this company runs campaigns. Using Ensighten has resulted in tuning campaigns so that open rates for this company are now over 50% and click-through rates are close to 25%. Initiated site personalization. Using Ensighten to tailor site experience based on site search metadata stored in Ensighten data layer, one company launched into personalization, resulting in an increased revenue of more than $95 million per year. The composite company initiated site personalization initiated 18 months after adopting Ensighten; thus, the benefit is calculated at 50% in Year 2 and 100% in Year 3. Improved identification of buyers. The composite organization has corporate policies against storing personally identifiable information (PII) about customers. With Ensighten, the organization was able to scrape unique identifiers from browsing sessions, combine the data with third-party databases, and deduce individuals without using PII. The financial impact of this benefit was $30,000 per year per 1 billion website server calls. The aggregate impact on revenue of using Ensighten to optimize marketing activities is more than $34 million. The interviewed companies provided a broad range of ways that enterprise data and tag management helped optimize marketing activities. Although each of the companies had significant results, Forrester compensates for the variability by riskadjusting benefit by 20%. The risk-adjusted total impact on net profit resulting from optimizing the results for marketing activities over three years is $2,405,200. Reduced Cost Of JavaScript Developers The composite organization receives 2 billion server calls annually and reduced its need for JavaScript developers by three full-time equivalents (FTEs). Based on the experience of the companies that Forrester interviewed, the composite organization was able to refocus the effort of internal developers and eliminate the need for custom, hardcoding on website pages. Using an annual salary of $120,000 for JavaScript developers, Forrester quantifies the savings at $360,000 per year (see Table 4). In Forrester s interviews, the experience of all four companies showed a similar change in the need for developers. As such, most readers should have a similar experience. Based on this relatively low risk, the risk-adjusted values for this benefit are 1% lower at $356,400.

9 7 TABLE 3 Optimized Results From Marketing Activities Ref. Metric Calculation Year 1 Year 2 Year 3 A1 A2 A3 A4 Improved identification of buyers Prioritized and managed retargeting Improved the success of opens and click rates Initiated site personalization $30K/1 billion server calls $250K/1 billion server calls $1.28M/1 billion server calls $8.3M/1 billion server calls $60,000 $60,000 $60,000 $500,000 $500,000 $500,000 $2,560,000 $2,560,000 $2,560,000 $8,333,333 $16,666,667 A5 Profit margin 7% 7% 7% At Optimized results from marketing activities (A1+A2+A3+A4)*A5 $218,400 $801,733 $1,385,067 Risk adjustment 20% Atr Optimized results from marketing activities (risk-adjusted) $174,720 $641,387 $1,108,053 TABLE 4 Reduced Cost Of JavaScript Developers Ref. Metric Calculation Year 1 Year 2 Year 3 B1 Developer FTEs 1 FTE per 750M server calls B2 Salary and burden costs $120,000 $120,000 $120,000 $120,000 Bt Btr Reduced cost of JavaScript developers B1*B2 $360,000 $360,000 $360,000 Risk adjustment 1% Reduced cost of JavaScript developers (risk-adjusted) $356,400 $356,400 $356,400

10 8 Total Benefits Table 5 shows the total of benefits across the two areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the composite organization expects risk-adjusted total benefits to be a PV of more than $2.4 million. TABLE 5 Total Benefits (Risk-Adjusted) Optimized results from marketing activities Benefit Initial Year1 Year2 Year3 Total Present value $0 $174,720 $641,387 $1,108,053 $1,924,160 $1,521,405 Reduced cost of developers $0 $356,400 $356,400 $356,400 $1,069,200 $886,314 Total benefits (risk-adjusted) $0 $531,120 $997,787 $1,464,453 $2,993,360 $2,407,719 COSTS Ensighten solutions are purchased as a subscription service that is based on website server calls. Each of the four companies that Forrester interviewed stated that using Ensighten was simple, logical, and straightforward. As such, the model excludes common costs for new products such as implementation, integration, or training. Table 6 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the composite organization expects total costs to total a net present value of $385,462. Between the four companies that Forrester interviewed, the costs for Ensighten were similar. The risk that readers will have pricing that will vary significantly is minor, so Forrester makes no risk adjustment to this cost. TABLE 6 Total Costs Benefit Initial Year 1 Year 2 Year 3 Total Present value Ensighten (volume of 2 billion server calls) $0 $155,000 $155,000 $155,000 $465,000 $385,462 Total costs $0 $155,000 $155,000 $155,000 $465,000 $385,462

11 9 FLEXIBILITY Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement Ensighten and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A). The companies that Forrester interviewed experienced flexibility and unquantified benefits from: Identifying predictive analytics. One company that Forrester interviewed accumulated sufficient data from tags to engage a predictive analytics vendor, develop a regression coefficient for buyers actions that trend toward a purchase, and set up business rules to change how the company engages with high-probability buyers. Troubleshooting becomes simpler. When marketers have the ability to create and deploy tags without direct involvement from developer or the IT organization, marketers can also turn off specific links or disable tags that pose technical problems. By enabling marketers to troubleshoot and disable tags, the IT organization is able to provide ancillary support without fear that rogue code will disrupt website functionality or create problems that the IT organization will be required to clean up later. Reducing analytics cycle time. Although Forrester did not quantify the value of a shorter analytics cycle for the composite company, each of the four companies interviewed experienced a significant reduction. One company told Forrester, Today, our data is obsolete after three months. Before using Ensighten, our analytics cycle was four months. Without using Ensighten, we would be unable to run campaigns against relevant data. RISKS Quantitatively capturing investment risk and impact risk by directly adjusting the financial estimates results provides more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as realistic expectations since they represent the expected values considering risk. TABLE 7 Benefit And Cost Risk Adjustments Benefits Adjustment Reduced cost of JavaScript developers 1% Optimized results from marketing activities 20% Costs Adjustment Ensighten (volume of 2 billion server calls) 0%

12 10 Financial Summary The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the organization s investment in Ensighten. Table 9 below shows the risk-adjusted ROI, NPV, and payback period values. These values are determined by applying the risk-adjustment values from Table 7 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 8 Cash Flow Chart (Risk-Adjusted) $3,000,000 Cash flows $2,000,000 $1,000,000 $0 ($1,000,000) Initial Year 1 Year 2 Year 3 Total Costs Total Benefits Running Total TABLE 9 Cash Flow: Risk-Adjusted Initial Year1 Year2 Year3 Total Present value Total costs $0 ($155,000) ($155,000) ($155,000) ($465,000) ($385,462) Total benefits $0 $531,120 $997,787 $1,464,453 $2,993,360 $2,407,719 Net benefits $0 $361,120 $827,787 $1,294,453 $2,483,360 $1,984,954 ROI 525%

13 11 Ensighten: Overview The following information is provided by Ensighten. Forrester has not validated any claims and does not endorse Ensighten or its offerings. Ensighten, the leader in enterprise data and tag management, boosts marketing agility with the industry s first Agile Marketing Platform (AMP), built to meet the needs of enterprise marketing organizations. With Ensighten AMP, businesses rapidly execute any marketing initiative, achieve one-to-one marketing and deliver great user experiences. Ensighten s proprietary data and tag delivery network and patented technology give organizations unmatched ability to deploy any vendor tag on any platform or device, using unlimited deployment conditions, while accelerating page performance. Marketers use Ensighten AMP to collect, own and use their on-site, off-site and offline data. Ensighten AMP processes tag requests from 30,000 web domains across 150 countries, representing more than $30 billion in ecommerce for top brands that include Brooks Brothers, Capital One, E-Trade, Microsoft, monster.com, Sony Electronics, Staples, Symantec, T-Mobile, United Airlines, and Wal-Mart.

14 12 Appendix A: Total Economic Impact Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company s technology decisionmaking processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks. BENEFITS Benefits represent the value delivered to the user organization IT and/or business units by the proposed product or project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line. COSTS Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created. FLEXIBILITY Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point. However, having the ability to capture that benefit has a PV that can be estimated. The flexibility component of TEI captures that value. RISKS Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections, and 2) the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density function known as triangular distribution to the values entered. At a minimum, three values are calculated to estimate the underlying range around each cost and benefit.

15 13 Appendix B: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set their own a discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their own environment. Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs. Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows. Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost. Return on investment (ROI): A measure of a project s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs. A NOTE ON CASH FLOW TABLES The following is a note on the cash flow tables used in this study (see the example table below). The initial investment column contains costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in Years 1 through 3 are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations are not calculated until the summary tables are the sum of the initial investment and the discounted cash flows in each year. TABLE [EXAMPLE] Example Table Ref. Metric Calculation Year 1 Year 2 Year 3