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1 I D C T E C H N O L O G Y S P O T L I G H T U p d a t i n g M arketing Technology a s P a r t o f E n t e r p r ise Digital Transformation October 2015 Adapted from Worldwide Marketing Software Forecast : $20 Billion and Growing Fast by Gerry Murray, Mary Wardley, Melissa Webster, et al., IDC # Sponsored by SAP Marketing technology has long been an enterprise staple for orchestrating the top of the funnel activities related to customer experience. But as organizations are undergoing a digital transformation to the 3rd Platform of computing, marketing technology is both ahead and behind the curve. While marketing has been quick to absorb the newest of technologies, a morass of customer information has been created. Critical customer information is locked in multiple silos that cannot communicate in a timely manner. This Technology Spotlight outlines the enterprise marketing technology challenges in a 3rd Platform world and discusses how new and legacy technology can be combined to provide a true 360-degree view of the customer. Following a discussion of SAP's hybris Marketing solution, this document provides guidance to enterprises looking to update, to "harvest" their data and/or migrate to the next level of marketing known as "contextual" marketing. The Evolution of Customer Relationship and Marketing Software For years, enterprises have looked to technology to help them manage customers and the customer experience. Managing the customer relationship and ultimately using customer data for marketing purposes has evolved from simple databases and other standalone applications to sophisticated enterprise CRM packages that enable organizations to not only meet customer needs but begin to predict customer behavior in order to develop marketing programs that seem to know customers better than they know themselves. While modern marketing software is more than 10 years old, the technology is only now emerging from its formative stage. In years past, point solutions were the only tools available and marketers had to deploy dozens of different systems in order to automate the diverse activities of marketing. Every time a new digital channel or a social network emerged, it required a new application to manage it. As a result, midsize advanced organizations typically have systems and IDC has clients with more than 200. Amid rapid innovation, the era of consolidation has begun. Newer solutions provide more seamless customer engagement throughout the customer's journey, made possible from all interaction points being seamlessly weaved together, sharing one common customer data model and decision engine. Major enterprise technology providers are also bringing key pieces of the marketing software landscape together to create software-as-a-service-based offerings or hybrid solutions that include on-premises deployment. These offerings, tailored to the needs of the organization, are beginning to be integrated enough with back-end systems to provide the promise of seamless operations and reporting across the diverse activities of a large marketing organization. IDC 2015

2 Digital transformation is driving the evolution of marketing software. IDC defines digital transformation as the continuous process by which enterprises adapt to or drive disruptive changes in their customers and markets by leveraging digital competencies to innovate new business models, products, and services that seamlessly blend digital, physical, business, and customer experiences while improving operational efficiencies and organizational performance. Essentially, the 3rd Platform of computing created through the combination of cloud, mobility, big data/analytics, and social business is forcing businesses to transform. And while enterprises have worked hard to cope with change by adopting new marketing technologies, the current rate of acceleration and the order-ofmagnitude increases in volume present marketers and the IT departments that support them with daunting challenges and enormous opportunities. As Customers Change, So Must Enterprise Marketing Digital transformation is more than just technology change. Customers also have changed. Interactions with customers have moved from a centralized model to a multimodal decentralized model. Brands, and customers' opinions of them, once forged and maintained over a long period of time, are now fleeting and as fluid as the last customer experience. Response to customer feedback and innovation used to be slow processes, but now they must be immediate. In particular, innovation, once the domain of R&D, is now everyone's job. Where rigidity meant stability and efficiency, it now means going stale and being unresponsive. In the past, while companies stated that the customer was king, it only held true as long as the customer fit into the company model. Now, the customer really is in charge and enterprises must obey. While organizations have attempted to address customer needs for years, marketing requires such a wide range of technical capabilities that many organizations find themselves unable to take a holistic approach. The result typically is an infrastructure of disparate, frequently redundant solutions that were implemented to solve activity-based inefficiencies and not part of a larger marketing ecosystem. This has greatly exacerbated the issue of specialized silos within marketing at a time when buyers expect continuity across every touch point. Customers don't want their learning process to restart when they move from a search to a social campaign to a Web site to a community to a purchase. Brands don't want to race to the bottom of a price war because they have nothing to offer beyond the ordinary cosmetic in the bottle, the UI on the screen, or the vehicle in the garage. The content must match their context throughout every pre- and post-purchase phase of the journey, or it's a waste of their time. Coordinating marketing around this expectation necessitates an infrastructure conceived, implemented, and operated holistically. Buyers are no longer satisfied with being "sold to." Equipped with mobile devices and informed by social business connections, customers are more knowledgeable about products and services well before entering a purchase. This knowledge is enabled by the increasing use of and reliance on personal and professional contacts for references and opinions as well as the wealth of online information. As a result of customer self-education and easy access to opinion leaders, peer-to-peer interactions are now a significant influence. By the time they reach a point of purchase, they are in a position to validate their knowledge and are well past the learning process. To succeed, organizations must now harvest knowledge of past interactions with similar customers, as well as predictive and, most importantly, in-the-moment information, to glean best practices and share new approaches to solving business problems. Customers expect organizations to understand not only who they are but anticipate their intent and motivations so that customer engagements are relevant and timely IDC

3 Consolidating the diverse world of marketing technology and the associated organizational, process, and data work streams is critical for market leadership. Marketers need to develop structured, holistic approaches to managing the diverse portfolio of new technologies that have reinvented marketing. To reach its true potential, marketing technology must always serve the customer; support specific business objectives; operate as an ecosystem; produce and consume diverse, well-governed customer data; and exist in a culture of creative collaboration. Evolving Marketing Technology in an Era of Digital Transformation In reality, the typical company is unprepared. Marketing is largely organized around a set of silos based on specialized program functions such as campaigns ( , Web, mobile, social), advertising (search, social, display, mobile), content production (text, image, video), and data and analytics. Each of these functions has its own database or audience source. These functions may be further fragmented when replicated across business units and geographies. On a grander scale, the whole enterprise also is organized around silos of customer activity across marketing, commerce, sales, finance, fulfilment, service, and support. There are too many disjointed points of customer contact, too many disparate sources of customer data, and too many disconnects across departments. Therefore, marketing must be reinvented around data and context to help the enterprise reinvent the customer experience. Customers now expect personalized concierge-level services that deliver useful insights every step of the way along their buyer's journey. To deliver this experience, marketers need detailed, real-time information on each customer and its context. Modern social and mobile-oriented applications can encourage better, more effective customer interactions. They not only enable real-time communication and customer-relevant information sharing but also combine the collective intelligence of an organization's staff via social sharing with context-relevant customer information to make every interaction more meaningful and to deepen relationships. To get an accurate view of customer behavior, marketers must unlock the information frozen in every media-related silo. While the current drive to engage with customers in the social realm is critical for relationship purposes and in filling the gap in understanding customer expectations and the white space surrounding customers, it does not supply the entire picture of the customer. Enterprises already have a wealth of information about their customers because they for years have populated legacy marketing applications with customer data and then applied analytics to this information. There are also additional enterprise data sources available today that haven't been leveraged in the past, such as customer s, Web forms (complaints/compliments), and call center recordings (converting audio into text files and running text analytics to find out the sentiments and keywords). Models based in traditional transactional data can be refined and extended with social inputs. Likewise, insight from socially derived hypotheses can be validated or balanced with the trended information derived over time. This approach, using a combination of traditional and new technologies, goes a long way to helping organizations reach the nirvana of marketing harvesting data to gain a true 360-degree view of the customer. Considering SAP's hybris Marketing Platform SAP hybris Marketing suite is a new offering from SAP-owned hybris, a provider of multichannel ecommerce software, built on the SAP HANA in-memory database platform. SAP hybris leverages real-time contexts to drive relevant customer engagements, enabling users to gain insights into the full context of individual customers to deliver individualized engagements at every stage of the customer journey. The solution is designed to understand performances of all marketing activities to optimally plan resources that drive customer advocacy and growth IDC 3

4 The SAP hybris Marketing solution is a critical component in SAP's Customer Engagement and Commerce product portfolio. SAP is calling the solution a "contextual marketing" platform. Context, according to the company, is taking the real-time engagement information about customers and interactions, along with the historical information, and applying and analyzing that information to provide greater clarity about individual customers' intent and motivations. SAP hybris Marketing solution draws from customer data from legacy enterprise applications such as CRM and ERP systems for purchasing history and account information and propensity models leveraging to realtime online behavior such as browsing or keyword searches to identify customer intent. The solution will take customer data from multiple business silos and help to provide a consolidated customer view, providing marketers with a clear picture of individual customers' past and present behaviors, as well as helping them predict their future behaviors so they can craft more relevant and targeted campaigns. The marketing solution is based on several key capabilities. First is the HANA-based customer data management foundation, which creates a centralized store of information. The SAP hybris Marketing solution also offers engines for customer segmentation, predictive analytics, and contextual analysis. On top of these rest tools for cross-channel campaign management, customer loyalty, marketing dashboards, marketing planning, budgeting, and program implementation. There are also a recommendation engine and onsite targeting tools. In addition, SAP hybris Marketing offers components for real-time, behavior-based remarketing and marketing performance management. Open APIs and flexible architecture enable integration with multiple legacy and cloud-based applications, and SAP hybris Marketing provides standard out-of-the-box integration with hybris Commerce Suite and other SAP applications, enabling the platform to provide a centralized marketing solution that incorporates customer information from virtually anywhere in an organization. SAP offers the SAP hybris Marketing suite as a cloud-based or on-premises solution. Challenges SAP does face challenges, however. First, SAP hybris Marketing represents an advanced approach to solving the problem of gaining a 360-degree customer view. The company must focus on how its hybrid approach is different and can help enterprises use data from any source within the organization. In addition, in a world of ever-changing use of technology, the "customer" is constantly evolving. Meeting their changing needs not only requires adaptive technology but also adaptive business and process practices within an enterprise. SAP must take a lead in helping its customers determine best practices for its contextual marketing and provide case histories and education to help enterprises succeed. Finally, SAP must be a leader in reminding organizations that legacy enterprise applications are still invaluable and must be integrated into new platforms. Conclusion Almost all companies today chop up their customer interactions into marketing, sales, fulfilment, finance, service, and support functions or some limited variations. This fragmentation not only can waste a customer's valuable time but makes it nearly impossible to know if a marketing program is being prioritized relative to corporate goals. The solution to reassembling the customer experience is to manage customer creation as an end-to-end process. Data and data-driven marketing will be fundamental to this effort IDC

5 CMOs and CIOs need to forge new partnerships around marketing technology that enables both to contribute in new and substantial ways to business performance. For CMOs, leveraging marketing technology can elevate them to a more strategic position within the senior executive team. For CIOs, the explosion in marketing technology offers an opportunity to serve the company mission more directly. However, the successful digital transformation of the company's customer interface is incompatible with the steady state of independently serving internal audiences. Marketing automation, social monitoring and response, customer databases, ad retargeting, mobile Web sites, digital asset management, and predictive analytics have become a part of the cost of doing business. But it is now possible for CMOs and CIOs to base their marketing technology road maps on business directives rather than playing catch-up with the latest trends. As enterprises look to adopt next-generation marketing technology, IDC recommends that they do the following: Understand and map out the customer journey Assess/audit the current state of marketing technology Define long-term marketing infrastructure requirements Create a road map for investments in marketing technology based on business drivers Continually monitor and assess weak and missing links in the customer data collection process Evaluate every customer interaction for its potential to capture data including all sales and support, back-office, and external data source interactions Endorse new modes or channels for interactions to optimize data capture (e.g., analog media increasingly features ways to connect to digital media; unstructured interactions [social/voice] should be recorded, transcribed, and subjected to semantic analysis) Establish policies to make all appropriate customer datasets as accessible as possible in compliance with privacy laws Apply quality control KPIs to everyone that produces customer data Make customer data and analytics part of hiring, onboarding, and training programs so everyone understands the company's customer data structure, who owns what data, and how their role produces and consumes data All technology should be leveraged for scale but, more importantly, leveraged for responsiveness and consistency. In particular, enterprises should understand that "communities" made up of customers are now strategic resources, not just tactical targets. As such, all efforts should be targeted at creating an environment of trust, honesty, and integrity because "community" is not just a format but an experience. Finally, any marketing solution should include analytics, harvest data from virtually all customertouching sources in the organization, and provide a way for enterprise marketers to not only learn about customers but also customer context. To the extent that SAP meets the challenges listed previously, SAP hybris Marketing should be on the short list of any enterprise looking for an advanced marketing automation solution IDC 5

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