Making the Most of Marketing Automation

Transcription

1 EXTRAPRISE Company Services Alliances Case Studies Extraprise Report Making the Most of Marketing Automation Volume 5 No. 8 Executive Summary The functions of marketing were traditionally captured by the simple mnemonic The Four Ps : product, price, promote, place. Marketing organizations have always been involved in defining new products and services, pricing them, promoting them to the market and in many instances, selling them to customers directly and through channels. As business has become faster, more complex and increasingly global, this summary appears at best incomplete, and at worst simply quaint. As a discipline, marketing has expanded in scope and increased in sophistication. The chart below captures some of the typical functions that reside in marketing organizations at companies both large and small. Over the last several years, a new generation of software applications has entered the market promising to automate these processes. As these products continue to evolve they are creating an excellent platform for increasing marketing efficiency and effectiveness (especially in the areas highlighted in bold). Figure 1. Common functions in corporate marketing organizations. (Extraprise, 2002) Major vendors like Siebel, SAP, Oracle, PeopleSoft and SAS offer marketing modules in their extensive software suites; specialist software companies like E.piphany, Annuncio, Aprimo, MarketSoft, MarketFirst, Kana, Unica and others offer solutions targeted more closely in this area. None of these products can automate all marketing processes, but they have become mature enough and extensive enough to warrant attention by any company. EXTRAPRISE 2002

2 Introduction As the previous diagram demonstrates, there are many dimensions to modern marketing organizations. This list of functions is meant to be illustrative, not exhaustive. Automating this standard set of marketing processes is currently beyond the scope of any off-the-shelf software product. While each application has a different design center, all provide support for a common subset of marketing processes. Nearly every marketing automation product has modules to support campaign management (defining, executing and evaluating , direct mail, advertising, events and other leads generation activities). Similarly, these products almost always include customer management capabilities such as database management, leads processing and pipeline or forecast development. Similarly, all provide an analytical package to perform profit and loss, customer segmentation and program effectiveness calculations. Most provide graphical tools for workflow or process management that enable marketers to more easily define and automate integrated marketing campaigns that may cross two or more communications channels. Many provide functionally to manage joint marketing programs with partners or other third-party companies. Finally, the best of these packages provides what the industry refers to as marketing resource management, for budgeting, staffing, inventory management, financial compliance and reporting. Many of the common marketing functions are neglected in standard marketing automation software. This is particularly true of the product planning and pricing domains. While sales force automation software often includes support for standard selling processes (like target account selling or TAS), there is no equivalent for the product planning and development process. Many CRM suite vendors, such as Siebel Systems, sell pricing and product configuration software but these are not typically part of a standard marketing automation package. The same is often true of public relations, analyst relations, investor relations, advertising and Web site management. Software packages may include support for these processes in a campaign management or workflow module, but functionality tends to be limited where it exists at all. In short, marketing automation software tends to be very good at what it does, but one thing it does not do is automate all of marketing. To slightly oversimplify, these packages focus on understanding customer-buying patterns, designing integrated marketing campaigns for addressing customers directly and analyzing and managing leads generated through these programs. Marketing automation solutions offer very little on the product and pricing aspects of marketing. To oversimplify even more, marketing automation software tends to be good at the promote and place aspects of marketing, but not very good at all in product and price. Benefits of Marketing Automation In an earlier Report (Maximizing the Return on Siebel Software, Vol. 4, No. 8), we argued that CRM vendors did the market a disservice when they attempted to link investments software directly to gains in corporate revenue, profit and share price. When business is good, there are many reasons: product lifecycles, economic cycles, capital structure, and competitive status in addition to marketing and sales effectiveness. When business is bad, every company will closely scrutinize its marketing and sales expenditures regardless of their demonstrable strengths or weakness. Marketing program spend (advertising, direct marketing, sponsorships, etc.) is always viewed as a variable cost in difficult economic periods. 2

3 We urged sales and marketing executives to focus on tactical and operational gains that increase the effectiveness and cost structure of their functions. These same issues are true with marketing automation. In our experience, companies invest in marketing automation for some combination of the following ten reasons: 1. Better manage marketing expenditures. There is an old joke about marketing investments that applies here. We waste half of our marketing dollars. We just don t know which half. Marketing resource management helps inform investment decisions by functional managers and corporate executives. 2. Link program spend to revenue generation. Very few companies have a completely closed-loop marketing system that allows them to track specific program investments to closed business. Such a correlation justifies and directs continued investments. 3. Manage the complexity of interlocking and high volume marketing programs. Volume direct mail or programs and multi-channel campaigns often require a degree of infrastructure support that can only come from sophisticated software applications. 4. Align marketing and sales processes. Marketing is typically focused on leads and sales on revenue generation. These two goals are often poorly connected. Marketing automation solutions help enforce consistent processes between sales and marketing. 5. Move customers to the most cost-effective channel. Moving customers to a preferred channel can only take place if purchase history is known (through analytics) and marketing promotions are consistent with the strategy. 6. Support the corporate transition from product focus to customer focus. Companies that have traditionally done marketing at a product line or business unit level increasingly recognize the need to change to a customer-driven marketing philosophy. 7. Support one-to-one marketing. To maximize the share of wallet from each customer it is important to deliver customized offers, collateral and point of sale information for individual customers. 8. Add a real-time dimension to marketing. Getting targeted promotions to the point of sale (or point of marketing) in real-time is often the difference between a sale and an inquiry. This applies to the Web, contact center, retail outlet and even direct sales force. 9. Develop an infrastructure for outsourcing. Companies typically need focus on their core competencies. Marketing communications, advertising, event management, field marketing and other traditional activities that are outsourced need consistent and often centralized management. 10. Audit trail of decisions and investments. Marketing executives come and go, investment levels rise and fall, products life cycles are increasingly condensed. As a result, it is important not just to track marketing investments, but the thought process behind them to better measure their effectiveness. As these reasons illustrate, companies invest in automating marketing to enable multi-channel communications with their customers, improve their marketing and sales processes and contain costs. To date, most companies undertaking major customer relationship management initiatives have begun with sales or customer service applications. A major investment in marketing automation typically lags other areas. To some extent, this was inevitable since the maturity and scalability of this software was suspect until the last several years. With a new generation of applications in the market, software now has the potential to address all of the issues outlined above. 3

4 Enhancement not Just Automation Most of the major challenges in automating marketing functions lie not in technology but in the functions themselves. Automating outdated strategies and ineffective marketing processes tends to be expensive, never-ending and does not result in financial payback. As a result, automation initiatives typically involve process improvement as well as technology implementation. Extraprise uses the Marketing Maturity Model, on many automation projects to insure that technology delivers measurable benefits. This approach (or something equivalent) should be taken before any major investments in technology are made. We will cover this approach in an upcoming Extraprise Report. In short, this model describes the process for moving from product and transaction-based marketing to one-to-one relationships that optimize overall customer value. The model provides discipline to process improvement and helps define strategies and tactics to improve financial performance through improved customer satisfaction, loyalty and retention. As the following diagram illustrates, in the early stages of maturity marketing organizations focus on product and event-based marketing programs for customer acquisition. They segment customers (lists, databases, etc.) in support of individual promotions and they measure their success on the results of these activities. As marketing organizations mature, they move to a second phase oriented around customer profitability. In this stage, marketing programs typically focus on customer segments with a focus on up selling and cross selling new and existing accounts. Promotions often focus on the immediate needs of each major customer and this can lead to significant customization of products and services. Success is measured by customer profitability and there is usually an attempt to move lower value customers to less expensive sales and service channels. Figure 2. The Extraprise marketing maturity model. (Source: Extraprise, 2002) In the final stage of this model, marketing moves to behavior-driven, one-to-one customer relationships that span all channels of interaction. These relationships typically have a real-time dimension, that is, customer history and specialized promotions are available at each point of 4

5 interaction and are reanalyzed based on immediate behavior. The focus is on developing and refining a custom dialog with each customer to build loyalty and increase share of wallet. As a future Report will detail, getting from one phase to another is a journey of many steps. A typical process for implementing the model involves a number of steps, with the key ones outlined below: Interview major stakeholders and company executives to understand their longand short-term business/marketing objectives and their view of top opportunities for improvement Review business and marketing strategies, channel economics, customer segmentation, coverage strategy, marketing documents and reports Compare the company s situation to industry best practices and operating models Interview sales, service, marketing and technology professionals Create Day in the Life scenarios as a tool for understanding the current state of customer relationships, envisioning the future and considering best practices Develop/review technology, architecture and topology diagrams, data models and system documentation Identify gaps between the current and desired state Conduct marketing and stakeholder workshops to environ the future state, introduce best practices and gain consensus on the scope of the initial implementation Marketing Automation Choices Map the output of this work to available software modules and scope system While marketing automation software provides little support for corporate strategy and product planning, they still provide real benefits to companies in search of greater understanding of their customers and improved operating efficiency. Software vendors approach the marketing automation problem from several perspectives, as the following diagram shows. Figure 3. Sources of marketing automation software. (Source: Extraprise, 2002) 5

6 Earlier generations of marketing software (prior to the year 2000) were highly compartmentalized and scaled poorly. Even so, they provided real benefits in analytical and leads management processes. Over the last several years and especially with the commercialization of data warehousing and Internet technologies the situation has improved markedly. CRM suites from Siebel Systems, SAP, Oracle and PeopleSoft among others include marketing applications as part of their standard product portfolio. These products are competitive in functionality but provide an additional benefit in integration with compatible sales, contact center, customer service, pricing, configuration and analytical modules. Since these enterprise software companies are also large in size, they often provide marketing solutions tailored to specific industries and market segments. Conversely, point products from vendors like Annuncio, MarketSoft, Unica and others are often more functionally complete, but lack integration with software that may be in use in other company departments. During the Internet bubble, many campaign management companies (Kana, egain, Delano, etc.) were funded and have evolved their products beyond their initial focus on and Internet channels to provide more comprehensive marketing solutions. A similar development cycle has been visible at companies originally focused on analytical and business intelligence. Companies like SAS, SPSS, Business Objects and Cognos have extended their analytics capabilities in the marketing area and should be expected to seek acquisition targets for software that automates the operational aspects of marketing. E.piphany already took this route in 2000 with their acquisitions of RightPoint and Octane to incorporate marketing and service features on top of their Insight analytical platform. Like the CRM industry overall, the marketing automation segment is undergoing a cycle of consolidation. Choosing the best solutions from a bewildering array of providers will become somewhat easier over the next few years as mergers (and bankruptcies) continue to increase as vendors search for scale. While this process unfolds, choosing a product to automate marketing is becoming less about the functionality of individual products than about the long-term stability of individual vendors. We will discuss software and vendor selection criteria in a later section. Marketing Automation Functions As discussed earlier, marketing automation software is not particularly strong in the areas of strategy development and product planning. Nearly every product includes the five modules described below: Customer Analytics Understanding customer demographics and buying patterns helps inform corporate decision making from quarterly forecasting to long-term strategy. We detailed many of the process and technical issues in this area in two earlier Reports (Marketing Analytics: Technology Options, Extraprise Report, Vol. 5 No. 5 and Marketing Analytics: A Worthwhile Option, Extraprise Report, Vol. 5 No. 4). There has always been an analytical aspect to marketing, but evaluations were typically done infrequently as batch processes from a central location. Today, marketing automation software enables companies to perform typical tasks such as customer segmentation, financial forecasting and personalization closer to the point of sale in real-time. 6

7 In marketing, analytics take several forms. First, organizations frequently analyze industry, customer, product data and other sources to do strategic planning and go-to-market plans. Second, they analyze customer, financial and product data to do regular tasks like customer segmentation, customer profitability, contract compliance and others. They analyze customer, financial and marketing data to determine response rates, lead conversion rates, average sales price, product profitability, channel effectiveness and many others. In short, customer data finds its way into many marketing (and corporate) decisions. Providing access to dispersed data throughout the organization in a timely fashion is often difficult in practice. Data sources often use different formats and are stored in remote locations. Individual marketing managers typically do not have the skills to normalize, integrate and query this kind of data. Historically, this created a reliance on IT and financial staff to do the integration and create the reports. Marketing software now provides both the repository, integration and reporting tools to enable marketing staff to do these kind of queries as required. As earlier Reports have discussed, the major trend in customer analysis is to move the process closer to customer-focused personnel so they can make informed decisions in response to customer behavior patterns. Campaign Management When companies decide to automate their marketing processes, campaign management is often the impetus. Direct marketing, public relations, advertising, telemarketing and events typically make up the bulk of marketing spend and almost always take a greater (sometimes significantly greater) share of budgets than do personnel costs. Marketing software to manage campaigns offers four benefits to marketing executives: 1. Better targeting, sophistication and timeliness of campaigns, 2. Greater consistency across communications channels, 3. Automation of routine but staff-intensive work, and 4. Better management of costs. Three factors have always limited the effective management of customer promotions: The time lag between planning, execution and analysis; the inability to tailor offers to individual customers and the difficulty in managing promotions across marketing channels (direct mail, public relations, advertising, partners, etc.). New campaign management tools offer much to each of these areas. Modeling and prototyping tools create the ability to test campaigns before major investments are made. Campaign tools are typically integrated with analysis software to help tailor promotions. The software can be deployed widely inside the marketing organization and to channel partners so it is significantly easier to implement multi-channel campaigns. Campaign management is often the design center of marketing automation suites. Vendors recognize that this is the largest area of marketing spending in any company. As a result, the software is often quite extensive but intuitive enough to be used by individual marketing professionals with a day of training. 7

8 Customer Management Response tracking, leads management, qualification, pipeline and forecast management are all traditional marketing tasks. These customer management processes are well covered by any marketing automation system. Every marketing automation product has some customer and opportunity management system including integration with major relational database systems. These modules tend to be very similar across vendors, but five features require close evaluation: 1. Scalability. Some vendors provide an integral database with their application. In the base product this is often a small footprint with limited scalability. Make sure that the customer management system can be easily integrated with enterprise database systems. 2. Integrated customer model. Most companies use a formal marketing and sales process (TAS being one of the most popular). The customer management system should have standard functionality to automate this process. 3. Incorporate third party data. Lead and prospect lists come from many public sources in many different formats. The customer management module should have data extraction, transformation and loading (ETL) capabilities to load this data easily. 4. Update and distribute. The system should have tools to automate and securely deliver leads to sales representatives based on several factors: territory, management level, account name, deal size and contractual detail. 5. Customized reporting. Every customer management system includes a number of standard reports and there is often a more extensive reporting module. Many of these are difficult to program and customize. Workflow Management One of the greatest challenges in managing multi-channel marketing programs is to visualize, diagram and track all the processes, dependencies and dates involved. Many marketing groups use paper-based systems or general project planning tools like Microsoft Project. Most marketing automation tools include a set of workflow management tools to better automate these functions. A typical system will include a visualization tool to enable marketers to lay out the process flow for programs on a graphical display. This initial workflow chart may generate a list of activities, dependencies and dates for analysis and refinement in a final plan. The result is a timeline of events, checkpoints, staff allocation and data dependencies that can span all corporate functions. The key to this kind of product is ease of use. Many marketers are not technically sophisticated and getting access to an IT professional to make changes to the system can delay the planning cycle. As a result, most of these tools are very easy to use with drag-and-drop interfaces for most critical actions. The tools also include reporting and trigger processes to help manage the execution of the planned campaign. Marketing Resource Management Managing marketing organizations can be complex. There are may different disciplines involved, the budget is frequently a moving target and measurable returns often lag the original investment. Most executives would prefer to manage marketing expenditures as a totally variable cost and as a discretionary expense. In practice, since campaigns can be complex and execute over several fiscal periods, programs are often delivered under contract to an assortment of advertising vendors, event managers, direct mail houses and other outside vendors. 8

9 Managing investments that are made in one quarter, executed in another, delivering returns in still others create constant pressure between marketing and corporate management. The marketing and financial groups routinely do a quarterly dance to determine how expenditures should be expensed, accrued or amortized. Most accounting software is not well designed to track these kinds of investments. Until recently, software had little to offer to the management aspects of marketing. Marketing resource management tools are now available as a component in automation products and as standalone software. These typically include staff allocation and evaluation modules, financial tracking, budget allocation by department, as well as measurement and reporting tools. Some products automate staff development functions such as objectives, reviews and training plans. Perhaps most importantly, they include what if scenario planning and reallocation modules to enable marketing management to respond quickly to changes in their budget. Selecting the Right Solution Marketing software does not exist in a vacuum and as discussed earlier, investments here typically lag sales and service automation. As a result, selecting the best software is often a complicated enterprise. We recommend the following decision tree: 1. If the company has standardized on a CRM platform for sales or service, it is usually best to use the marketing module from this vendor. Even if marketing functionality is behind the state of the art in some areas, integration with other customer-focused organizations should be a key selection criterion. 2. If the company does not have a standard CRM platform, it is better to use the marketing automation initiative as a way to select such an infrastructure than go it alone with an isolated solution. 3. Where there is no pressing need for a larger CRM platform, the goal should be to select the product with the most extensive functionality. When selecting a product of this kind, it is important to understand how this software might be integrated with a corporate CRM standard in the future. If the marketing software uses proprietary interfaces or requires a native scripting language it may be difficult to integrate with such a standard in the future. 4. When selecting software, your company is also selecting a vendor. The size, stability and viability of this vendor should be of paramount concern. As the market continues to consolidate, acquisitions and failures will only increase. Make sure your organization is not stuck with an orphaned system. 5. Understand the range of the vendor s partner ecosystem. Larger companies will have extensive systems integrator and complementary software partnerships. Most companies do not have the internal expertise to deploy the initial system, integrate it with existing data sources or add functionality over time. 6. Select a comprehensive solution, but implement it in stages. We advise this for all CRM projects (see Living through the CRM Life-Cycle, Vol. 4, No. 6 ). Begin implementation with the most pressing point of pain and add functionality gradually over time. This will help keep the project manageable and limit financial risk. 9

10 The Bottom Line The discipline of marketing and the software available to automate it have evolved rapidly over the last decade. Enterprise-wide marketing automation software has been available for the last two or three years. As discussed in this report, these applications are particularly adept at the operational and interaction aspects of marketing. They offer very little support for strategy development and product planning. Individual vendors offer variants of functionality, but all of the major specialists and CRM companies provide some capability for managing marketing resources, campaign management, customer management, analytics and workflow automation. Selecting the best product is often a matter of aligning with a company-wide CRM infrastructure or selecting the most viable software vendor. Functionality is important, but most products have sufficiently evolved so that support is available for most marketing processes and the major vendors can be expected to continue to evolve their products rapidly. Automating a bad strategy or an inefficient process accomplishes little and may give the marketing organization an undeserved sense of satisfaction. Any major marketing automation initiative should start from strategy and rethink process before any technology project is undertaken. Many companies attempt to redesign processes in the midst of an automation effort. This is better than no redesign effort, but can significantly increase costs and induce delays. Strategy, process and automation in that order deliver the best and most predictable results. 10

11 Further Reading Marketing Analytics: Technology Options, Extraprise Report, Vol. 5 No. 5 Marketing Analytics: A Worthwhile Option, Extraprise Report, Vol. 5 No. 4 Maximizing the Return on Siebel Software, Extraprise Report, Vol. 4, No. 8 Living through the CRM Life-Cycle, Extraprise Report, Vol. 4, No. 6 Only the Ubiquitous will Survive, Extraprise Report, Vol. 3, No. 5 11

12 Further Information Extraprise is an international technology services company specializing in customer relationship management. We combine industry best practices, proven technologies and rigorous processes to enable our clients to become more effective at customer acquisition, retention and service. Extraprise solutions span analytics, direct sales, marketing, field service, customer support, e-commerce, contact centers and other points of interaction. For further information on Extraprise services or the material featured in this Report, contact David Winterhalter All content Copyright 2002, Extraprise Group, Inc. All trademarks are property of their respective holders. Extraprise Reports may not be duplicated, reproduced, stored in a retrieval system, or retransmitted without the express permission of Extraprise. The information contained in this publication is believed to be reliable, but not necessarily complete and its accuracy cannot be guaranteed. This Report originated in Boston. All content Copyright 2002, Extraprise Group, Inc. All trademarks are property of their respective holders. Boston London Amsterdam Chicago Dallas New York San Francisco tel info@extraprise.com tel +44 (0) infouk@extraprise.com