A Forrester Consulting Thought Leadership Paper Commissioned By Silverpop How Marketers Should Rethink Their Approach To Marketing Automation May 2012
Table Of Contents Executive Summary... 2 The Current State Of Marketing Automation... 3 A Limited Playbook Blocks Marketers Efforts... 5 Up Your Game By Positioning Automation As A Strategic Asset... 9 Add New Plays To Your Playbook With Customer Value... 10 Key Recommendations... 12 Appendix A: Methodology... 13 Appendix B: Supplemental Material... 13 Appendix C: Demographics... 14 Appendix D: Endnotes... 15 2012, 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 www.forrester.com. [1-IQ1UDF] 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 www.forrester.com/consulting. Page 1
Executive Summary Customers and prospects control the conversation like never before. Through an exploding number of channels, realtime feedback, and powerful mobile devices, customers dictate what companies should talk to them about and how frequently they should do it. Marketers have Marketers focus on automation s efficiency responded to this shift by using marketing automation tools, such as campaign benefits, but big opportunities management and lead management systems, to manage customer and prospect reside in using automation to enhance marketing s strategic communications. While users focus on the tools improvements to process approach to customers. efficiency, they too often fail to exploit automation s potential to evolve marketing s strategic approach to customers and to peers in sales and support. In January 2012, Silverpop commissioned Forrester Consulting to understand how marketers use marketing automation tools to drive communications, develop campaigns, and deliver valuable customer experiences. Forrester also analyzed how marketers current capabilities affect their emphasis on customers and examined how marketers expect technology to alleviate the challenges they experience. Through in-depth surveys with 155 US-based senior marketing professionals, Forrester found that most marketers focus on the efficiency benefits of marketing automation tools. Many still overlook the tools potential to build programs that drive customer lifetime value or boost alignment with sales or support. Not realizing these strategic benefits of automation can result in lowered customer satisfaction, reduced lead quality and revenue, conflict with other departments, and increased dissatisfaction with their automation tools. It can also create paralysis from the resulting flood of customer data. Key Findings Forrester s study yielded the following key findings: Marketers embrace automation and plan to increase usage. Automation allows marketers to eliminate guesswork from demand generation and customer relationship management. Most respondents told us they plan to increase the number of automated campaigns and see additional headroom for efficiency improvements. The performance of automation tools allows enterprising marketers to iteratively improve customer relationships through a test and learn approach. I do believe in the value of marketing automation as we learn more about our customer base and their needs and wants, we are able to go back and continually refine our campaigns. (Director of marketing, global strategy and design agency) Marketers focus on process efficiency obscures the strategic potential of automation. Marketers embrace automation, but most users focus on its ability to improve efficiency rather than effectiveness and organizational alignment. The most mature users in our study use automation as a method of improving lifetime value, building dialog with customers, and increasing collaboration. Less mature users were more likely to rely on simple response metrics, fail to use advanced campaign design, and blame the technology when their campaigns create problems for other parts of the business. Page 2
The easiest way to measure performance is email. How many sales you can get from leads that are generated by automated marketing compare sales dollars to actual contacts coming in. That s the way we measure it. (Manager of online marketing, Fortune 500 financial services institution) New and experienced users can readily improve program maturity. New and experienced users of marketing automation can build programs that are both efficient and customer-centric. The winning automation playbook improves customer relationships and collaboration by focusing on customer value, business impact, crossdepartmental alignment, dialogue-based campaigns, and real-time automation. The lesson we learned was that by focusing on improving one campaign at a time, marketing automation could drive revenue and improve customer ROI. (Manager of email marketing, large online retailer) The Current State Of Marketing Automation Marketing has evolved significantly over the past several years, and the pace of change continues to accelerate. Global economic conditions constrain budgets and headcounts, while at the same time the number of communication channels, touchpoints, and customer expectations for companies responsiveness have all grown. To counter these trends, marketers have employed marketing automation solutions from campaign management, lead management, or email service providers to design and direct customer interactions with more speed and greater personalization than is possible with manual processes. Forrester defines marketing automation as: Tooling and process that help generate new business opportunities, improve potential buyers propensity to purchase, manage customer loyalty, and increase alignment between marketing activity and revenue. 1 Marketing automation solutions provide direct gains in operational efficiency and underlie more sophisticated customer relationship programs. Marketers surveyed indicated that they have and will continue to increase investments in programs enhanced by automation. Marketers see automation as a critical technology. Automation allows marketers to eliminate guesswork from demand generation and customer relationship management. So it s not surprising that marketing automation technology finds warm reception within marketing, delivering improvements to customer experience and allowing users to meet increased resource demands. Large majorities of marketers plan to increase the number of automated campaigns, and see additional headroom for the technology to continue to improve the efficiency of marketing processes (see Figures 1 and 2). I do believe in the value of marketing automation as we learn more about our customer base and their needs and wants, we are able to go back and continually refine our campaigns. (Director of marketing, global strategy and design agency) Yet most marketers fail to position automation as a strategic asset. The most mature marketers those using automation for 5 or more years showed clear differences in how they measure the performance of their Page 3
automated campaigns. While all marketers use response metrics, mature marketers were more likely to use incremental revenue, cross-sell and up-sell, and customer lifetime value metrics (see Figure 3). This focus on business-impact allows mature users to demonstrate that automation builds better customer relationships and improves organizational alignment. The lesson we learned was that by focusing on improving one campaign at a time, marketing automation could drive revenue and improve customer ROI. (Manager of email marketing, large online retailer) Figure 1 Future Plans Show No Indication Of The Trend Toward Increased Automation Slowing Down How will the number of automated campaigns change over the next 12 months? Decrease, 2% Stay the same, 39% Increase, 59% Base: 155 US marketing professionals Figure 2 Marketers Believe In The Value Of Marketing Automation I believe that marketing automation will the efficiency of my marketing processes: Not change, 14% Decrease, 3% Increase, 83% Base: 155 US marketing professionals Page 4
Figure 3 Mature Marketers More Often Focus On Sophisticated Measurements Of Campaign Performance How do you assess the performance of your automated marketing campaigns? Use AM for four years or less Use AM for five years or more Response metrics 74% 86% Incremental revenue 34% 55% Cross sell/up sell 21% 38% Customer lifetime value 15% 33% Base: 122 US marketing professionals A Limited Playbook Blocks Marketers Efforts Mature users focus on marketing automation s ability to improve efficiency, but also look to the technology to improve effectiveness and organizational alignment. Automation allows users to design sophisticated, dialogue-based interactions. It also enables the marketing department to align its capabilities with the needs of other departments, such as sales and support. Yet we found that most marketers: Frequently fail to use marketing automation to nurture customer relationships. Most respondents miss out on automation s ability to transform the marketing department s focus from generating lists to engaging with customers. Respondents newer to automation told us that they use the tool for customer activation and data gathering, while mature users focus on lead nurturing, cross-sell and upsell, or conversion completion (see Figure 4). Digging in to current usage, we see that marketers tend to focus on easing their own workflow through recurring campaigns, rather than building relationships through behaviorally triggered, multi-step or dialoguebased campaigns (see Figure 5). When we implemented the first time, we jumped in without planning and found that it was not the best way to drive leads to sales. We needed to be more organic, to allow behavior to drive contacts, not just easily increase the number of contacts. (Manager of email marketing, large online retailer) Page 5
Figure 4 Engagement Outshines Sales And Lead Generation What do you use marketing automation for? Customer engagement/activation Customer data gathering Loyalty Sales and marketing alignment Lead nurturing Offer generation Cross-sell or upsell Conversion/transaction completion Process efficiency/response time Onboarding Anti-churn or attrition 17% 15% 11% 25% 47% 47% 42% 38% 38% 37% 57% Base: 133 US marketing professionals Figure 5 Recurring Campaigns Are Currently Most Popular, But Interest In Behavioral Data Is Increasing What do you use to trigger automated messages? What will you use in the next 12 months? (check all that apply) Now In 12 months Recurring Behavioral Situation or event-based 50% 45% 53% 65% 69% 66% Multi-step or multi-wave 29% 30% Dialogue 14% 17% Base: 133 US marketing professionals Focus on low-level metrics that do not impact the business. Marketers must show that technology investments deliver business impact to quiet skeptics within and beyond the marketing department. Yet the vast majority of users focus primarily on basic response metrics, such as email opens and clicks. Only a minority of respondents judge their programs based on incremental improvements to lead generation or revenue (see Figure 6). Fewer still use strategic measures to guide the development of their marketing automation programs, such as impact on customer retention and lifetime value (see Figure 7). Page 6
The easiest way to measure performance is email. How many sales you can get from leads that are generated by automated marketing compare sales dollars to actual contacts coming in. That s the way we measure it. (Manager of online marketing, Fortune 500 financial services institution) Figure 6 Response Metrics Are Used To Evaluate Success, Leaving Customer Or Business Impact Metrics Largely Ignored How do you assess the performance of your automated marketing campaigns? Response metrics Improved lead generation Incremental revenue Customer ROI Cross sell/upsell Customer retention rates Lead nurturing improvement/sales impact Customer lifetime value 31% 25% 24% 23% 21% 41% 40% 80% Base: 133 US marketing professionals Figure 7 Email Behavioral Data Is Used Most Frequently What characteristics of behavioral data do you use? Email opens/clicks Visit frequency Ad clicks Purchase Form completion Attending an event Ad impressions Form abandonment Shopping cart event Shopping cart abandonment Social activity Geolocation activity Page category Site path Don t know Base: 90 US marketing professionals 1% 11% 11% 38% 33% 29% 24% 22% 21% 19% 18% 57% 52% 51% 66% Fail to build buy-in with other departments. As the number of customer touchpoints increases, marketers have the opportunity to extend their reach (and increase their budgets) to departments outside of marketing, such as ecommerce, sales, loyalty, or customer support. Yet interviewees failed to co-opt other departments when Page 7
planning their marketing automation implementations. Even after implementation, they fail to collaborate with other departments when enhancing or adding automations. Most survey respondents told us that they operate the technology solely from within the confines of the marketing department (see Figure 8). Sales isn t comfortable with the way marketing automation is working. They still want a little black book of customers they aren t willing to share with anyone else... our biggest challenge is to get end user buy-in on our side. (Manager of online marketing, large business consulting firm) Figure 8 Most Automation Users Come From Three Main Marketing Departments In which area of marketing are you most involved? Which area of marketing oversees marketing automation? (Select all that apply) Brand marketing 31% Marketing strategy 38% Marketing strategy 22% Brand marketing 36% Interactive marketing 21% Campaign management/crm 36% Campaign management/crm Social/emerging media campaigns 7% 15% Interactive marketing Social/emerging media 25% 20% Customer data analysis 3% Analytics/customer intelligence 17% ecommerce and ebusiness 0% ecommerce and ebusiness 14% Customer experience 0% Sales 11% Traditional advertising and media 0% Customer experience 10% None of the above 0% Demand generation 6% Base: 155 US marketing professionals Do not take advantage of the resulting flood of customer data. Competitive advantage increasingly derives from customer knowledge. Automation platforms improve marketers access and ability to analyze customer data. Yet most respondents focus on access, not insight. Marketers are adding behavioral, demographic, and survey data (see Figure 9). Yet their infrequent use of preference, propensity, and influence data shows that they miss out on the true potential of the technology. As long as users focus on data access instead of insight, it s no surprise they feel overwhelmed by the data deluge. We are highly satisfied with our marketing automation provider, but our challenge is that we are now drowning in data. We need to rethink how we use automation to get us in the right position. (Manager of online marketing, Fortune 500 financial services institution) Page 8
Figure 9 Marketers Take A Pragmatic Approach To Triggers What types of data do you use to construct triggers? Transaction history Promotion and response history Behavioral data Demographic data Survey data Social activity or comments Account activity or balance Psychographic data, including preference Third-party data appends Geolocation data, proximity, or check-ins Mobile activity Propensity scores Influence scores Don t know 2% 14% 12% 11% 9% 8% 26% 25% 20% 38% 55% 51% 48% 48% Base: 133 US marketing professionals Up Your Game By Positioning Automation As A Strategic Asset Whether you are considering a marketing automation pilot or are reevaluating an established program, approach marketing automation as a strategic asset, not a tactical expedient. To unlock your tool s true potential, base your automation playbook on generating customer value, both for the customer and your business partners. A focus on process efficiency will help you put quick points on the scoreboard, but will not be enough to win the game. A marketing automation program that serves customers and prospects by increasing personalization, relevance, and lifetime value will provide a long-term competitive advantage. How can marketers transform automation tools into a strategic asset? Marketers new to automation should plan a phased technology strategy. If you haven t yet made an investment in a marketing automation tool, begin by creating a game plan that begins with establishing responsiveness and execution efficiency. Structure future phases on customer value so that you achieve crossdepartmental alignment, using techniques like lead scoring and nurturing. The most mature phases of your plan should focus on using automation to drive customer lifetime value through dialogue-based campaigns or lead-torevenue management. Use this game plan to guide your tool selection, so that you aren t forced to rip and replace your platform in order to mature your program. Marketers experienced in automation should redesign program goals and tactics. If you are frustrated by the current state of your program, shift your goals so that you can show value beyond the initial productivity gains. Create a game plan that ties program performance to incremental revenue, improved lead quality, crosssell/upsell, or retention. Then change the design of your campaigns, triggers, channels, and performance metrics Page 9
so that you create the effect of real-time dialogue with customers and prospects. Delivering value to both the customer and your business will provide you with the business case for future program expansion. Add New Plays To Your Playbook With Customer Value New and experienced users of marketing automation can design programs that are both efficient and customer-centric. The right playbook will demonstrate how your automation program improves customer relationships and improves collaboration across the business. So what defines a winning marketing automation playbook? A focus on customer value. The marketing automation playbook focuses the marketer s game plan on greater content and message relevance and improved organizational alignment over pure efficiency improvements. While incremental improvements to marketing processes provide a series of quick wins, marketers must plan to advance the maturity of their automation programs. Advanced programs demonstrate value across the organization through building use cases focused on lead scoring and nurturing, cross-sell and upsell, retention, and customer dialogue. Better metrics for enhanced accountability. Marketers cannot rest on channel or response metrics to assess the performance of automated marketing campaigns. In order to guide customer behavior toward business goals, marketers must use higher-order metrics, such as improved lead generation, incremental revenue, return on investment (ROI), and customer lifetime value. With these measures in hand, marketers can demonstrate the value of these programs to their peers across the business, secure buy-in for future enhancements, and understand where changes will have the greatest impact. A priority on collaboration within and beyond marketing. Sales, ecommerce, customer support, and loyalty teams will all feel the effects of a mature marketing automation program. For those effects to be positive, however, marketers must invest in cross-functional collaboration. For example, B2B marketers should not automate a lead generation process without working with sales to define a lead scoring method, forwarding qualified leads directly to sales while routing the remainder into lead nurturing programs. Marketers should see cross-functional committees less as hindrances and more as methods of easing the path to marketing automation s success. Campaigns that go beyond simple recurring execution. Mature marketers make heavy use of multi-step and dialogue-based campaigns, using a combination of inbound and triggered outbound communications to deepen relationships with their prospects and customers. Why? While recurring programs provide a simple method of retaining contact with customers, they focus on easing the marketer s burden, not improving the relevance of messages for customers. Behavioral triggers, such as email clicks and form completions, provide a relatively simple way of implementing these campaigns, but marketers should also look to changes in customer state, such as attending an event or changes in account activity, to implement advanced campaigns. A platform that enables real-time automation. To keep up with customers in today s fast-paced world, marketers should look to build real-time messaging programs, based on integrated data systems, analysis and triggers. Integration requires an upfront investment in systems and processes, but the effort is necessary to Page 10
implement real-time responsiveness in marketing automation. The investment will return even greater responsiveness, relevance, and performance, since this capability will allow you to take advantage of customerinitiated actions, such as visits to your website, mobile check-ins, or online social network activity. Figure 10 Improve Marketing Effectiveness With The Strategic Marketing Automation Playbook Customer value Accountability Real-time Automation Collaboration Campaign design Source: Forrester Research, Inc. Page 11
KEY RECOMMENDATIONS An organization that wants to embrace marketing automation must determine the appropriate mix of enterprise technology, smart skill sets, intertwined processes, and cross-departmental involvement. Prepare to redefine your organization s marketing playbook in the following ways: Think globally, act locally. Whether you re just getting started or reevaluating your existing marketing automation program, remember that you need to find a balance between strategy and action. Your marketing automation program must show how it will address business strategy even as it delivers incremental improvements. Pick high-value interactions, such as lead generation or conversion events, and then develop a few automated response campaigns by defining simple scoring rules based on demographics or triggers based on behavioral factors. As you build on the success of these initial efforts, you will be able to develop more complex campaigns based on customer value. Center processes on customer knowledge. Automating marketing processes provides a direct benefit in efficiency to the marketing organization. To realize the true potential of marketing automation where customers perceive an improved relationship with your company via faster, more relevant interactions you must consistently implement analytical and measurement practices at each touchpoint, then apply any customer insights derived to automated programs. Aggregating and analyzing customer, promotion, and response data for actionable insights is an essential characteristic of an advanced marketing automation program. Develop your marketing technologists. Marketing s future will never be less technology-driven than it is today, and marketing automation only accelerates that trend. To improve your capabilities, look to strengthen your marketing technologists web developers, marketing operations professionals, application developers, and database administrators in order to improve the performance of both day-to-day operations and the long-term development of your marketing technology stack. 2 Don t be afraid to look for individuals with nontraditional marketing backgrounds: Marketing technologists frequently come to the marketing department from IT organizations. Nurture the marketing and IT relationship. Although marketing technology buying decisions are increasingly made by marketers, IT organizations still remain closely involved in requirements definition, product evaluation, vendor selection, and implementation. Marketers should leverage IT s role not only to smooth the process of getting buy-in, but to build trust as well. IT professionals who trust their peers in marketing are less likely to hamstring marketers needs for managing customer data or developing new process automations. Don t be too quick to blame technology. Marketing automation programs take many months to get up to full speed. These systems require significant configuration as well as deep integration with other tools, but they also depend upon organizational readiness in order to flourish. If you feel that your program isn t advancing quickly enough, take the time to examine non-technological contributors to the problem. Get your sales and marketing teams together to diagnose the problems in the lead nurturing process. Or bring together your interactive marketers and ecommerce teams to see how you can improve the customer experience. Treating your technology as the scapegoat could result in unnecessary pain as you lose time swapping out systems. Page 12
Appendix A: Methodology For this study, Forrester conducted an online survey of 155 mid- to senior-level marketers in the US to evaluate how they use marketing automation to drive communications and lead nurturing efforts in service of enhanced customer experiences. Survey participants included decision-makers in brand marketing, interactive marketing, campaign management, customer relationship marketing, and social/emerging campaign management. Questions provided to the participants asked about their challenges and current capabilities, the impact of marketing technology, and their overall opinions about metrics and measurement. The study began in January 2012 and was completed in February 2012. Appendix B: Supplemental Material Related Forrester Research Automating Lead-To-Revenue Management, Forrester Research, Inc., December 9, 2011 B2B Marketers Must Better Prepare For Marketing Automation, Forrester Research, Inc., April 26, 2011 Investing In Marketing s Technology Future, Forrester Research, Inc., October 24, 2011 Revisiting The Enterprise Marketing Software Landscape, Forrester Research, Inc., February 14, 2012 Page 13
Appendix C: Demographics Figure A Respondent Demographics Which industry vertical are you from? To whom does your company sell primarily? Technology & manufacturing 26% Financial services/insurance 19% Businesses, 36% Consumers, 23% Media & publishing 16% Services 13% Retail Consumer packaged goods (CPG) Travel & hospitality 8% 7% 10% Both consumers and businesses, 41% Base: 155 US marketing professionals Figure B Respondent Demographics Which of the following most closely describes the department you work in? Advertising, 8% Marketing, 92% Base: 155 US marketing professionals Page 14
Figure C Respondent Demographics Using your best estimate, how many employees work for your company worldwide? 1,001 or more employees 28% Which of the following best describes your position at your company? Executive, 6% Manager, 54% Vice president, 11% Director, 28% 50 to 1,000 employees 72% Base: 155 U.S, marketing professionals Appendix D: Endnotes 1 Marketers serving buyers that make high-consideration purchases need to communicate with those individuals at every stage of their path to purchase. To manage this depth of engagement at scale requires marketing automation. Source: B2B Marketers Must Better Prepare For Marketing Automation, Forrester Research, Inc., April 26, 2011. 2 To manage and take advantage of the increasing use of technology, marketing departments are developing new organizational structures Forrester calls the Marketing Technology Office. The office, headed by a chief marketing technology strategist, guides technology strategy, develops the marketing technology stack, and evangelizes innovative uses of technology throughout the marketing department. Source: Investing In Marketing s Technology Future, Forrester Research Inc., October 24, 2011. Page 15