It's a simple equation: Customer Loyalty = Profitability. As the Internet emerges as a bi-directional sales and marketing channel, mass marketing campaigns of yesterday are being replaced by multichannel, targeted campaigns that will ultimately lead to real-time, one-to-one customer relationship management and marketing.
The focus is shifting from the transactional aspects of electronic commerce to marketing engines that drive prospective customers to company Web sites. "Now that there exists the automated ability to take transactions over the Internet, companies don't need as wide a net to identify potential customers, qualify them and pull them through the sales campaign to point of closure," says Christopher Fletcher, an analyst for Aberdeen Group and author of a recent marketing automation viewpoint report. As a result, he believes there will be much more growth in Internet-based marketing than pure Internet-based selling. However, he believes there must first be a convergence of sales force automation and marketing automation applications, as well as integration with customer support and call center technologies.
This demand is driving the burgeoning field of enterprise marketing automation.
EMA vendors are stratifying into three major areas: high-end campaign management, Web-driven campaign execution and marketing-oriented analytical applications. This further breaks down into a complementary set of customer support technologies, including lead management; data mining; campaign management; customer centers; integrated call center and Internet capabilities; and agent-based marketing tools and capabilities.
One of the first areas to boom was that of analytical applications, offered by companies like Epiphany, Paragren and soon Hyperion/Arbor. "There is increased popularity of data marts with core business logic, but for EMA-style analytics to succeed, you need core functionality to measure all major aspects of sales and marketing [e.g., customer profitability, customer churn], as well as provide interfaces to key customer relationship management [Clarify, Siebel, Vantive, Silknet, Trilogy] and enterprise resource planning [Baan/ Aurum, SAP, Oracle] vendors," says META's Barry Wilderman, vice president of application delivery strategies. He believes successful vendors in this space will develop interfaces to a wide variety of disparate ERP and legacy systems.
Consequently, it is expected that systems integrators and consultants, including AnswerThink, Cambridge Technology Partners, Ernst & Young, KPMG, TSC, SoftPlus and Hensley Segal Rentschler, will play an increasingly important role.
"Successful vendors in this space will develop interfaces to a wide variety of disparate ERP and legacy systems."
With so many players and so many opportunities, EMA is a market into which there have been huge infusions of venture capital. In fact, the market for EMA solutions is expected to grow from $100 million in 1998 to $2 billion by 2002, according to studies conducted by META Group (stamford, Conn.).
"By 2002, 60 percent of Global 2000 companies will have outgrown their traditional data bureau-based database marketing approach," believes Wilderman, who forecasts that by 2001/02, component-based architectures and marketing automation suites will center on integration with business performance management. "This will enable `closed-loop' relationship management with tight feedback loops, through direct or indirect channels. Firms can then easily measure the impact of promotions, products, services and pricing."
But not everyone is as optimistic about how quickly EMA will take off. "Most companies are still trying to figure out if they can justify this type of thing. They are aiming to do so through cost savings," says Michael Bernstein, research analyst with Gartner Group (stamford, Conn.). He believes EMA will pick up momentum as cost savings are realized. "Revenue enhancement is icing on the cake. But for now, few companies are buying what you'd call marketing automation software." Instead, he sees firms "sticking their toes in the water," delving into campaign management software for tracking campaigns through data analysis. Bernstein believes EMA will focus on execution. "But, before execution, companies need background analysis with campaign management tools, which will enable firms to identify new prospects, qualify them and then pull them through their marketing campaigns by sending them to the call center or Internet."
The EMA market is evolving rapidly, so devising an EMA strategy and choosing vendors are daunting tasks for marketing heads and IT executives.
EMA solutions can demand considerable investment, not to mention enormous amounts of attention by IT staff. New entrants offering applications that bind sales, service and production into a cohesive, customer-sensitive whole will have a high price tag for early adopters. "The cost to equip marketing will run from $6.6 million to $8 million," contends J. Thomas Gormley, senior analyst with Forrester Research (Cambridge, Mass.), and co-author of "Marketing Applications for Dynamic Trade," a whitepaper on retooling marketing strategy.
Despite the cost, he believes companies have no choice but to invest in emerging technologies. Marketing in most companies, he believes, is ill-prepared for "dynamic trade," which he defines as the ability to satisfy current demand with customized response. However, he notes that recent reengineering of core systems and packaged applications has laid a solid IT foundation for EMA at leading-edge companies. "While the inter-enterprise supply chain dream has yet to be realized, most corporations have made huge strides forward in materials planning, production management and logistics by installing applications from vendors like SAP and I2." Gormley adds that, with appropriate inputs to these systems, companies will respond faster than ever to shifting market demands.
Business-to-Business vs. Business-to-consumer
There are two recipes for EMA solutions: business-to-business (B2B) and business-to-consumer (B2C). "Before the new era of one-to-one, business-to-customer campaigns emerges, data warehouses must mature and high-end, business-to-consumer campaign management solutions must evolve," says Aberdeen's Fletcher.
META predicts that until the end of 1999, IT organizations will increasingly focus on B2B e-commerce, driven by enterprise-scale customer relationship management (CRM) packages. By 2002, META expects that more than 50 percent of all B2B campaigns will be managed internally, with a heavy emphasis on Web delivery. "Intelligent, agent-based business-to-consumer initiatives will falter until 2000/01, when business-to-consumer services, CRM and database marketing automation mature and integrate with traditional lead management, sales force automation, customer support, field service and order management," says Wilderman.
Some, however, believe there is more urgency in B2C. "B2B companies should not start there; rather, they should focus on lead and channel management and ultimately put in more basic management tools," says Gormley. He notes that in the B2B world, "while it's true there are smaller numbers of customers, each relationship is more complex. So you may not really need these big data analysis engines to segment, but you will need something more execution-focused to coordinate all your contacts in a particular account, to make a big sale, for instance." In the B2C world, he sees a need for heavy-duty data analysis engines to sort through millions of customer records to facilitate segmentation. "You need a heavy-duty campaign management tool for analytics, such as those offered by Prime Response or Exchange," he adds.
Actual EMA Implementation
Although few and far between, actual EMA applications users are surfacing.
One such company is Netscape, which is working toward one-to-one marketing with its millions of customers. The mammoth online services company is in beta testing of applications from Annuncio Software.
"Regardless of your focus, marketing needs a plan in initiating EMA. Identify your top two processes for automation efforts," says Jane Smith, group marketing manager for Netcenter, Netscape's portal site, through which online versions of magazines and newspapers are offered, in addition to services for families, businesses and special interest groups.
Netscape wants to go a step further, aiming for "one-to-one" relations with more than 10 million Netscape customers. "We will apply offline direct-marketing concepts to the Internet to improve click-through rates and advertising appeal."
Marketing communications thus far have been centered around Netcenter's online newsletter, broadcast to its entire customer base. "We firmly believe that target marketing will lead to loyal customers, which translates into profitability. We want to know more about our users and target them with relative content," says Smith. "If we can know the geography and demographics of each customer, we can, for instance, send reviews of Chicago restaurants or weather reports to the appropriate members."
At the core of Netscape's enterprise marketing strategy is Annuncio Live, which includes campaign management, reporting, analysis and tracking capabilities. "We chose Annuncio because it met our time-to-market needs, overall cost targets, and marketing and product requirements," notes Smith, who expects to be in full production by the second quarter of this year.
Link to Future Loyalty
Based on customer relationship management systems already in place, EMA applications will be the linking function that cements repeat business. "The ideal marketing event will be taking advantage of the opportunity to tell a customer about a product ideal to that individual, even if he called in for another purpose, like checking account status," says Wilderman. "We hear a lot about high-end campaign management from companies that are focused on the next level of direct marketing, which is figuring out how many ways they can touch an individual or business-through the Internet, e-mail, direct mail, call center or customer interaction center-without overwhelming the individual."