Growing Pains

Marketing executives are no longer Teflon Dons. Working with thinner budgets and under heavier scrutiny to deliver results, chief marketing officers and heads of marketing departments are in the hot seat and need to account for every penny spent. As a result, these days marketing executives have to be smarter about both how they deliver their messages and how they measure a marketing initiative's return on investment (ROI). As companies are under pressure to do more with fewer resources, savvy marketers are turning to marketing automation to make their lives easier in a multichannel world. In fact, although it is still an emerging market, some analysts predict that companies will spend $2 billion on marketing automation software and services this year. That figure will grow as more enterprise companies adopt marketing automation solutions over the next few years. Adding marketing automation to a company's digital nervous system can deliver positive, accurate results--especially to direct marketing programs, which often yield fuzzy results. Today marketing automation technology allows marketers to analyze customer-buying trends, segment customers with laserlike precision, design targeted sales and marketing campaigns, manage both online and offline campaigns, and measure ROI. One problem marketing automation has faced is confusion over what it really does. It often gets confused with e-mail marketing, says Christopher Fletcher, vice president and research director at Aberdeen Group, a Boston-based research and analysis firm. "Marketing automation is the antithesis of the spam approach," Fletcher says. For this reason, some vendors are moving away from the term marketing automation. They prefer to use the new moniker marketing resource management, because they view marketing as a transactional approach, says Cynthia Countouris, vice president of product marketing at MarketFirst, a marketing automation software vendor in Mountain View, Calif. "Traditionally, marketing has not had a solution or a supersoaker in the game. Marketing has been seen as intellectual capital," Countouris says. Nevertheless, marketing automation, or marketing resource management, has a big upside. During the past few years it has grown from solo campaign management applications to multilayered solutions with marketing analytics and campaign management as core components. Enterprises that properly use it can boost customer acquisition, increase customer retention, fine tune marketing strategies, and save money by detecting weak campaigns. "Marketing automation solutions can [deliver] a big ROI. They are trying to give a seamless application with both analytics and campaign management that can be used by the modeler and the marketer," says Gaurav Verma, an analyst at Doculabs, a Chicago-based market research and consulting firm. In many cases marketing automation solutions have an ROI of fewer than 12 months, Verma says. And these days the bottom line for marketing is ROI. Marketing automation vendors recognize this and have it in their sights. "C-level executives are having a lot of conversations on how we are going to measure this," says Marty Shepard, senior vice president of marketing and business development at Protagona Worldwide, a marketing automation software vendor based in Chicago. Robert McLaughlin, cofounder and executive vice president at four-year-old Aprimo Software, also sees chief marketing officers turning to today's full-featured marketing automation as they come under increasing pressure to make each dollar count. So in March the company released Aprimo Marketing 5.0, which features enhanced campaign management and lead management. "The strongest trend we see is, How is the CEO viewing marketing? How accountable are they going to hold the marketing executives? It's not just about marketing presence, it's about a business professional like the marketing executive driving business for the company," he says. Paul Rodwick, vice president of market development and strategy at E.piphany, agrees. "The current pains for many clients are the shrinking marketing budgets," says Rodwick, adding that such a climate is positive for marketing automation. "Our clients wants to understand who their customers are and then to take the right action across all the customer touch-points, so we continue to innovate on making more complex, targeted marketing efforts easier for customers." The release of E.piphany Marketing 6 in March was designed to answer that need. It was the company's largest marketing release, and contains dynamic HTML that allows a range of user interface improvements to simplify the job of complex segmentation, Rodwick says. In addition, a feature called E.piphany Real-Time, which helps users to model customers in real-time and create customer attributes in a self-learning environment, is enhanced in the latest release. A Crowded Yet Growing Market The current state of the marketing automation market shows it is maturing quickly, and is headed for rapid consolidation, with weaker players becoming irrelevant, industry experts say. It is also an area that will be targeted by integrators and consulting firms. For instance, the Big Five consultancy Accenture has created a marketing area of focus within its CRM practice. In the CRM world the marketing automation sector is one of the most crowded. Myriad vendors offer Web-based marketing automation solutions with varying degrees of analytics, real-time capabilities, and the ability to tie to CRM systems. Currently the field of marketing automation vendors includes such companies as Applix Inc., Aprimo Inc., E.piphany Inc., MarketFirst Software Inc., Protagona Worldwide, SAS Institute Inc., Unica Corp., and Xchange Inc. Doculabs breaks down the marketing automation sector into three segments. The first is led by the campaign management firms that have added analytics through alliances with companies such as Hyperion Solutions Corp. and MicroStrategy Inc. The second segment comprises vendors with a marketing-analytics focus such as Chordiant Software Inc., E.piphany, Protagona, and Unica. And the third is CRM suite vendors, including Siebel Systems Inc. and PeopleSoft Inc., which ported additional marketing functionality with the acquisition of marketing automation firms. For example, PeopleSoft's acquisition of Annuncio Software Inc. in January will allow the firm to port functionality of Annuncio's marketing automation software into PeopleSoft's marketing modules. These will be included in the upcoming releases of PeopleSoft 8.4 and PeopleSoft 8.8, says Robb Eklund, PeopleSoft's vice president of CRM product marketing. The key for any of these marketing automation vendors is that they must meet basic requirements to propel marketing within a contact center, Doculab's Verma says. Those features are marketing analytics, campaign management, real-time analysis, and integration with third-party CRM systems. "People are looking to integrate their marketing efforts and flow the leads to the sales process. The challenge is for businesses to be integrated with all segments of the customer interaction," Eklund says. "From our perspective the value is supporting the marketing business process end-to-end, making sure we can elegantly support every step of that business process." Elegant or not, marketing automation is not the end all, cautions Don Peppers, partner at the Peppers and Rogers Group, a management consulting firm in Norwalk, Conn. It must fit with the company's overall CRM strategy and marketing strategy, he says. "Marketing automation is all about informing the marketer. Most of the marketing automation software falls in the camp of campaign management, and that falls into automating the marketing tactic," Peppers says. This is why having an analytics component in marketing automation software is so critical. Finding the Right Niche While the marketing automation vendors claw for market share, they all face one common challenge: homegrown systems using Microsoft Office, Aprimo's McLaughlin says. "It's a very disconnected state," he says. "This is becoming a more recognized space, with the IT organizations seeing that marketing automation is an alternative solution." Given this competitive landscape, marketing automation vendors are fighting for center-stage attention. Like many of his competitors, Greg Erman, CEO of MarketSoft, a Lexington, Mass.-based vendor, is looking for its place in the spotlight. "We want to be to marketing what Siebel is to sales in the category of marketing automation," he says. The company, Erman says, is using a demand chain management approach for its Java-based product suite called DemandMore, which has five modules. The company's solution set is poised to attract marketers trending toward guerrilla marketing, he says. "Marketing organizations are faced with cut budgets and are being asked to transform from traditional to guerrilla marketing. They are going from 20 campaigns a month to 200 campaigns, with much more relevant and targeted marketing, and you can't do that off an Excel spreadsheet," Erman says. Recognizing that marketers need to get these robust systems implemented quickly, MarketSoft's solution has a distributed rules engine design that shifts the business rules development from the IT department to the business users, thus cutting implementation time between one to six months. "IBM got it up in two months," Erman says. Vendors are also responding to companies' growing interest in analytics. "The trend we are seeing is midmarket companies that need sophisticated analysis," Protagona's Shepard says. "We are building wizards and analytical guides into the products." Marketing automation vendors such as Protagona Worldwide and Unica, both of which once had their roots in statistical modeling, have evolved their campaign management products, wrapping them with analytics to give marketers what they really need, he says. Protagona Ensemble 5.5 was released in March with improved analytics, workflow, and project management. Protagona's workflow project management piece, called Choreographer, helps marketers track ROI. For analytical functionality, Protagona has partnered with MicroStrategy and Unica with Business Objects. "We are trying to simplify life for the marketers in the midmarket as they might not be as sophisticated in analytics," Shepard says. Marketing automation vendors are also recognizing the increasing importance of call centers to the marketing function. According to MarketFirst's Countouris, the marketing automation sector is making strides in building functionality that supports call centers with dynamic scripts that help target customers types, as well as offers robust marketing features. MarketFirst itself last month rolled out Market Release 4.0, which has a stronger support for analytics, better integration of the data sources, and has a feature for building dynamic content that does not require marketers to have programming skills. "It doesn't require a lot of changes in skill sets," she says. Market Release 4.0 also sports new features, including Lead Manager, which allows for lead distribution directly to the sales organization or through a sales force automation system. Another new feature, called Event Manager, is designed to help event marketers. While the marketing automation vendors fight for mind share, market share, and bragging rights, their own marketing fight is just beginning as this sector picks up steam both in adoption and in market consolidation. But marketing executives cannot stay in the comfort zone of tracking campaigns on an Excel spreadsheet. As they face big marketing ROI challenges, choosing a marketing automation solution is a choice that is as important as growing and retaining their best customers.