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Three Strikes and You’re Out: Why Marketing Automation Failed the First Time, and Why This Time Is Different
[October 31, 2007]

Three Strikes and You’re Out: Why Marketing Automation Failed the First Time, and Why This Time Is Different

By Jon Miller
Vice President, Marketing

Matt Williams, a Golden-Glove winning second baseman, was a promising batter but couldn’t hit a curveball. He had potential but the wrong strategy. What did he do? He revamped his swing–and dramatically improved his batting average, not to mention his salary.

Chipper Jones was the star third baseman for the Atlanta Braves, but he knew the importance of versatility. So to expand what he could offer the team he switched to the outfield–and may have saved his job. He’s still playing for the Braves today, and he’s back at third base by the way.

What do these players have in common? They recognized the changing nature of their industry and did something significant to maintain their value, with significant success as result.

Just as baseball has evolved, requiring new strategies and techniques to stay competitive, marketing is also undergoing a dramatic upheaval, driven by the Internet and the rise of marketing accountability. In turn, this will lead to new players and strategies for success in marketing automation.
Marketing upheaval

The Internet has forever changed the way we interact with and market to customers. Web sites, email campaigns, Webinars and pay-per-click campaign management are just a few examples of this, not to mention blogs, podcasts, and user-generated content. You won’t find any of these tactics referenced in classic marketing textbooks from just a handful of years ago. But they’re all valuable channels for interacting with potential customers, and they can’t be ignored.

Another fundamental change to marketing departments is a growing call for accountability. Marketing is a significant expense for many companies (a good rule of thumb is between five and 10 percent of total sales), but unlike manufacturing, IT, etc., traditional marketing expenses are loosely structured and hard to tie to revenue–which is why many executives think of marketing as a cost center, not an investment. And that makes marketing budgets hard to justify.
Enter marketing automation

When any market experiences significant change, companies spring up to provide solutions. For that reason I expect we’ll see a rebirth of the marketing automation industry in the near future. This time around, however, things will be different, because it’s a whole new ball game out there.
As a category, marketing automation first emerged in the mid–‘90s in response to the explosion of data available about customers, the emergence of online channels, and the need to keep track of it all. Marketing automation was first thought of as an extension of database marketing, and it later fell under the CRM umbrella. These solutions promised to bring companies closer to their customers, automate and streamline the marketing department, and deliver the holy grail of complete marketing accountability.

Unfortunately, while that initial promise had promise, the majority of these solutions failed to deliver–and most of the early marketing automation vendors ended up being acquired or shut down. Why? What went wrong with marketing automation?

Strike one
In a stroke of irony, most first-generation marketing automation companies didn’t understand their own target audience. What do I mean by that? Early marketing automation companies didn’t understand that marketers aren’t techie people. The solutions these companies built were delivered using on-premise software and were extremely difficult to install and integrate. They also required ongoing IT support, which is rarely available to marketing departments.

First-generation marketing automation solutions were also expensive and often required up-front capital investment. The same can be said even for most of today’s on-demand marketing automation vendors. Although marketing departments have large program budgets, they just don’t have the budgets to buy expensive technology or huge annual subscriptions. Justifying investments for marketing is nearly impossible, because the department is nearly always seen as a cost center and not a revenue-generating asset. So while marketers can spend $20,000 for a demand-generation program or $50,000 for a tradeshow, they can rarely get those costs approved for software, no matter how promising.

How’s that for misjudging your target customers?

Strike two
While certainly helpful for executing campaigns, first-generation marketing automation companies overlooked the emerging need for marketing accountability at the CMO level. These solutions were focused on DOING marketing and didn’t provide the tools marketing executives needed to demonstrate the bottom-line impact of their programs–in a way that mattered to the CEO and CFO. Measuring, forecasting, planning–these are all essential elements that were MIA in the first wave of marketing automation solutions. What’s needed is a balance between the doing and the measuring. If a solution goes too far in one direction or the other, it simply won’t work.
Three strikes and you’re out.

While the first wave of marketing automation solutions helped companies to target and communicate with potential customers, this raised its own set of problems with privacy and interruption. Customers now have options for avoiding unwanted “push marketing,” especially from companies with which they don’t have a relationship. Today’s buyers seek out their own solutions, with 93 percent of all B2B buying cycles beginning in a search engine.

When potential customers actively seek out information about a particular product or service, they are more likely to make a purchase than, say, someone who happens to notice an advertisement in a technology magazine. So common sense says it behooves you to make yourself easy to find online. This is where search engine marketing (SEM) comes in. Search must be part of a complete marketing automation solution, because if marketers don’t make themselves easy to find online, someone else will. And if that happens, well, game over.

Marketing automation is still a great idea, but the first wave of companies that attempted to do it simply went about it all wrong. The new contenders out there must learn from the mistakes of the past. To succeed they must provide a solution in a way that makes sense for the way marketers think and spend money.
Fundamentally, this means marketing automation needs to be less like enterprise software and more like consumer software. And that means much more than simply providing “software as a service” or having a cool AJAX UI. It means selling like a web company, providing support like a web company, and pricing like a web company. In other words, solutions for the marketing department must be easy (and free) to test drive and trial. They need to be easy to use. They need to be easy to buy from existing marketing budgets. And they need to work without any IT support.

Today’s marketing automation solutions also need to reflect the latest techniques and trends in marketing, which means including search engine marketing as part of the equation. Doing this right requires a complete SEM solution, from keyword selection to bid optimization to landing page management. And the solutions must provide the measurement, forecasting and planning tools that marketers need to provide accountability to C-level management.

Winning the new game of marketing automation won’t be easy, but no one said it would be. The key is to keep your eye on the ball and anticipate the needs of your target audience. Otherwise you just may find yourself on the bench.

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