What Is Marketing Automation and Why Should You Care?
The term "marketing automation" is perhaps one of the most widely used, ill-defined and ambiguous terms in the marketing and sales technology landscape. Ask 10 different people how they define marketing automation, and you'll probably get 10 different answers.
Are there marketing automation solutions? Is it a category? Is it a type of technology? Or is it just a bunch of hooey?
As an analyst, I thought it would be appropriate for me to dispel some of the myths and haziness that shroud the marketing technology landscape, particularly the use of the term "marketing automation." In my opinion, much of the uncertainty and ambiguity has stunted growth of technology that will be critical for every company to embrace in order to maintain a competitive foothold in the market. The research I have conducted has consistently shown that marketing automation technology has a direct impact on bottom-line cost reduction and top-line growth. However, before we tackle that, let's define "marketing automation."
First, a disclaimer: I do not seek to provide a new standard in the market for defining marketing automation. I wholeheartedly understand that there are other analysts, thought leaders and product marketing managers who may not agree with all the components of my definition. However, I believe the definition below will help clarify and provide structure around the concept of marketing automation and hopefully help conceptualize why automating marketing activities is of value for every organization.
I believe marketing automation is technology; it's technology that helps automate marketing management and customer engagement. In some cases marketing can be automated with formalized processes, but excluding technology, this is more marketing optimization and process. Technology can automate manual, repetitive, mundane tasks in the marketing function and therefore, in my opinion, exclusively provides the source of marketing automation.
Today, the marketing technology landscape is extremely fragmented, with hundreds of providers and an eclectic mix of solution offerings ranging from one-solution-fits-all to niche marketing channel-specific solutions. Technology providers typically automate internal marketing management processes and/or the execution of customer engagement across one or more channels. Let's look at the difference between automating marketing management and customer engagement:
- Marketing Management Automation. This encompasses automation of internal marketing processes. These might include things like budgeting and planning, workflow and approvals, the marketing calendar, internal collaboration, digital asset creation and management, and essentially everything that supports the operational efficiency of the internal marketing function.
- Customer Engagement Automation. This encompasses automation across one or more marketing channels: email, the Web site, microsites, direct mail, and dozens of marketing channels. In other words, the technology helps automate the process of engaging with customers across one or more channels. This might include setting up an email campaign, sending it out, and tracking performance; or creating a new landing page with a form capture element; or more importantly, managing communication with a prospect across multiple channels (email, the Web site, microsites), and tracking their behavior to identify the relative propensity to purchase.
The line between marketing management and customer engagement is a bit of a gray area, and technology providers that deliver marketing automation typically automate elements of each. However, the definition above leaves room for the email marketing vendor that delivers only basic email campaign capabilities. An automated email marketing solution with basic email automation would mostly fall under "customer engagement," which technically is marketing automation. While it can be difficult to see the term "marketing automation" smattered throughout vendor Web sites and collateral, I think splitting it between marketing management and customer engagement helps clarify exactly how each technology solution will be of value depending on the type of activities it automates for the marketing function.
At this point, it's pretty obvious that marketing automation is a category, not necessarily a uniquely defined technology with a specific set of features that are consistent across all technology providers. In much the same way as the word "transportation" broadly defines all types of vehicles, "marketing automation" defines the set of technologies that help automate internal processes and customer engagement.
Most companies search for technology to address a specific business pain: "need to improve internal productivity and process"; "need to send more personalized emails"; "need a more engaging Web site"; etc. As a result, it's critical to understand the different solutions that fall under marketing automation to invest in the right technology for the organization's resources and culture.
There's one more undefined capability that the definition of marketing automation must embody. It's the notion that customer engagement (and, to a certain extent, marketing management) produces data that must be transformed into actionable insights that allow an organization to make better decisions over time.
Without a measurement and analytics component, all "automated" technology is of little more value than a car without a steering wheel. Thus, in order for any customer engagement component to be valuable, it must return actionable data that can be analyzed and benchmarked over time to consistently improve performance -- otherwise what's the point of automating in the first place? Data integration has become the foundation for extracting limitless value from marketing automation.
Why Invest in Marketing Automation?
The value of marketing automation is that it has the potential to impact the top and bottom lines of an organization. Marketing management capabilities address operational efficiency, productivity and cost savings -- the bottom line. Customer engagement helps maximize the demand for products and services -- the top line. Isn't that what every CMO wants -- some way to measurably quantify and justify the tangible impact marketing has on the top and bottom line in one easy-to-use solution? This is the driving force behind adoption of marketing technology.
However, 89 percent of organizations still struggle with automating the marketing function. In fact, only 23 percent of organizations in an April 2009 study from the Aberdeen Group, "Marketing Automation: A Strategic Guide for Optimizing End-To-End Marketing Activities", indicated they used an "integrated marketing platform" that centralized the marketing management and customer engagement capabilities in one solution. Research consistently demonstrates that marketing automation has a long way to go before it joins the ranks of CRM, sales force automation, and ERP (enterprise resource planning) in terms of widespread adoption.
Research from the customer management practice at Aberdeen Group helps define the measurable value in automating marketing activities. For example, companies that achieve the highest performance in annual revenue and return on marketing investment (also defined as "Best-in-Class" based purely on performance), were four times more likely than peers to automate customer engagement with a marketing automation solution.
Likewise, Best-in-Class were 4.7 times more likely than their peers to use an integrated solution that automated both marketing management and customer engagement. These trends suggest a discernible correlation between performance and the use of automated technology in the marketing function. However, it's important to note, Best-in-Class firms also display a unique set of organizational capabilities that allow them to extract more value from technology investments.
Despite the noted benefits, challenges abound when it comes to automating marketing activities. In the April study on marketing automation, 67 percent of the 130 respondents indicated they primarily relied on multiple siloed niche solutions for automating marketing activities. This is a huge problem for most organizations. Data silos, multiple interfaces and a general inability to holistically tie together performance and marketing leave many CMOs frustrated. Therefore, it's no surprise to see 58 percent of respondents planning on adopting an "integrated marketing solution" that delivers both marketing management and customer engagement capabilities. Only time will tell if these trends will actually translate to strategic action and purchase decisions.
For many organizations, the recession is a scary time. It hardly seems the time to make major purchase decisions about marketing automation technology investments. However, the recession might be the most forgiving time to work out new processes and add capabilities that automation will bring to the organization.
Marketing automation will be a critical component for every organization to grow market share after the recession lifts. Nobody expects stellar performance during a recession, so it's the best time to toss in a few speed bumps on top of the landslides. Again, companies that achieved the highest performance in key metrics like revenue, conversion and return on investments are more likely to use marketing automation technology. These are the organizations that are achieving the highest performance during the recession and, therefore, will be in a position to sustain a competitive advantage after the recession is over.
The "Marketing Automation: A Strategic Guide for Optimizing End-To-End Marketing Activities" study is available for free for a limited time.
Ian Michiels is a research director and the practice leader of the Customer Management Technology Group at the Aberdeen Group. He can be reached at firstname.lastname@example.org.