If there was any doubt that marketing automation has become a hot best-of-breed software category in the area of CRM solutions, Marketo’s filing with the Securities and Exchange Commission at the beginning of April to go public in a $75 million IPO should eliminate it. An active CRM subsector like marketing automation is good news for users, of course. But before a company decides to invest in the technology, it should consider the pitfalls and ask some tough questions.
For starters, this is still an emerging category despite its many years of existence. It was only recently that marketing automation, prompted in large part by the arrival of social media, arrived on the scene for many companies.
Take Precautions with New Providers
New or still youthful vendors must be considered carefully. If they fail or are acquired it could set users back significantly. Their financial models also remain in flux. Marketo’s IPO highlights these issues. Several years old, the company noted that it has never posted a profit. It also noted that its Software-as-a-Service model allows customers to come and go.
“Our customers have no obligation to renew their subscriptions for our software after the expiration of their subscription period, which is typically one year, but ranges from one quarter to three years,” the filing said. In addition, “our customers may renew for lower subscription amounts or for shorter contract lengths.”
The observations are a clear plus for users, and indeed there is a strong case to be made for companies trying out new technology to use the SaaS model. It is less risky.
But those are generic concerns for any company broaching a new technology or software space. Marketing automation comes with other issues for companies to consider. Among them:
How Will You Use the Technology?
Executives and line of business users in this space are still unsure how to get the most from this technology. A new report from IBM, which surveyed 358 marketing professionals, found that only 23 percent believed they were highly effective at uncovering new insights to generate additional business value.
Are You Ready for Data Overload?
Marketing automation, especially applications that tap into unstructured data – or social intelligence, as it is increasingly being called – can lead to a tsunami of data that is difficult to manage. Indeed, this appears to be the case even without the implementation of new software: The IBM survey also noted that than 70 percent of the chief marketing officers participating in the survey reported they felt underprepared to deal with the data explosion.
Think Beyond ROI
Marketing automation software can increase the focus on ROI – possibly to an unhealthy degree. The IBM survey noted that nearly two-thirds of CMOs expect return on marketing investment to be the primary measure of their effectiveness by 2015.
“In this world of big data and tight budgets, marketers everywhere need a more systematic way of capturing and analyzing data, unearthing insights and using those insights to improve business outcomes,” IBM concluded.
That is perfectly fair and accurate. But a focus on ROI and nothing but ROI can lead marketers to ignore the biggest shift in their industry in recent years: online, peer-to-peer conversations.
“Online conversations, not brand broadcasting, are the new determinants of a company’s brand identity,” Sandra Zoratti, vice president of marketing at Ricoh and author of Precision Marketing: Maximizing Revenue Through Relevance, told Marketing Daily. “Peer-to-peer conversations are increasingly powerful because we’re communicating with people, not business entities, and those same people make recommendations and shape brand perception.”
In summary, it’s true that marketing automation holds significant promise to companies, especially when they leverage it with their social media activities. But like the would-be investors in Marketo’s IPO, it will pay to proceed carefully.