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Why is the Marketing Automation Industry Floundering? (And 5 Fixes to Fuel It): A Strategic Viewpoint

Jeff Pedowitz | Articles > From the section: Common Mistakes

October, 30, 2014 |

CEO, The Pedowitz Group

The Marketing Automation Industry is approaching its thirteenth year. Originally pioneered by Epiphany and Pivotal in the late 1990’s as an On-Premise Module added on to key CRM functions, it took off when SAAS entered the scene in the early 2000’s. Today there are many vendors in this space competing for wallet share.

The key business challenges that Marketing Automation addresses are marketing efficiency and effectiveness, marketing accountability for financial performance, lead generation, lead quality, and systematic revenue growth.

Currently, the industry has a combined market cap of under $150 million dollars. This is calculated by adding up all of the revenue from the 20-plus competitors that are in the market, and looking at the revenue from email vendors that have a portion of their platform dedicated to these functions. Compared to other verticals, such as Sales Performance Management (over $1B), Customer Relationship Management (over $10B), Online Marketing (over $1B) and even Social Media (over $1B), this industry is struggling in its drive to gain broad-based market appeal and acceptance.

There are 5 primary reasons why this industry is underperforming:

1. Wrong Executive Target.
The very person that Marketing Automation seeks to empower – the marketing executive; has the least power on the senior management team to buy. While marketing executives that have adopted these platforms have experienced great success in beating all kinds of performance benchmarks, their peers have been slow to drive the change needed and implement the technology.

2. Failure to Broaden Vertical Expansion.
High concentration in software and technology and minimal penetration into other verticals has slowed overall industry growth. A high focus on B2B, which always lags B2C in technology adoption has also slowed grass-roots appeal

3. Too Much Competition, Not Enough Education.
For the size of the market, there are too many competitors (over 20 at last count), and not enough collective education. The market is brutally competitive, with high profile vendors frequently sparring both publicly and privately. While this may help their respective companies find focus, it has done little to help the market because no one is paying attention.

4. Too Complicated.
The concepts and processes that drive successful adoption of marketing automation are often beyond the core skill sets of daily practitioners. To get it right, practitioners need to be highly logical, process driven, think like an engineer and a financial person all while trying to be creative. There aren’t too many people that can do all of those things simultaneously, let alone do them well.

5. Economic Pricing Model.
The industry has largely adopted a subscription pricing model based upon contact database size, opting against a user license or usage approach. Customers that have adopted the platforms have seen a great ROI – in many cases over 10X. But to those who have not adopted, the model seems expensive and prospects struggle to articulate the value internally, regardless of what price band the vendor is selling at.

To successfully grow the market, maximize adoption and grow vendor shareholder value, we recommend the following course of action:

1. Expand target focus beyond the marketing department.
Start selling to sales executives, CFOs, CIOs and even the CEO. Make this an enterprise play, not just a marketing one. After all, revenue performance effectives the entire company, not just marketing. To connect the dots, the offering has to be more system driven. Business Intelligence around Revenue Performance, integration with Social Media and Search Engine Optimization, expanded focus of CRM application, and enabling the Sales organization will bring all parties to the table and make a more compelling business case.

2. Expand vertical offerings.
Work with key partners and value added resellers in additional market segments. Create true productization and differentiation for solving key vertical challenges.

3. Work collaboratively to educate but still compete aggressively.
Vendors and partners need to work together to drive industry education and adoption of key principles. Knowledge and IP should be shared to grow the pie. Joint conferences, standardization around certification, and standard concepts should be adopted and driven. Competitors can still beat each other up at the table, but every-

4. Simplify the concepts and simplify how the software works.
Best practice templates, pre-built programs, one-click activation – all this needs to drive adoption. Don’t give the customer too many choices, simplify the process and do the thinking for them. As they grow in their knowledge and sophistication, expose deeper areas of the application that they can leverage.

5. Change the positioning of the pricing model.
Aggressively offer buy-now pay later, trial, pilot and other types of offerings to get the software in the hands of the customer. Bundle in services to help drive adoption. Statistics show that payback can occur in as little as 3 months.

We live in a customer-driven economy and there is plenty of room for multiple vendors in this space. In fact, competition is good. It is the mother of invention, which ultimately benefits the customer.

TPG believes cooperation, focus on these 5 areas, and continued expansion of the partner ecosystem will successfully drive industry adoption and grow the market beyond the $1B mark by 2015.

The Pedowitz Group The Demand Generation Agency www.pedowitzgroup.com | 1-888-459-8622

About the Author

Jeff Pedowitz is CEO & President of The Pedowitz Group, the world’s largest demand generation agency, which he founded in July 2007 www.pedowitzgroup.com. With 20 years of experience leading successful B2C and B2B organizations, Jeff is responsible for setting the company’s vision and strategic direction along with managing all daily operations. He frequently writes and speaks on a variety of topics related to demand generation, Web 2.0, and marketing. Prior to founding The Pedowitz Group, Jeff served as vice president of professional services for Eloqua, one of the world’s leading providers of demand generation software.

While there, he spearheaded a best practices consulting organization from the ground up and helped Eloqua achieve a significant thought leadership position in the marketplace. Jeff began his career with Subway Sandwiches, where he successfully built a territory to include 35 owned and franchised stores. From there, he held key leadership and executive positions with Computer Associates, SmartTime Software, and Salesnet. one wins when the pie is bigger.

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