0 [x+1] NexTargeting Conference: Cross-Channel Attribution and Online Ad Scalability Remain Hot Topics

Continuing my adventures in online ad measurement, I attended [x+1]’s NexTargeting Summit last week. This reinforced and refined my conclusions from last month’s OMMA Metrics conference, which identified the burning industry issues as:

- better understanding of the interactions between online and offline events (both advertising and results), and

- better scalability for successful online advertising programs.

The online / offline connection was covered by MarketShare CEO Jon Vein, who presented studies that showed including the “indirect impact” of online display ads can dramatically improve their reported return on investment. He also said his firm has found that marketing mix models with complete data can explain as much as 98% of the variance in revenue, while optimization based on mix models can typically improve marketing effectiveness by 10% to 15%. Although I don’t recall Vein mentioning it during his actual presentation, he did tell me in a side conversation that his firm purchased JovianData last year in order to expand its ability to work with individual-level data. MarketShare and [x+1] announced an alliance last month to combine MarketShare’s cross-channel analytics with [x+1]’s digital targeting.

Scalability was covered [x+1] itself, which announced extension of its Media+1 audience targeting platform to combine information from direct media buys and ad exchanges. The relationship between that extension and scalability is a bit complicated, but it boils down to this: combined information lets marketers control the number of ads served to individual consumers across both types of media buys, which segment-level purchases do not. This means that marketers can expand their budgets by targeting ads to new individuals (=effective scaling) rather than bombarding the same people with more messages (=ineffective scaling). That this mimics the reach and frequency measures used in traditional mass marketing (i.e., television) is a happy bonus.

I’ve skipped some of the subtleties of the Media+1 product. These include tracking the degree of overlap between the audiences of different direct-buy Web purchases; identifying optimal message frequency by customer segment; using direct-buy Web sites to establish a base of impressions and then supplementing these on a customer-by-customer basis through real time bidding on ad exchanges; and using scorecards to track performance after initial customer acquisition. The bottom line on Media+1’s beta client was reallocating 40% of the online ad budget to achieve a 20% improvement in results.

[x+1] also used the conference to announce an even broader product, called [x+1] Origin, scheduled for release this summer. This will build a customer-level data hub that combines data and sends targeted messages across display ads, Web site, email, and mobile. I asked [x+1] CEO John Nardone whether it’s actually possible to identify the same customer across all those channels, and he said it’s not an issue in many cases, since you can often give the customer a reason to log in or otherwise identify herself.

Of course, the big exception is acquisition, which seems like a pretty big exception indeed. (“Other than that, how did you like the play, Mrs. Lincoln?”) But tracking mechanisms do get better all the time and there’s plenty of value in better treatment within existing customer relationships. So it’s definitely a good start.

0 Whatsnexx Manages Customer States, Not Campaigns

Whatsnexx offers itself as a radically easier way to manage customer and prospect interactions than conventional marketing automation. I agree that it's radically different: it works without a central marketing database and tracks customer states rather than assigning them to campaigns. Whether it’s radically simpler is another question.

Some perspective is in order. Although Whatsnexx was launched just last year, state-based systems have been used in marketing before. Previous products include Verbind (later purchased by SAS), Elity (eventually owned by Unica), and Harte-Hanks Allink Agent (still around in some form). The concept is intriguing: instead of creating campaigns that predefine paths a lead can follow, you define the actions to take when customers are in a particular situation. The advantage is you can think in terms of new customers, loyal customers, disgruntled customers, etc., and specify how to treat each group after common events such as placing an order. Most marketers find this easier to conceptualize than a massive campaign with separate branches for each contingency.

Anyway, that’s the theory. In practice, defining customer treatments in Whatsnexx didn’t look much easier to me than defining them in other systems. (You can judge for yourself by viewing several how to videos on the company's Web site.) The process is this: users first define “scenarios”, which are customer processes such as acquisition, retention or complaints, and "states", which are customer types such as new, high value, or disgruntled. They then define the flow of events within each scenario, with the possible responses for each event for each customer state. Terminology aside, I don't find this much different from assigning customers to segments, assigning the segments to multi-step campaign flows, and assigning treatment rules to each step.

But maybe I’m missing the point. Whatsnexx’s Jacques Spilka says he finds huge time savings in the analysis stage that precedes the campaign set-up: instead of taking a week to understand client needs and processes, he can do it in a few hours using the state-based technique. Most of the time setting up any system is spent on analysis, not the mechanics of the campaign design. So savings of that magnitude would be significant. On the other hand, you still have to create the actual content, which is probably the biggest expense of all.

The other main difference between Whatsnexx and conventional marketing systems is that Whatsnexx doesn’t rely on an independent marketing database. This isn’t an inherent feature of state-based systems: other products do work with a database of their own. Indeed, even Whatsnexx maintains a central database of customers and their states. But Whatsnexx doesn’t import all the events that occur in other systems and it doesn’t send messages by itself. Rather, users configure "Infogates" that let existing systems send alerts to Whatsnexx when specified events occur. These alerts (technically, XML messages via a SOAP protocol) include whatever contextual information is needed for Whatsnexx decisions. Whatsnexx receives the alert, applies its logic, and returns a message telling the external system how to respond. The company has existing Infogates for Salesforce.com, Constant Contact, Deliva and CakeMail. It will add new Infogates as required by customers.

It seems to me that this approach is actually a more important differentiator for Whatsnexx than its state-based logic. As the company points out, it lets marketers continue to do their work in their existing systems. This saves the effort of learning a new tool and potentially needing to rewire their current infrastructure. It also lets them avoid building a central marketing database – although I suspect that many will need one anyway for data consolidation and analysis. Still, even deferring that need could remove a barrier to immediate adoption. This is especially true as marketers add data sources that are not built into standard marketing automation products, which are often limited to Salesforce.com and perhaps a tagged Web site.

Whatsnexx was developed by Montreal-based email company Komunik over several years. It was formally launched in late 2010 and has four current customers. Pricing is based on the client’s activity level and starts at $500 per month for up to 100,000 transactions.

0 eBay Offers $2.4 Billion for GSI Commerce: More Support for Marketing Automation

eBay’s $2.4 billion offer for e-commerce services giant GSI Commerce has been described largely in terms of helping eBay to compete with Amazon in servicing retailers – or, as eBay President John Donahoe put it somewhat more diplomatically in the press release, “GSI will enhance our position as the leading strategic global commerce partner of choice for retailers and brands of all sizes.”

I suppose that’s legitimately the main point of the story. But what I really want to know is what it means for marketing automation. Not that I’m obsessed or anything.

What makes the connection worth pondering is the approach to marketing automation taken by IBM, most recently in the Smarter Commerce initiative announced earlier this month. IBM defines marketing automation as digital analytics, and puts digital analytics at the center of the business universe. The broad argument is that online activities, including both paid advertising and social messages, drive consumer behavior and can therefore be used to improve both supply chain operations (creating and stocking the right products) and demand chain operations (creating sales and managing brand attributes).

This desire to merge marketing into the larger stream of business activities is shared by GSI Commerce (and now eBay) in their approach of offering marketing within a suite of ecommerce operations. It’s been intriguing over the past few years to watch GSI supplement its core operational services (order processing, fulfillment and call center) with marketing services including email (e-Dialog), agency (Silverlign), mobile (M3), affiliate (Pepperjam), retargeting (Fetchback), database (MBS), and attribution (ClearSaleing).

I fully realize that eBay/GSI’s focus is limited to retail while IBM’s scope is literally the entire world. But both are pushing the fundamental idea of marketing as a node within the larger organizational collective. This is quite different from marketing, and marketing automation, as a largely self-contained activity that only connects with the rest of the organization comes when it drives customers to make a purchase. It also suggests that the notion of “integrated marketing management” is fundamentally flawed – if you take “integrated marketing management” as referring to a system to tightly integrate activities within the marketing department..

There, I said it. It feels so good I’ll say it again: integrated marketing management is bad. Bad bad bad. Companies need to integrate their customer treatments across all functions. The role of marketing, and marketing automation, is to guide those treatments. To do that efficiently, marketing automation must be built into the operational systems, not sit outside them. The only thing that can be handled separately is marketing analytics, just like other types of specialized analytics. But the results of those analytics must be communicated to operational systems for execution. Those operational systems must themselves be tightly integrated with each other to ensure the treatments are coordinated.

You could argue that this coordination across operational systems is also a role for “marketing automation”. I agree it is, but don't think it's not the primary meaning of the term. Traditional marketing automation is about campaign planning, execution, and analysis.

Now, don’t take this to mean that I’ve swallowed the Smarter Commerce Kool-Aid. I still think it’s presented in ways that ignore the fact that most activity is still non-digital. (I also recognize that the folks are IBM are plenty smart enough to realize this, and expect that they’ll merrily include non-digital activities in their projects. Or they’ll argue that even non-digital activities are captured digitally and therefore included in their definition. The latter is true, but if "digital" encompasses everything, why use the term at all?)

Okay, that's just quibbling about words. I see a more important difference between whether you start with an operational platform and add analytics (the GSI approach, if I oversimplify a bit), or you start with analytics and tie it into operational systems (the IBM approach, for sure). In an ideal world, the operational systems would all have great customer management features and the operational approach would win. But here on Planet Earth, most companies have several customer-unfriendly operational systems that won’t go away any time soon. Connecting them into an external analytics system – even if the connections are a bit superficial – is probably the best bet for most organizations. (I could explain this with a wonderful analogy about running extension cords vs. rewiring the walls. But I won’t. You’re welcome.)

Bottom line: whether eBay intends to or not, their GSI purchase supports the broad view of marketing automation as an enterprise-wide utility, not a tool for intra-marketing efficiency. (Ha – and you thought I couldn’t write a concise sentence.)

0 OMMA Metrics Conference: Online Ads Must Prove Real Value To Succeed

I took a break from my usual obsessions yesterday to attend the New York edition of MediaPost’s OMMA Metrics and Measurement conference. It was a good chance to dive into this particular sector of the marketing analytics universe. (Another version of the program will be presented in San Francisco in July; the company also live streams a free Webcast. You can also download selected presentations from yesterday.)

If there was an overriding theme to the event, it was frustration that online advertising isn’t attracting as much money as it should. There was more than a little ”TV-envy”: the feeling that TV gets more advertising because buying is based on simple, widely-accepted audience measures. Some speakers argued for duplicating this situation, by removing some middlemen and creating standard online audience measures.

Others pointed to a deeper issue: that online marketers can’t measure the value of their efforts in terms of revenue or brand metrics like awareness and preference. In this view, TV buyers accept simple measures like Gross Rating Points because these measures have proven over time to correlate with real business results. Media mix modeling has more recently confirmed this. But except for direct response, online media can’t show the same relationship. This forces online marketers to report endless (but never complete) data about who saw what and how they acted, in the hopes that piling on enough details will somehow make advertisers happy. It never does.

This is the online version of the old joke about the drunk who loses his keys in the alley but looks for them under the streetlamp “because the light is better”. Moral of story: no volume of irrelevant data can substitute for the information you really need.

In the case of online advertising, the dark alley is the connections between ad placements and final business results. Several speakers touched on parts of this. IBM’s Yuchun Lee gave an opening keynote that highlighted the pervasive influence of online information over all customer activities, not just online purchases. Adometry’s Steve O’Brien explicitly stated that attribution must measure the incremental impact of each marketing effort on final results (although I think he limited this to online results). ForeSee Results’ Larry Freed stressed the need to trace all online and offline behaviors to understand their true role in final outcomes. Others cited studies where careful measurement found that indirect results showed online to be much more powerful than direct attribution alone.

Yesterday’s speakers also raised the problem of scalability: that is, being able to duplicate and expand on success. This is one area where TV envy makes sense, because it’s easy to add more Gross Rating Points and be reasonably sure of getting the expected results. Online ad buying is more like buying print ads or mailing lists: you may have some sense of the audience demographics, but the only way to really know how it will perform is to run a test. But this isn't a measurement problem: simple, standard measures that hide true audience differences are only going to be unreliable predictors of actual results. What’s really needed are better testing methods to predict as quickly and cheaply as possible how each new audience will perform. The trick is you’re not just looking at immediate response, but all of those indirect effects that are so tricky to capture in the first place. Now you have to predict them in advance as well as measure them after the fact.

Nobody said it would be easy.

0 Infusionsoft Helps Clients Map Their Marketing Strategy

Summary: Infusionsoft is making it easier to build campaigns and taken a new approach to helping clients plan their marketing programs. Both are needed for marketing automation to reach to a wider audience.

Infusionsoft this week staged the official coming out party for its latest release at its annual Infusioncon users conference. The big news was a one-step “web lead campaign” generator that automatically creates a Web landing page and three cross-linked email flows: a set of follow-up messages after the initial Web form; a “hot lead” track for people who click on a link in any follow-up message; and a “nurture” track for people who complete the follow-up sequence without clicking on anything. Users still need to build the initial Web form and put copy into all the blank emails. But Infusionsoft said that the automated set-up itself saves six to eight hours of work and even more time puzzling out the underlying concepts.

This may seem underwhelming: Infusionsoft has simply added campaign templates, which higher-end marketing automation systems have offered for years. Indeed, you could sniff that Infusionsoft is only now adding campaigns, in the sense of a container to link separate process flows. As if to drive the point home, the company was also previewing early designs for its next release, which will apparently center on a visual flow chart to build campaign diagrams: Dude, welcome to 2003!

Okay, that was totally unfair. First of all, some of these features are pretty impressive. For example, the system-generated forms and emails automatically include campaign-specific tracking codes, which most systems require users to add manually. And true branching campaigns – as opposed to sequential campaigns with splits inside each step – still aren’t found in most marketing automation systems (although those vendors argue they’re not needed. See last week’s post on eTrigue for details).

More important, the significance of Infusionsoft’s new features isn’t that they’re playing catch-up with systems built for larger companies. It’s that Infusionsoft has been tremendously successful – more than 6,000 clients and 20,000 individual users – without them.

In fact, the company’s research has found that nearly half its clients do almost no email, using the system instead primarily for sales automation and service. Others have used its sequential processes either separately, to automate a variety of annoying manual tasks, or by painstakingly stringing them together by themselves or with professional help.

Another to look at it is this: campaign management is just one application for Infusionsoft, and to date it hasn’t been the dominant one. Rather, Infusionsoft clients have valued labor savings they gain from having one integrated system for marketing, sales, e-commerce, and service. Some of those savings are inherent in the integration itself – that is, files don’t need to be moved from one place to another. Other savings come from running simple automated processes against that integrated data. Only a few Infusionsoft users have added value by running more complex processes, although the crowd at Infusioncom was clearly eager to join them.

The other big announcement at Infusioncom wasn’t about technology at all. It was a new planning methodology called the “Perfect Customer Lifecycle”. It made immediate sense to me, in good part because it somewhat resembles the Customer Experience Matrix that long ago gave this blog its name.

Like the Matrix, the Perfect Customer Lifecycle is organized around the stages in a customer’s relationship with the company, from Attract Traffic through Collect Cash to Get Referrals. Infusionsoft developed it after realizing that few clients could see how the pieces of their marketing programs fit together, which made it difficult to prioritize and maintain focused.

The Perfect Customer Lifecycle replaces a previous Infusionsoft methodology that based on standard marketing programs shared by Infusionsoft’s most successful clients. Although Infusionsoft doesn’t put it this way, the critical difference I see is that one methodology is built around the customer while the other is built around the company. As with the Customer Experience Matrix – still used by my friend and the concept’s original developer, Michael Hoffman of ClientXClient – the customer-oriented approach makes it easy to track every step in the customer relationship and pinpoint opportunities for improvement.

The Perfect Customer Lifecycle illustrates how much effort Infusionsoft puts into helping its customers succeed. I don’t want to make too much of this, since many vendors – and surely all the good ones – care deeply about their customers’ success. But there's an extra passion at Infusionsoft that I think comes from serving small business people. (The company and its clients prefer the term “entrepreneur”; I’ve been toying with “micro-business” as a label. From a practical standpoint, I draw the line at $5 million in revenue and having a professional marketer on staff). The micro-business owner's life is tied to the company’s success in the way that even the most loyal employee's or corporate manager's life is not. I see the same passion for helping customers at other firms serving this market, notably OfficeAutoPilot.

(It doesn’t hurt that micro-business owners often see themselves as self-created Ayn Randian heroes and are more than little susceptible to flattery along those lines. But they're also passionately loyal to anyone who genuinely seems to care about helping them.)

That brings me to my central observation. Marketing automation for micro-businesses is fundamentally different from marketing automation for larger firms.

The technical difference is that micro-business systems expand beyond marketing to integrate marketing, sales, and service. Of course, this is the same scope as traditional CRM, but the micro-business systems add stronger process automation than most CRM products.

The integration and the process automation share the same root cause: small businesses lack the resources to build custom integration or tolerate process inefficiency. Larger firms are organized into departments where the costs of separation are less obvious, intra-departmental efficiency is often hidden from top management, and, probably most important, department heads want separate systems they control directly. Those departmental fiefdoms don’t exist at a micro-business because the owner makes all important decisions personally,

Micro-businesses also need more vendor services because they lack internal marketing expertise. Remember, pretty much by definition, these companies have no professional marketers on staff. The exceptions are small marketing agencies and business coaches, who form a major segment of successful micro-business marketing automation users. This makes sense: they’re the one group of micro-business owners equipped to figure out how to use the systems for themselves, or at least to ask vendors for the right kinds of help. Other micro-businesses nearly all rely heavily on the vendors for both technical and marketing assistance.

By contrast, the pioneering users of larger-company marketing automation systems have largely been technology firms. I think the driving force with this group has been comfort with technology – almost verging on blind faith – even when specific applications were unclear.

If micro-business marketing automation (which obviously shouldn’t be called “marketing automation”) is distinct from the rest of the industry, the next question is whether the adjacent segment is one group of firms from $5 million to $500 million in revenue, or that segment must be divided. My first instinct to look for a division, but when I think about the systems used by companies in that range, their functionality is not very different. You may I recently pointed out that Eloqua, Marketo and Pardot all have about half of their clients with under $20 million revenue (but I suspect very few under $5 million). So even the more powerful marketing automation systems have a lot of small(er) clients.

I do suspect that some mid-tier vendors skew towards the smaller end of the scale and others skew towards the higher end. But that has more to do with pricing and sales models than the products themselves. So maybe one big segment from $5 million to $500 million makes sense after all.

Regardless of how you split the market, it’s clear that both the micro-business and other (regular? corporate? grande?) segments are moving beyond pioneers towards mass adoption. Furthermore, both groups face exactly the same challenge: to make marketing automation easy enough for non-pioneers to adopt it.

Infusionsoft’s move towards campaign templates and visual flows is a big step in this direction. But those features alone won’t solve the problem: if they could, other products that already have them would be more widely adopted. The need to supplement simplicity with marketing training is why Infusionsoft is simultaneously moving ahead with the “Perfect Customer Lifecycle” and related programs.

Vendors selling to larger companies have also been stressing education. So far, though, their focus has seemed more tactical (“how to run a Webinar”) than strategic (“optimize the customer lifecycle”). Maybe that’s because their clients are professional marketers who already have the big picture or rely on marketing agencies and other service partners to provide it. Or – and this is my bet – the marketing automation vendors just haven’t yet recognized that they need to offer strategic frameworks. This is a delicate task since you don't want to insult your prospective buyers. Perhaps the frameworks will be disguised as deployment methodologies and best practices. If I’m right, it doesn’t bode well for vendors who believe that greater ease of use by itself can greatly expand adoption.

This line of thought (plus lack of sleep and coffee – most of this was written on a late night plane ride) leads a final question. If micro- and non-micro-marketing automation vendors are converging on features and strategy training, will the micro-business focus on process automation also be duplicated at larger companies? I can’t point to any evidence yet, but it wouldn't surprise me. Certainly all marketers are subject to the same pressure to operate more efficiently. If process automation does become more important, it will further increase the pressure for process optimization as part of successful deployments. Not to beat a dead horse.