November 19, 2016

How to Get “Return on Technology”

Here’s a stunning statistic:

In the last four years, the number of marketing technology companies has grown from 350 to over 3,500. In fact, there’s been an 87% growth in marketing tech companies in the last year. (Source: Marketing Land)

2016-martech-landscape-evolution-800x448

Meanwhile, the number of public companies has remained relatively flat. (Source: Bloomberg, NBER, Political Calculations)

stockmarket

Let me put this another way…

Over four years there’s been a 10x increase in MARKETING technology startups who are selling to roughly the same number of public marketing leaders.

I’ll put this up visually to really make the point:

What does this all mean?

It’s truly an amazing time in digital marketing! Right?! That may depend on where you sit, and what you consider amazing. For me, revenue growth is amazing.

I think this is an inflection point when digital and ecommerce leaders should consider their future investments.

I’ll bet your company has purchased a lot of these technologies with hopes of revenue growth and/or efficiency. And this continues. IDC reports CMOs will drive marketing technology spending to $32.3B by 2018, reaching a compound annual growth rate (CAGR) of 12.4% (again, during flat public company growth and 3.6% GDP).  From 2014 to 2018, marketing technology spending will reach $130B for the five year period.

We’re former ecommerce operators here at Clearhead. So to make this more operational, let’s break this spend apart. There are two types of technology investments:

  1. Technologies that (nearly) run on their own
  2. Technologies that need to be run

First, there is technology that nearly runs itself. I can speak from personal experience as founding CMO of Bazaarvoice. The beauty of our platform was once you dropped that “one line of code” on product pages and started automated review-request emails, the review volume grew, and that content drove conversion. Lots of A/B splits were done on this. And while you could play with design and placement, there was little optimization needed to achieve ROI. Other technologies that fit this category include algorithmic product recommendations, operations up time and security (alerts), payment processing, and search/filter technology. Unfortunately, these types of “set-it-and-forget-it” technologies are rare. They are the beautiful rainbow unicorns of the martech world. They are NOT the majority of your tech spend or potential benefit from those 3,500 startups above.

The vast majority of technologies require operation and optimization to achieve outcomes. These are platforms like CRM, social marketing, data management, sales enablement, buy-side ad platforms, email service provider, web analytics, testing, personalization, and content management. When you buy them, they do nothing to drive revenue or cut costs…UNTIL people, process, and skills are applied. In other words, there is not output until there is input. Return on Technology does not occur until you complete the circle.

Let me share a personal example.

As I mentioned, I was once in your seat, an ecommerce executive leading consumer Dell.com with a large (flat) budget for marketing technology and agencies. Early on, we made decisions with gut. Then we launched clunky web analytics and A/B testing technology in the early 2000s. At launch, we had one SQL analyst who took hours to pull a report, and it took weeks to pull off an A/B test. Within a few years, with roughly the same technology, we put processes in place alongside 40 people in web analytics and testing to increase efficiency with these technologies, allowing the business to make confident business decisions. Then the culture changed, and so did the outcomes. During that time, we grew online sales to $3.5B, from 20% online sales to 55% of revenue, and we aligned merchandising and product roadmaps to data-driven outcomes.

Back to Technology Startups

Now let’s turn our attention back to these marketing technology startups and fast forward. Over the last 10 years it got cheaper to launch a marketing tech company and easier to get VC funding. Also speaking from experience, as former CMO of Bazaarvoice and CEO of Mass Relevance (now part of Spredfast), I built two marketing tech companies taking advantage of these amazing times.  I lived on planes and sold technology to over 1,000 marketing leaders for eight years. My experience is that marketing executives are excited by innovation, are more tech-savvy, and have growing tech budgets. And while the spend in marketing technology has grown, in many instances the outcomes have not. A Q3 2014 study by CMO Council and Tealium found that 54% of CMOs were not finding ROI on marketing technology investments.

Don’t get me wrong. Technology has a long way to go. Your platforms are still clunky. Getting content up is pain. IT is too involved. Notwithstanding, I believe it’s as easy to buy and launch a technology as it is to miss the opportunity for its returns. As one of our clients said of their testing and personalization technology platform, “I’ve paid for a ferrari that’s sitting in the parking lot.” Even when we get out of the gates — putting contacts in a CRM, creating a dashboard, executing a test, launching personalized experiences — the momentum quickly plateaus without the right process, skills, and culture to sustain momentum.

Why is this?

Marketo (another technology that requires input) shared results of a study of digital marketing leaders. Lack of budget (i.e. lack of people), lack of skills and strategy (which is a skills, process, and culture problem) were the top barriers to success.

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Today my hypothesis is even stronger and more timely than when I co-founded Clearhead with Matty and Ryan over four years ago: In the digital and ecommerce industry, marketers are overspent and overloaded with under-deployed technology. Technology is only half the solution for revenue growth outcomes. The rest is people (a.k.a. process, strategy, skills, availability, culture, etc.).

Said another way, you bought technology yin, but perhaps have not developed the cultural yang.screen-shot-2016-11-15-at-2-56-00-pm  I’m a big believer in complementary forces. On the back of my laptop you’ll find the Yin-Yang symbol. It’s a chinese philosophy, representing the combination of two contrary forces being complementary and interdependent to achieve strength in the natural world. To me it symbolizes the strength in balance, in left and right brain thinking, in diversity of perspectives.

As an industry steeped in technology, we look at people investment contrary to technology.  Technology should replace people, right? What if people are as contrary as they are complementary to technology, especially if organized the right way?

Today, you have a stack of technologies that towers over your the expected pay off.  So, something for you to consider in planning for 2017… How will your focus, attention, and budget shift to achieve an “outcome balance” to apply the right people, process, and skills to your technology assets. As we’ve found with clients over the last four years at Clearhead, the results are amazing. 10x to 50x ROI. And of course, if you’re interested in how to plan for your technology ROI with Clearhead, I’m glad to share how!

 


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  • Great perspective and insight Sam. Also interesting is a lens on how much of the Marketing Tech is happening in or moving into Texas. Why? Cheaper so a reflection of the substantial increase in companies? Central so benefiting from both coasts’ experience in internet, adtech, advertising, etc? Getting the attention as the future from Silicon Valley (Austin startup exuberance) and thus appealing to market/media oriented companies? Frankly a little bit of all of that and more. Would love to catch up soon.

  • Great perspective and insight Sam. Also interesting is a lens on how much of the Marketing Tech is happening in or moving into Texas. Why? Cheaper so a reflection of the substantial increase in companies? Central so benefiting from both coasts’ experience in internet, adtech, advertising, etc? Getting the attention as the future from Silicon Valley (Austin startup exuberance) and thus appealing to market/media oriented companies? Frankly a little bit of all of that and more. Would love to catch up soon.