B2B Marketing Automation How-To Guide

1. How-To Guide B2B Marketing Automation By David Raab, Research Director February 2014 EXECUTIVE SUMMARY Business-to-business (B2B) marketing automation systems are among the hottest sectors of the technology industry. Vendor revenues have grown at 50% per year since 2009 and will probably top $1 billion in 2014. Leading vendors including Eloqua, Marketo, and Pardot have been acquired or gone public at tremendous valuations. Major software companies including IBM, Oracle, Salesforce.com, Adobe, and Teradata have purchased B2B or business-to-consumer (B2C) marketing automation products. Venture capitalists have invested several hundred million dollars in start-ups and existing firms. © 2014 Demand Metric Research Corporation. All Rights Reserved.

2. How-To Guide Yet, despite this growth, fewer than 20% of B2B marketers have purchased an integrated marketing automation system (although many more use email, Web analytics, and other component technologies).1 Even more alarming, many past buyers do not use their systems fully and a significant portion report little benefit from their investment.2 The lesson of these statistics is not that marketing automation doesn’t work. The same studies show that the majority of users are satisfied and productive. Rather, the point is that marketing automation works only when marketers deploy their systems effectively. This Best Practices Guide will help to ensure that you are among the successful majority of B2B marketing automation buyers, not the unhappy remnant. WHAT IS B2B MARKETING AUTOMATION? The label “marketing automation” might apply to any type of computer system used by marketers: email, ad buying, search engine optimization, Web site personalization, Web analytics, budgeting, planning, predictive modeling, segmentation, Webinars, mobile messaging, lead management, social media, and much else. But over the past few years the term has increasingly taken on a narrower meaning of products that offer B2B marketers an integrated combination of email, Web behavior tracking, landing pages, multi-step nurture campaigns, lead scoring, integration with sales automation software, and related analytics. In fact, a major selling point for marketing automation has been its ability to replace multiple single-purpose systems (often called “point solutions”). The price of marketing automation is not always less than the combined fees of the point solutions it replaces. But the savings in training and time spent moving data between the systems are substantial. These savings are especially important to small businesses where the same person would operate several of the point solutions herself. Using the same system for different marketing tasks matters less at larger organizations, where different people manage email, advertising, Web pages, and analytics. But those organizations gain greater benefits from the shared customer database, easier coordination across channels, better planning and budgeting, and tighter control over user access to specific functions and data. 1 http://customerexperiencematrix.blogspot.com/2013/02/why-is-marketing-automation-growing-so.html 2 http://customerexperiencematrix.blogspot.com/2013/10/marketing-automation-user-satisfaction.html © 2014 Demand Metric Research Corporation. All Rights Reserved.

3. How-To Guide The scope of many marketing automation systems has recently expanded to incorporate social media publishing and, somewhat less common, social monitoring and social promotions. Some systems have also added “inbound marketing” functions designed to attract Web traffic, including blogging, Webinars, search engine optimization, and paid Web advertising. However, most marketers still use separate systems for the “inbound” functions. Instead of trying to replace those systems, most marketing automation vendors have made it easier for those systems to integrate with the primary marketing automation database. As already noted, most systems now described as “marketing automation” are designed for business marketers. This wasn’t always the case. The phrase “marketing automation” was originally applied to B2C systems such as Unica and Aprimo. Like the B2B systems, those earlier B2C marketing automation products offered an integrated solution that supported several channels with a shared customer database and shared analytics. The specific channels and features differed because different marketing methods were important when those systems were originally developed during the 1990’s. The more important distinction, which still remains, is that the B2C systems attach to an external marketing database with nearly any design. B2B systems maintain their own customer database, with core structures that mirror sales automation databases so the two can easily exchange data. Early B2B marketing automation systems were extremely limited in the deviations they allowed from this core data structure. Some of today’s systems are considerably more flexible but this is still an area that requires close examination by prospective buyers. Another important difference between B2B and B2C marketing automation is that the nearly all B2B systems are designed as “cloud” (Software as a Service, or SaaS) systems, meaning the client only purchases a subscription to software which is actually run by the vendor. It also typically implies a “multi-tenant” architecture, meaning many clients run on the same instance of the software and security procedures ensure each client’s information remains separate and private. Most B2C marketing automation products were originally designed as “on- premise” software, which was purchased outright by the client, installed on the client’s servers, and managed by the client’s staff. Many large B2C deployments are still handled this way. Today’s B2C systems © 2014 Demand Metric Research Corporation. All Rights Reserved.

4. How-To Guide usually offer some type of SaaS option, which may or may not have a true multi-tenant architecture underneath. B2B marketing automation systems were specifically designed to provide marketers with features that were missing from sales automation systems. Yet there is always a question of whether marketing automation should be part of sales automation or sales automation’s parent category of customer relationship management (CRM) software. Some marketing automation features are now more common in CRM, including landing pages, lead scoring, some analytics, and some social marketing. But others remain mostly missing, including advanced segmentation, multi-step nurture campaigns, and Web behavior tracking. This is largely due to technical constraints that make it difficult for CRM systems to support all marketing automation functions. These constraints will probably be overcome in the long run, but, for the immediate future, the categories will probably stay distinct. The one exception is “all in one” systems for very small businesses, such as Infusionsoft and Ontraport, which already combine CRM and marketing automation features. They can do this because their relatively small data volumes make it easier to support CRM and marketing automation requirements on the same architecture. CORE FUNCTIONS B2B marketing automation systems all provide the following core functions. However, they differ considerably in the details of their implementations. Email. Users can compose and send mass emails to lists of prospects and customers. This is a critical difference from CRM systems, which let salespeople send emails to individuals but often have very limited mass mailing capabilities. Nearly all marketing automation systems support personalization (inserting data values such as the recipient’s name) and some allow dynamic content (inserting different messages based on variables such as the recipient’s industry). Other differences involve the creation and use of standard templates, formatting and previewing for different devices (smartphone, tablet, desktop), spam scoring, and support for large message volumes. Landing Pages. Users can build Web forms that post information to the underlying marketing database. These forms are typically hosted by the marketing automation system, freeing the marketers from dependence on their company Web site. Some systems can generate forms to add to the company Web © 2014 Demand Metric Research Corporation. All Rights Reserved.

5. How-To Guide site and/or provide code that lets external forms post to the marketing database. Advanced features include pre-filling forms with known data, automatically replacing answered questions with new ones (“progressive profiling”), and asking different questions based on previous answers or other customer data (“branching”). Some systems let users build surveys and multi- page microsites in addition to simple forms. All systems make it easy to embed links to forms in system-generated emails. Behavior Tracking. The system keeps a record of email and Web behaviors such as email opens, link clicks, and page views. Individuals are tracked by dropping browser cookies that identify repeat visitors; when a visitor explicitly identifies herself by filling out a form or logging in, the identity is connected to the cookie. Tracking is sometimes limited to emails and landing pages created by the marketing automation system but can usually be extended to other Web pages by embedding a vendor- provided bit of Javascript. Different technologies are needed to track behaviors on mobile devices; some vendors do this better than others. Systems also differ in how much behavior detail they store, which data is accessible to external systems, and how it can be used for segmentation, event triggers, analyses, and other purposes. Lead Scoring. Users can define formulas that attach a category label or numeric score to each lead. The formulas draw on behaviors and profile data stored in the marketing database. Many systems create two scores, one reflecting the lead’s similarity to the company’s target customers and the other reflecting the lead’s apparent level of interest. Systems vary considerably in the types of data available for scoring, the sophistication of the scoring formulas, how often scores are recalculated, whether scores are influenced all leads from the same company, and whether one lead can have multiple scores. Lead scores may be exposed to sales people through the CRM integration; some marketing automation vendors offer special modules to let sales people to view and understand this information. Nurture Campaigns. Names in the database can be sent a sequence of messages. These are typically aimed at people who are not yet ready for direct sales contact, but the campaigns might also have other purposes such as encouraging renewal or use of new system features. Some systems send everyone the © 2014 Demand Metric Research Corporation. All Rights Reserved.

6. How-To Guide same set of messages at fixed intervals (“drip campaign”). Others keep the same intervals but vary the messages based on user attributes. Some can deliver entirely different experiences based on response to previous messages (“branching”). Systems vary in how users enter a campaign, how the campaign flows are defined, how treatments can vary within a flow, what data is available to guide treatments, what actions can be triggered by a campaign, what messaging channels are supported, and what information is available for reporting. Nurture campaigns are a very powerful part of marketing automation, but complex campaigns can be difficult to design and execute. Campaign features probably differ more between systems than any other marketing automation function. Users need to look carefully to find a system that matches their requirements and skills. CRM Integration. At a minimum, the marketing automation system must be able to pass new leads to CRM. In practice, nearly all marketing automation systems can both send and receive CRM data and have synchronization features to ensure that changes made in one system are later copied into the other. Systems vary in the types of data that are shared, the control users have over which changes are accepted, how processes such as campaign assignments are coordinated, how new leads are added to the CRM system, and whether marketing automation can send alerts or assign tasks to sales people. Typically only some marketing automation data is copied to the CRM database. Other information, such as detailed behavior histories, is displayed on CRM screens but read from marketing automation files. Most CRM integration works through vendor-published Application Program Interfaces (APIs) which are open to all systems. Access to special features or to CRM systems without a published API may still require custom programming. Analytics. Marketing automation systems provide basic statistics on email performance (messages sent, opened, clicked, bounced, etc.), landing pages (views, unique visitors, form fills, etc.), and campaign events (leads added, leads removed, active leads, leads per stage, etc.). Some provide more detailed information, better visualizations, drill-down into segments, and custom reports. Automated predictive modeling is occasionally available, but usually relies on external software. Some systems create return on investment reports based on revenue data from CRM or other systems. One key challenge with such reports is © 2014 Demand Metric Research Corporation. All Rights Reserved.

7. How-To Guide that CRM systems often don’t attach the revenue to the contacts or accounts that exist in marketing automation. SPECIALTY FUNCTIONS As the core marketing automation features have become established, vendors have expanded in several directions. These include social marketing, marketing administration, and Web traffic generation. Each category has its own functions. Social marketing features include: Social Monitoring. This is listening for public mentions of a client’s product or other keywords on social media such Twitter, Facebook, LinkedIn, and blogs. Advanced monitoring might use artificial intelligence to classify the mentions and direct them to appropriate individuals for response. Some systems also identify influencers or import influence measurements from external sources such as Klout, PeerIndex, and Kred. Social Publishing and Sharing. It is now fairly common for B2B marketing automation to let users add sharing buttons to system-generated content such as email and Web pages. These buttons let recipients repost the content to their own social networks. Many systems also can now publish content directly to major social networks through the client’s own accounts. These systems also providing tracking reports to show readership and traffic generation. Social Promotions. Some systems support specialized promotions through Facebook and other networks, or run general promotions such as contests and games. Some can also produce landing pages, surveys, and similar contents that are tailored to specific social networks. Marketing administration features include: Budgeting and Planning. Basic features are attaching expected costs and revenue to campaigns and comparing these with actual results. More advanced features include assigning campaigns to hierarchies related to product, regions, strategies, or customer segments; estimating costs based on volumes; and associating costs with revenues for return on investment reporting. © 2014 Demand Metric Research Corporation. All Rights Reserved.

8. How-To Guide Revenue Forecasts. Some systems assign leads to funnel stages and forecast the timing and amount of revenue they will produce, based on historical data. This is similar to the sales pipeline forecasts in CRM systems except that the leads are at an earlier stage in their lifecycle. The stages may be a simple sequential funnel or more elaborate flows that move customers in specified patterns among alternate states. Project Management and Workflow. These features let marketers define the tasks required to create a promotion, assign those tasks to individuals, and track progress. Some B2C marketing automation products offer very sophisticated project scheduling features but these are rare among B2B systems. More B2B systems have basic workflow to manage content development, such as tracking approvals and revisions. Traffic generation features include: Blogging and Content Marketing. Some systems provide built- in blogging and Web site management tools. This makes it easier to add subscribers’ names to the marketing database, to add blog and Web readership to behavior profiles, and to publish personalized promotions on blogs and Web pages. Similar advantages apply to managing other types of content, such as downloadable white papers, within the marketing automation system. Search Engine Optimization. These features let marketers specify the search terms or types of readers they wish to target, and then assess the likely performance of Web pages, emails, and other potential marketing content against those goals. At its simplest, this involves scanning the content for keywords and other attributes that help with search engine rankings. More advanced systems can recommend additional search terms to target or suggest content to add. Advertising Management. An increasing number of systems integrate directly with search engine advertising tools like Google AdWords to set up and manage paid search campaigns from within their marketing automation interface. This makes it easier to identify the campaigns associated with each response and provides easier integration with planning, budgeting, and return on investment analysis. © 2014 Demand Metric Research Corporation. All Rights Reserved.

9. How-To Guide KEY CONSIDERATIONS The functions described so far are supported by underlying technologies that have a major impact on user experience. Issues to consider include: Content Management. Emails, landing pages, and other marketing content are usually created within the system using some sort of visual designer. Beneath this layer, systems differ in how easily content can be shared across promotions, how it is stored and accessed, and the controls provided over versions and changes. Multi-national organizations will also be concerned about support for multiple languages. Database Management. Early B2B marketing automation databases often held little more than a single profile record and behavior history for each individual, with only a handful of user- defined fields. Even today, many systems rely on email address as a unique identifier for each individual. Some systems are now much more advanced, allowing additional user-defined tables, multi-layer data structures, and user identity matching on multiple keys. There are often still limits on the total amount of data that can be stored or on the amount that can be extracted to other systems. Marketers with large data volumes or extensive analytical needs should examine database features closely before selecting a system. User Rights Management. Smaller marketing departments are often comfortable letting all users access all system functions and data, but larger departments typically need to control who does what. These limits might reflect divisions along product lines, geographic regions, or functional specialties. Larger organizations are also more likely to require a supervisor or compliance officer to approve a program someone else has created before it is released. Systems vary substantially in the how finely they can control user authorities and in how easily users can manage complex authorization hierarchies. Open API and Apps. Most marketing automation systems were originally designed as self-contained systems with little integration to other software except for CRM. Today, major vendors have published APIs that let external systems access marketing automation data and functions. Many also let the marketing automation system itself access other products’ APIs. Typical uses include integration with Webinar systems to send © 2014 Demand Metric Research Corporation. All Rights Reserved.

10. How-To Guide invitations, register participants, and track attendance; integration with search engine advertising campaigns; and integration with external data sources to clean data and enhance customer profiles. Some vendors have created their own application market places that make it easy to find and incorporate third party systems with a few mouse clicks. VENDOR LANDSCAPE Marketing automation is a composite of several “point solutions” within the larger category of marketing software. To put it a broader context, marketing systems are part of the CRM environment (broadly defined as including marketing, sales and service systems), which in turn is nested within customer interaction management (incorporating CRM and Web site management), which sits alongside “back office” systems accounting, human resources, and manufacturing). Integrated suites exist at every level of this structure: complete enterprise management systems like SAP; complete customer interaction systems like IBM; complete CRM systems like Salesforce.com. Since these suites all contain some form of marketing automation, they are all part of the competitive landscape. But companies that purchase such suites are rarely focusing on marketing automation as their main priority, so the most relevant competition for B2B marketing automation vendors is still other B2B marketing automation vendors. © 2014 Demand Metric Research Corporation. All Rights Reserved.

11. How-To Guide Those vendors fall into three rough groups, based largely on the size and sophistication of their target clients. Some vendors serve more than one client group, but each is probably best suited to a single segment. Micro-Business Vendors. These serve the very small businesses, typically under 20 employees and often with fewer than five. Companies this small rarely have a professional marketer on staff, so the owner or one other person runs the system. Because one person handles all the marketing and often all the sales, buyers want a single system that offers as many functions as possible. This simplifies training and avoids the need for technical skills to move data from one system to another. Vendors serving this market stress extreme ease of use, comprehensive scope, limited complexity, and low price. This is the realm of “all in one” systems that combine CRM with marketing automation. Major vendors include Infusionsoft, Ontraport, and Venntive. This segment is also served by several systems that add nurture campaign capabilities directly to a CRM database; while not true marketing automation, they meet the same purpose for many companies. Examples include CoreMotives and ClickDimensions, which both integrate with Microsoft Dynamics CRM, and ZohoCRM. This segment is also served by several companies that specialize in small service businesses, such as dentists and plumbers, providing help with appointments and local advertising. This group includes companies like ReachLocal and DemandForce. Pricing for a full marketing automation solution in this segment usually starts around $200 to $400 per month, although lower cost options are often available for companies who want only limited features. Small to Mid-Size Business Vendors. This is the heart of the marketing automation industry, where the most vendors compete for the most revenue (although the micro-business vendors have more individual clients). Clients in this group range from $5 million to $500 million revenue, with exceptions in either direction. These firms have at least one full-time marketer and a separate sales staff. They run more complicated marketing programs and use most core marketing automation features, content marketing, and social publishing, and promotions. However, these marketers are less interested in integrated CRM, advertising, and Web site management, since those are often handled by someone else. Major vendors in this segment include Act-On Software, HubSpot, and Salesforce/Pardot for smaller clients and Marketo, Oracle/Eloqua, and Silverpop serving larger © 2014 Demand Metric Research Corporation. All Rights Reserved.

12. How-To Guide firms. This segment also includes systems that are sold primarily to marketing agencies who use them to support their own clients. This group includes Optify, Net-Results, and LeadLife. The sector also includes many other, small vendors with strong products. These often have specialized features or expertise that make them worth considering if they happen to fit the buyer’s needs. Pricing in this segment starts from $1,000 to $2,500 per month. Enterprise Vendors. These serve businesses over $500 million revenue. Those firms have large marketing departments, often reaching several hundred users in multiple locations. They need high scalability, precise user rights management, advanced budgeting and planning, revenue forecasting, project management, and extensive content management including multiple language support. Oracle/Eloqua is the leading specialist in this group, with competition from Marketo and Silverpop among conventional B2B marketing automation vendors and, for the largest accounts, from B2C marketing automation systems including IBM/Unica, Teradata, Adobe/Neolane, SAS, RedPoint, and SAP. Prices among this group start around $5,000 per month and often reach much higher. BEST PRACTICES Cloud technology and monthly subscriptions make it very simple to deploy a marketing automation system. But successful implementation is still hard. Here are some key practices to get full value from your investment: Pick the Right Vendor. Marketing automation systems all have the same list of core functions, but there are still significant differences in the products and the vendors behind them. Every function can be implemented at different levels of sophistication and ease of use; marketers must carefully assess their own requirements to find the right balance power and complexity. In addition to features, vendors differ in their size, support services, partner networks, pricing, and industry expertise. Finding a vendor you’re comfortable with – and checking with references to be sure your impression is correct – is essential to a successful relationship. Define Scenarios. It’s easy to say that buyers should define their requirements, but many first time marketing automation users © 2014 Demand Metric Research Corporation. All Rights Reserved.

13. How-To Guide really don’t know what they need. One solution is to create scenarios that describe the specific steps needed to complete projects you plan to execute, like running a newsletter program or nurture campaign. Once you’re done this, have potential vendors demonstrate how they would execute the scenario using their system. The goal is to see what’s required to do real work, rather than just looking at a disconnected sample of whatever features the vendor wants to highlight. Make sure your scenarios include some of the more complicated marketing programs you intend to develop, such as elaborate segmentations or event-based branches in campaign flows. These are where product weaknesses will be most visible. Improve Data Quality. Don’t be surprised if your initial load uncovers poor data in the sales automation system: if anything, you should be surprised if it doesn’t. Sales users can easily ignore obsolete, incorrect, or duplicate records, but your marketing automation system will treat every entry as equally valid unless you tell it differently. Take a preliminary look at the sales data as soon as possible and work with sales people to find ways to eliminate or correct bad information. Then agree on standards and audit processes so you’re sure that only good information is shared between the systems in the future. Align with Sales. Data quality is just one area where marketing automation requires new levels of cooperation. Other key interactions with sales include defining target customers, building formulas for lead scoring, setting rules for when leads are passed to sales, creating the lead transfer process, and agreeing much effort sales will invest in marketing-generated leads. You’ll need even more coordination and training if your marketing automation system sends alerts to sales people, assigns leads directly, or shows sales people the lead scores and behavioral profiles that marketing automation has created. Invest in Training. No matter how easy the marketing automation system looks in sales demonstrations, your staff will still need training to use it effectively. This training extends beyond system operations to how to design effective programs, monitor performance, and improve results over time. Be sure the vendor’s start-up process leaves you with more than a handful of prebuilt programs your staff isn’t able to adjust. And be sure to continue training after the initial deployment so you staff can deepen their skills and learn new system functions over time. © 2014 Demand Metric Research Corporation. All Rights Reserved.

14. How-To Guide Map the Buying Process. Customer understanding is the foundation of marketing success. Map the stages in the buying cycle, with particular attention to the portion before leads are turned over to sales. Then match your marketing programs against the stages to identify any gaps where you are failing to guide leads to the next step. This will be your framework for future program development and analysis. You’ll further refine this framework over time by identifying different buyer personas and constructing programs to meet their particular needs. Set a Long-Term Plan. You can’t do everything at once. Start your marketing automation deployment with some basic campaigns that use primary features such as emails and landing pages. But to be sure you don’t get stuck at that level, set a long- term plan to add more advanced features such as lead scoring and social media integration. Track progress against the plan as part of your standard performance reporting to ensure it doesn’t get lost amid the inevitable short-term crises. You may not truly need every feature included in your marketing automation system, but remember that the most successful marketers generally use the broadest range of capabilities. Measure Results. If there is one key to marketing automation success, it is measuring results so you can prove system value and track improvements. Measures start with outcomes such as lead counts and response rates, but should extend to efficiency metrics, such as cost per qualified lead, and ultimately to value measures such as incremental revenue and return on investment. Measurements must always be placed in context by comparing performance against plan or past results. Reliable measurement supports other critical disciplines such as rigorous testing and fact-based decisions, which themselves contribute hugely to success. BOTTOM LINE The benefits of B2B marketing automation are firmly established, but they are not guaranteed. Marketers need to understand what these systems can do, identify how their company will use them, and pick a system that matches their needs. They then need to follow a disciplined implementation strategy that ensures they have the training, resources, programs, and sales alignment necessary to gain real value from their investment. Careful execution will ensure they become part of the successful majority of marketing automation users, not the © 2014 Demand Metric Research Corporation. All Rights Reserved.

15. How-To Guide unhappy minority whose deployments have failed to match expectations. ABOUT THE RESEARCH ANALYST With an MBA from Harvard, David is an expert in both B2B & B2C marketing strategy & technology. He has advised The Gap, JC Penney, Lowe's, Blue Cross/Blue Shield, Williams- Sonoma, Scholastic, Unisys, Sprint and Verizon Wireless. He also publishes the Raab Guide to Demand Generation Systems and the Marketing Performance Measurement Tool- Kit. © 2014 Demand Metric Research Corporation. All Rights Reserved.