6 Questions on TCO of Marketing Automation Technology

Recently, I was interviewed by Andrew Gaffney, Editor & Publisher of Demand Gen Report, for an upcoming article on the TCO (Total Cost of Ownership) of marketing automation solutions. With Andrew’s permission, his questions (and my answers) are reproduced below.

AG: Do you think marketing execs are aware of the all of the costs associated with implementing and integrating a marketing automation solution?

HJS: I don’t. Marketing automation has taken on the aura of a “magic bullet” for demand generation and lead management, but in practice marketing automation technology alone automates marketing as much as sales force automation automates sales.

AG: What are some of the factors companies may overlook when they look to automate processes that had previously been manual and often unconnected?

HJS: What many executives fail to realize is that any technology is only as effective as the strategy behind it. Without the implementation of best practices in areas like workflow, frequency, offer strategy, and creative, a marketing automation solution can not only be ineffective, it can actually hinder sales and damage your brand.

Let’s say you want to automate follow up and response to prospects downloading a free 30-day trial version of your software. Simply bombarding each downloader with a series of random e-mails may serve to automate the process, but it will do little or nothing to improve your conversion rate of trials to sales. Only with an investment in planning, workflow development, testing and offer strategy, and e-mail creative based on direct marketing and demand generation best practices, is such a program going to realize maximum value.

AG: Should marketers calculate the TCO of a marketing automation system before making the transition and the investment to implement one?

HJS: Yes, but I also believe calculating the TCO goes hand-in-hand with developing a practical strategy for how the system will be used. Too many companies are making the jump to marketing automation without a firm idea of how they’re going to put the system to use, beyond some vague notion about lead scoring or lead nurturing. Having a lead management strategy in place before you make the investment not only accelerates ROI, but it can help you choose the right system in the first place by knowing exactly what functionality and other differentiators are going to be most important to your company.

AG: If so, what are the costs/factors they should consider—training, integration, follow up service, ease of use, cost per user?

Ease of use is a huge factor; in fact, I think it might be the most important differentiator in the marketplace. We’ve watched a great many clients select a marketing automation vendor simply based on feature set, for example, only to find that actually implementing that functionality is close to impossible due to the product’s user interface or the amount of consulting and third party support necessary to design even the most basic campaign.

There are products on the marketplace today that require a team of systems consultants to implement. That’s not only expensive, it’s ridiculous. The power of an effective marketing automation system is its flexibility – i.e. the ease with which you can customize and adapt your communications based on different audiences, product sets, demographics, changes in business or market conditions, or user activity.

Another hidden cost factor – and I say this with self-interest because it’s a significant part of our lead management practice – is the development of an effective lead management strategy, including workflow, offer strategy, and associated e-mail and landing page creative. I call this a “hidden cost” because marketing executives will assume that anyone can write and design an e-mail, including their in-house staff, and of course that’s true. However, a professionally-crafted e-mail, landing page, and lead nurturing strategy can have a significant, cumulative impact on response, registrations, leads, and sales.

AG: Do you think it is critical that marketers should undergo some kind of trial or test before a full adoption of automation?

HJS: No, simply because there’s very little you can accomplish in the timeframe typically afforded a free trial (30 days) other than possibly to get a sense of ease of use. So if you feel you need to “play” with the system prior to purchase, fine. However, don’t expect that you’re going to recognize more than a minimal sense of the software’s potential.

AG: Once they have made the leap, what are the near term and longer term ROI benefits companies should expect?

HJS: Here are the most common, in our experience:

* increased sales productivity due to automated and standardized lead scoring and qualification, eliminating wasted hours following up with “junk” leads

* elimination of missed sales opportunities by ensuring that every lead is contacted in a timely manner, automatically and systematically

* shortening of sales cycles by nurturing existing prospects and advancing them along the sales process, with or without sales involvement

* increased ROI from all demand generation programs, by converting more raw inquiries to qualified leads and genuine sales opportunities

* improvement in conversion and close rates (lead to opportunity and lead to sale)

For an expanded viewpoint on the value of marketing automation and lead nuturing, download a free copy of our white paper on “Lead Recycling.”

Update: you’ll find Andrew’s complete article: “Building A Lead Management Strategy A Critical First Step For B2B Marketers” here.

One thought on “6 Questions on TCO of Marketing Automation Technology

  1. Suaad Sait

    I completely agree with you, Howard, that companies need to consider many factors before purchasing a marketing automation solution. However, I think something you are missing is how that solution fits into the bigger picture. A marketing automation tool will not be as useful if it doesn’t integrate with your sales force automation or CRM solution. And an even better question is what fuel are you putting into your marketing automation engine? A marketing automation tool is only as valuable as the data put into it. Are we still, in 2008, renting “sewage lists” and them pumping them though these marketing automation processes? Marketing automation is a necessary tool for all marketers but any of these tools is only as good as the data put into it.

    My point is that marketing automation is important but getting the data or fuel you put into it is PRICELESS!!


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