I was intrigued to read a recent post by David Raab, a leading analyst in the marketing automation space, on his blog, “Customer Experience Matrix,” in which he writes about the role that agencies play in the sale and management of marketing automation systems (bold emphasis mine):
“It seems that just about every (marketing automation vendor) now touts special features to support marketing agencies that resell the system to their clients or operate the system on the clients’ behalf. This isn’t exactly new but what once seemed like a niche strategy now looks more like a standard approach. It’s always been obvious that agencies were a sensible channel for marketing automation vendors to pursue, but I’m beginning to wonder whether agencies might turn out to be the primary channel for such systems, excepting only direct sales to large enterprises.
If this happens, the reason will be that agencies provide the missing skills that have prevented so many companies from taking full advantage of marketing automation systems by themselves. Vendors have been knocking themselves out for the past five years trying to educate marketers to run their systems. Perhaps having agencies run them is the real solution instead.”
You’d probably assume at this point that, as the co-owner of a technology-driven B2B marketing agency, I’d applaud the notion that firms like ours are becoming a primary sales channel for marketing automation. But, actually: no. Even though marketing automation is indeed a primary business driver for Spear, I’m not convinced that the particular scenario that Mr. Raab predicts is in our future.
Here’s why:
One reason is that agencies aren’t structured to sell software. Most agencies are professional service organizations, staffed and optimized to sell and deliver services. The staff, the expertise, the content, the sales cycles required to sell software effectively are very different. Some agencies will adapt, and be successful at it. Most won’t, I suspect, because it takes them too far outside their core business focus.
The second reason is that, in my experience, most B2B companies, even though they may indeed lack the manpower, expertise or resources to manage marketing automation effectively, aren’t prepared to surrender that responsibility in its entirety to a third party. Our firm works with dozens of marketing automation customers, for whom our technical team is intimately involved “under the hood” as it were, but few if any of those clients are interested in surrendering complete management of the software to us. Granted, that’s in part a self-fulfilling prophecy because we don’t actively promote or sell managed services. But even then, the question rarely comes up.
It is true (as Mr. Raab points out) that many B2B companies are missing the skills and expertise to get the most from their investment in marketing automation. And moreover, it’s also true that agencies may play a significant role in closing that knowledge gap. But I suggest that companies are more interested in a consultative relationship, in the acquisition of best practices, and in achieving knowledge transfer to a fledgling marketing operations staff, than they are in telling their agency: “Here, YOU manage this stuff.”
In addition to supporting the resale and “renting” of their software via agencies, marketing automation vendors would do well to also support – in every sense – a healthy ecosystem of professional service partners: agencies, consultants, and similar firms, who may not aspire to selling more software, but can, in the end, help make marketing automation clients more successful. Successful clients in turn drive technology adoption, license renewals, and revenue growth. It’s a win-win-win.
Howard, please call me David. I agree with your first point — I meant that agencies would provide marketing automation systems as part of the agency services, not sell the systems for clients to use themselves. This is more in line with your second scenario. It’s certainly true that people who have bought marketing automation to use in-house are people who want to use marketing automation in-house. But those companies are a tiny minority — remember that 90% to 95% of companies haven’t bought marketing automation at all.
The question is whether those firms haven’t bought because they don’t have the skills or resources to run their own system and would thus rather let an agency run it for them. This is definitely the case for many very small businesses, where agencies/VARs/resellers already account for a huge proportion of marketing automation sales. My question was whether a significant number of larger businesses will come to a similar decision, just as many larger firms already outsource things like media buying. There will surely be a mix but it’s quite possible that in-house deployment is something that will turn out to be limited to early adopters, while mainstream marketers will be happy to let their agency do the work.
I think I’m more in Mr. Raab’s camp. Larger companies will want to keep marketing automation in-house but technology is changing so fast that they will find it impossible to keep up.
I think it will become more commoditized, like media buying, and agencies will adopt a platform that they can put they clients on.
During the early 90’s, LANs and WANs exploded, as did powerful servers with distributed computing driven by 386/486/Pentium PCs. At first, IT Departments went about things on their own, but it became too much to handle…way too much. As a result, two types of service providers emerged: one that strictly provided consultants to fill specific needs (on-site or off-site), and another that provided managed services.
History will be repeating itself. Watch this space.
I agree with Mr. Raab, at least for the brazilian market. I work in a full service agency that has strong technology background and clients of any sizes. For the past 4 years what I`ve seen is more and more large or mature companies are bringing marketing technology in house while the small ones completely outsources that to us. For that reason, I`ve been bombed for salespeople of almost every vendor to make partnerships.
David, John, Joe, Leandro – thanks for your comments. Clearly this isn’t an “either/or” question … as I stated in my post, there are some agencies (Leandro’s, for example) that will adapt to this reseller role and be successful at it. It could also be that my personal experience is colored by our agency’s focus on high-tech clients – companies who are inclined to a more hands-on approach. I do believe, however, that when an agency sells software of any type, in any manner, it changes the role and client perception of that agency. It’s more difficult, in my view, to be a credible “trusted advisor” and consulting partner when you’re motivated by license revenues.