2004 Jul 01
Hosted Campaign Management
David M. Raab
DM Review
July, 2004

I once read that, on average, the most accurate weather forecast is that tomorrow will be the same as today. That we still look at weather predictions shows the importance of anticipating change: even unreliable warnings of an approaching storm are better than no warnings at all.

So it is with technology forecasts. Every new development is accompanied by predictions of world-shattering impact, but few live up to their hype. After a while, it’s tempting to ignore all the forecasts and simply assume that tomorrow will be like today. As with the weather, you’d be right more often than not. But, also as with the weather, you’d also occasionally face some major surprises. So ignoring the possibility of change isn’t a practical approach.

But accepting the possibility of change doesn’t solve the problem of guessing which changes will actually occur. Knowing that most technologies will fail leads to a natural reluctance to predict that any particular technology will succeed. This can delay recognition of important changes even after they appear.

Case in point: hosted campaign management systems. Such systems, which are run by vendors and accessed remotely via Web interfaces, were first introduced in the late 1990’s. They promised low cost, quick implementation, and sophisticated functionality. But many vendors failed when the Internet bubble burst, and most of the survivors have kept low profiles ever since. Even the most prominent exception, Aprimo, moved most of its business to selling conventional, client-operated software licenses.

With the benefit of hindsight, there’s an argument that hosting never really made sense for campaign management applications. After all, there are significant differences between campaign management and hosting’s most prominent success, sales automation systems like Salesforce.com, Upshot and SalesNet. Sales automation involves large numbers of widely dispersed users who demand extreme simplicity and need relatively little integration with other corporate systems. Web-based hosted systems fit this profile quite nicely.

In contrast, campaign management systems typically have a small number of power users at one or few locations. These users gain little benefit from Web deployment and appreciate the richer user interfaces of non-Web systems. Campaign management also typically requires a marketing database built from a large number of source feeds through a complex consolidation process. This takes greater customization, integration and support than most hosted systems are designed to accommodate.

With all these obstacles and a number of initial failures, it was easy to dismiss hosted campaign management as a change that didn’t happen. Yet hosted campaign management is once again on the rise. Specialist vendors include Zoomio, Sun Bear and Smart Button. Hosted sales automation products are also expanding their own campaign management capabilities.

Part of the reason for this success is technical. Web interfaces have improved substantially in the past few years and can now provide nearly the same user experience as conventional software. XML has significantly simplified data exchange, so it’s somewhat easier–though still a challenge–to build hosted marketing databases and integrate them with the rest of the enterprise.

But the primary change has been in the market itself. Today’s hosted campaign management systems are sold primarily to small and mid-size companies that could never afford or properly employ conventional campaign management software. These firms have simpler requirements than larger, more sophisticated companies and they lack the staff to make full use of the larger systems’ capabilities. They are therefore willing to accept less advanced systems in return for the lower cost and faster installation that hosted vendors provide.

One obvious impact of this change is that campaign management is now available to more companies. This lets them deploy more sophisticated marketing strategies and ultimately do a better job of serving their customers.

The effect on high-end marketers is more subtle. Because hosted systems are an appropriate, cost-effective solution for small and mid-size organizations, the conventional campaign management vendors find themselves limited to the relatively small number of high-end customers. This reduces the vendors’ potential for growth, constrains the resources available for product development, and forces them to keep prices high. As hosted systems improve their capabilities and drive down prices, the pressures on conventional campaign management software vendors will increase.

Conventional vendors have some time, because it still takes years to evolve a robust high-end campaign manager. Many have attempted to bolster their position in large marketing departments by expanding into related areas such as project administration, analytics and content management. Yet this strategy is also threatened by the XML-based technologies, which make it easier to integrate separate tools for such functions, and thus less useful to combine them in one product.

Of course, XML itself could turn out to be one of those changes that fails to live up to expectations, but it currently seems quite likely to succeed. In fact, conventional campaign management vendors might themselves take advantage of XML by using it to support an alternative approach: reinventing themselves as customer interaction managers.

Interaction managers coordinate business policies during customer interactions across all operational systems. Their core requirements are the precise capabilities needed for conventional campaign management–customer data integration, sophisticated segmentation, offer selection and response evaluation. These will be capabilities that hosted systems will need to most time to replicate.

The technical adjustments needed to move from outbound campaigns to real-time interactions are not trivial. But most campaign management vendors began work on such capabilities several years ago, to support Internet marketing. True cross-channel, real-time interaction management is still more demanding. Yet, faced with a market changed by hosted systems, conventional campaign management vendors must themselves change in response.

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David M. Raab is a Principal at Raab Associates Inc., a consultancy specializing in marketing technology and analytics. He can be reached at draab@raabassociates.com.

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