2008 Sep 01

Demand Generation vs. Marketing Automation: What’s the Difference?
David M. Raab
DM Review
September 2008

Last month’s column described the importance of lead scoring within “demand generation” systems. But perhaps we should step back to describe those systems in general. Many people still confuse them with “marketing automation” or “campaign management” products.

It’s an easy mistake. Both sets of systems maintain a contact database used to drive outbound marketing campaigns. Both provide reporting and analysis tools to understand promotion results. Both sometimes include marketing planning, viagra buy content management, and project management.

The obvious difference is that demand generation software is nearly always used by business marketers, while marketing automation and campaign management are used primarily to reach consumers. But this distinction is less useful than it seems. Many traditional marketing automation systems are also used for business marketing. And many small consumer marketers use lower-end demand generation software.

The more meaningful distinction is probably between companies that market directly to their customers and those that sell through sales people. Traditional marketing automation systems are used primarily in financial services, travel, retail and communications companies. Their campaigns sell specific products, even though the sale may be completed at a retail store, bank branch or sales agent. By contrast, demand generation systems attract and nurture leads which will be handed to sales departments when they are ready to buy. The salespeople will then identify needs, select appropriate offers, and close the deal.

Another, even simpler difference is that demand generation systems work with leads—that is, people who have not yet made their first purchase—while marketing automation systems focus on existing customers.

The fundamental distinction between nurturing leads and managing customers drives the major differences between the two sets of products. These include:

– focus on Internet behavior. Demand generation systems drive prospects to the company Web site, monitor their behavior, and infer when they are ready to buy. Most of herding is done with emails, which themselves can report whether they have been received, opened, clicked on, etc. Demand generation systems track Internet behavior in great detail because it’s one of their two main information sources. (The other is user-provided information such as surveys). By contrast, marketing automation systems work primarily with promotion and purchase histories. Non-purchase behaviors such as Web site visits are given much less weight if they are considered at all.

– integrated Web pages and analytics. Demand generation systems provide tools to build Web surveys and microsites and to capture data from these directly. This reflects their focus on online media. Marketing automation systems can sometimes build Web pages, but they largely assume this will be done externally. Similarly, they usually rely on third-party Web analytics systems to capture information about visitor behaviors.

– tracking of anonymous visitors. Tagging anonymous Web site visitors with cookies, building a history of their behavior, and later merging that history with the visitors’ identities are central features of demand generation systems. Marketing automation systems may not even track anonymous visitors, and certainly do not consider this a core capability. Have I mentioned that they are primarily interested in communicating with known customers?

– multi-step, highly reactive campaigns. Treatments within a demand generation campaign can vary quickly and significantly in response to an individual’s behavior. Marketing automation systems consider this an advanced feature that only their most sophisticated users are expected to deploy. In contrast, this is a fundamental capability for even basic demand generation products. In fact, finding ways to simplify deployment of multi-step campaigns is one of the main competitive battlegrounds in the industry.

– limited segmentation. This is the flip side of campaign complexity. Demand generation systems start with limited information about their targets, so they build campaigns that adjust treatments as information is gathered during execution. Marketing automation systems begin with a much richer customer history, so they select treatments using complex segmentations when the campaign is set up.

– lead scoring. Demand generation systems support elaborate scoring calculations to measure when a lead is ready for sales. Although marketing automation systems often support user-defined calculations and predictive modeling, they lack specialized lead-scoring functions such as depreciating the points allocated to older events or capping the points generated by a particular type of event. This is another competitive arena for demand generation vendors.

– simple database structure. Both demand generation and marketing automation systems maintain databases with information about individuals. But the base structure in demand generation systems is usually just a lead table and contact history. A modern marketing automation system nearly always includes purchases, and often additional information such as account balances and customer service interactions. The theory among demand generation vendors is that detailed information will be kept in the company’s customer management systems. However, most demand generation systems do let their clients extend the data structure through custom tables. For example, some version of purchase history is needed to measure campaign return on investment.

Many of these differences are more a matter of emphasis than fundamental technology. The products within each group also vary widely. So you still need to identify your own business requirements and assess how each system would meet them. But understanding the distinction between the two categories should make it easier to narrow in on the products best suited to your needs.

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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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