2004 Sep 01
New Marketing Systems
David M. Raab
DM Review
September, 2004

Second marriages have been described as the triumph of hope over experience. Given the failure of many marketing systems introduced during the boom of the late 1990’s, launching a new marketing system today may seem similarly irrational. But entrepreneurial spirits cannot be bottled up forever. With the economy apparently improving, a new generation of marketing software is now bubbling into view.

These new products are not simply clones of the existing industry leaders–the high-end campaign managers offered by Unica, Aprimo, DoubleClick and other survivors from earlier times. Rather, they evolved independently to meet the needs of the most recent few years, and they take advantage of technologies maturing this period. Although the older products have also been updated to reflect the same needs and technologies, the new systems offer a purer expression of current trends.

Functionally, the greatest distinction of the new systems is their focus on individual dialogue management. This means the systems are designed to respond to individual customer actions as these occur, rather working with groups of customers in batch jobs. The fundamental tool for such dialogues is a decision tree that defines the conditional sequences of customer actions and system responses. The underlying software must explicitly track the location, or state, of each customer within the decision tree. This contrasts sharply with conventional marketing campaigns, which are built around segmentation trees. These assign customers to different groups and then send a different promotion to each group. Instead of persistently recording customer state, the conventional campaign managers typically reexecute the segmentation tree at the time of each contact.

Both state-based and segmentation-based approaches can execute multi-step interactions. But the state-based approach is much better suited to quick reactions, large numbers of customers, and complex scenarios. This makes it the method of choice for real-time and near-real-time interactions on Web sites, call centers, and automated email response. For this reason, some conventional campaign management systems have supplemented their segment-based technology with a state-based capability to handle such interactions. Others have retained their segment tree but modified them to execute on individual customers. This works but requires considerably more processing than the state-based approach.

Other aspects of the new systems are often less sophisticated than their more mature competitors. In particular, very complicated segmentation schemes can be difficult to create, because the new systems lack the specialized user interfaces required to manage campaigns with 100-plus segments. Similarly, the new systems include basic query builders but may not provide the predefined functions needed to generate tricky selections without writing advanced SQL. Most of the new systems do allow users to define and reuse their own custom functions, however. This means the more difficult tasks can be repeated easily once the initial effort has been invested to create them.

The new systems also tend to have limited analytical capabilities. Most provide basic reporting but not the statistical analysis and predictive modeling often integrated with conventional campaign managers.

The new products do tend to offer reasonably comprehensive content management functions. This is superficially surprising: after all, content management is not a particularly prominent component of traditional campaign management systems. When it has been added, it has usually been as part of a bundle of marketing administration features also including expense tracking and project management. But the presence of content management actually reflects a specific goal of the new systems: to let marketers self-sufficiently execute Web and email dialogues. This is a realistic objective for internet marketing, where all the necessary resources can in fact be placed in a marketers’ hands. By contrast, telephone and direct mail marketing–the focus of traditional campaign management systems–require substantial participation by external operational resources. Thus, campaign managers could never aim for self-sufficiency. (Exception: the desktop MCIF systems that were used by small banks. These often printed letters or postcards at the marketer’s desk.) Campaign managers were originally conceived as specialized tools within a larger marketing infrastructure; later, with administrative and analytical functions added, they were imagined as the central management system for a marketing group. But this is still a different conception from a self-contained tool for managing customer interactions.

A similarly significant contrast between the old and new systems is that the new products frequently include lead distribution and management. This is another function that was not part of most traditional systems, and it also an area where the internet allows today’s marketers a chance of self-sufficiency.

The new systems also differ from the older products in technology and pricing. Technically, they nearly all use a browser-based interface and a service oriented architecture, whether J2EE or .NET. The older products were originally developed with client-server architectures and PC workstations. Most of the older vendors now offer thin-client, J2EE versions of their own products, so this difference may not matter in most cases. But it’s worth bearing in mind, since there are often still some functions on the older systems that work better on a PC client.

Pricing differences are more pronounced. Several of the new products, including Sun Bear, SmartButton, Etelos and Zoomio, are offered as hosted products rather than conventional run-it-yourself software. Pricing tends to start much lower than the current leading systems–sometimes as far down as $10,000 to $20,000, compared with $100,000 to $200,000 for most conventional systems. This makes the new systems much more affordable for smaller firms–never a true target market of the conventional campaign managers. For larger clients, the new systems are probably still cheaper but the difference is not as substantial. A number of the new products are from marketing agencies, including Strategic-One, ClickTactics and SmartDM, which have developed them primarily for their own clients’ use.

Will this new generation of marketing systems survive? Probably yes. Initial implementations will be primarily for internet marketing and lead distribution: these are real needs, and the fact that the systems can operate self-sufficiently should help to ensure successful deployments. Extension to other channels will be held back by the same barriers that blocked earlier marketing systems at small and mid-sized companies: lack of in-house expertise in database development and marketing techniques, and lack of funds to purchase these externally. This barrier will fall gradually as marketers and IT staffs grow more familiar with customer management issues. So vendors who survive should see slow but steady growth. As their products mature, they may also reach the point where they can meet the needs of more sophisticated marketers who now purchase high-end campaign managers. But this market is small and the existing vendors will continue to compete. So the future for the new vendors lies elsewhere.

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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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