“Data Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
In January 2012, Gartner declared that, within the next five years, CMOs at the world’s largest companies would spend more than CIOs on technology. Within six months, the industry saw some of the biggest acquisitions in marketing-software history, including the $735 million sale of BuddyMedia to Salesforce. Marketing software as a service, or SaaS, is one of the hottest startup areas today.
Indeed, marketing is overdue for a technology-focused overhaul. Most media buys are still built in simple spreadsheets, and social+mobile ad share continues to lag. Marketers are eager to find technology solutions that help them manage the multiplying media choices, and CMOs increasingly talk about an “always-on” marketing model.
The idea of software as a service tends to appeal to brand marketers. After all, it’s far cheaper than paying an agency to create something from scratch. Investors are enamored with the margins of the software model and strongly encourage startups to adopt the SaaS dogma: Staff up with salespeople, go for big enterprise deals, and spend as little as possible on customer service.
But, in the race to cash in, too many companies are falling short by putting service second. Signs of weakness are popping up in the marketing-software business. I have spoken with dozens of brand leaders at the world’s largest advertisers in the past few months, and they echo the same complaints:
- They don’t have the time to learn new software and keep updated on new features.
- The software is not keeping up with their specific needs.
- The tools are not producing noticeable business results.
As a result, a growing number of marketers choose not to re-sign annual contracts when they expire, and are either doing without marketing software or shifting the work back to their advertising agencies. Marketing SaaS is not yet delivering on its hype.
Why Service Should Come First
The reality is that marketers need service before software. For decades, they have relied on an ecosystem of partners, agencies, consultants and specialists to help them do their jobs. So handing them a username, password and instant-message support just doesn’t cut it. It will take what I like to call a “SaaS-backward” model to win in this new market.
We won’t see Gartner’s predictions ripen into reality until companies adopt a service-powered-by-software approach, built around three marketing-centric principles:
- Strong customer leadership: Startups must become trusted stewards of brands’ businesses who understand their clients’ challenges and get in the trenches to train them in new media tools. The pendulum will shift away from salespeople to client service.
- Service powered by technology: Once customer-service leaders steer marketers in the right direction, software can be used to drive business results in a scalable way. Marketing automation and machine learning will help both startups and clients make money while they sleep.
- Paid for performance: SaaS companies are leaving enormous piles of money on the table with flat monthly fees. If their software actually works, then there’s potential for limitless revenue growth because brands are more than willing to pay for results. A results-based fee structure would create partnerships that are successful for both parties and would motivate startups to keep innovating.
Increasingly, we will measure the strength of marketing SaaS companies by one critical number: renewal rates. Renewal rates represent the true test of whether or not clients are seeing enough return on their investments. Renewal rates also are important for software providers because it’s much more profitable to keep a client than to keep refilling the funnel.
Good marketers understand customers’ needs and develop products that meet those needs. In order for marketing software companies and their investors to succeed, we must take a chapter from brand marketers’ playbooks and deliver service first, and technology second.