A couple of weeks ago my partners and I hosted a meeting of our SaaS advisory board. This is one of our firm’s four advisory boards. I had written about the role of these boards and the value our firm and portfolio companies derive from our advisors’ insights, feedback and help. Our SaaS advisory board includes executives from SaaS application vendors, CIOs and CTOs of companies that are heavy users of SaaS applications, and leading SaaS consultants. One of the most interesting insights that came out of our meeting was that the Chief Marketing Officers (CMOs) are starting to drive the corporate application agenda. This is consistent with Laura McLellan’s position who in a recent Gartner webinar stated that by 2017 the CMO will spend more on IT than the CIO, as well as the conclusions presented here.
There are several reasons for the CMO’s emerging power:
- The accelerating move from offline to online for commerce, entertainment, and socialization. The web with its various personas (desktop, social, mobile, local) is enabling corporations to finally become truly customer-centric, i.e., to understand the problems customers face and provide mutually advantageous solutions.
- The big data that is collected from the various online and offline interactions between a consumer and a brand can now be utilized effectively through a new generation of analytic solutions that enable corporations to better target existing customers and prospects with the right message, at the right time through the right channel, as well as to assess the effectiveness of each message based on the resulting actions.
- Through the consumerization of the enterprise we are seeing a new generation of easier to “consume” applications that don’t resemble the monoliths of the past but instead take their cues from mobile applications, i.e., task-specific pieces of functionality that are easy to install, learn and use effectively.
- The cloud that is making acquisition and deployment of these next-generation applications easier and faster.
- The new generation of marketing personnel, including CMOs, that is more analytical, data-driven and technology-savvy.
Today we are seeing marketing departments acquiring applications to address online advertising for brand development and direct response commerce, social and mobile marketing and commerce, and analytics. Having anticipated this trend, over the past several years Trident Capital has been investing in such applications and today our relevant portfolio includes the online advertising technology companies Turn, Exelate, Jiwire, Brightroll, Sojern, the social marketing and commerce applications Extole and 8thbridge, and the retail analytic applications company Pivotlink.
Though the opportunities may appear brilliant, based on our experiences with these portfolio companies we have learned that working with the marketing organization also presents several challenges:
- There is little tolerance for long application-implementation periods, inappropriately functioning software and need for specialized personnel to operate these applications. Marketing departments want to see results quickly and, under today’s typical corporate budget environments, they don’t want to have to hire new people just so that they can use a new application.
- Short period during which to demonstrate meaningful ROI. Marketing departments may be willing to evaluate several different applications but they will ultimately commit to the ones that give them quick time to value with sustainable and growing ROI.
- Data is not always well organized and structured. This is area where most frequently application vendors see a big difference between working with the marketing and the IT departments. For marketing departments managing data and maintaining its quality are new tasks. This task becomes harder as the volume, velocity, complexity, and structure of customer data are increasing. Marketing application vendors must be prepared to help by providing appropriate services in this area and thus ensuring that the application’s time to value will be short.
- Skills for data analysis for insight-generation are lacking. While marketing departments are becoming awash in data, they often don’t have the people who can effectively analyze this data. Again, the marketing application vendors need to step and fill the void by offering their own data analytics and insight generation services.
- Shorter initial licensing contracts and smaller marketing campaigns. As they try to understand the value of the myriad of applications offered to them in order to implement their customer-centric strategies, marketing departments feel that they must first “get their feet wet.“ In most cases this approach results in application licensing contracts that initially are short-term (1-3 months), or in smaller-dollar (typically $10-50K) marketing campaigns.
- Need sales people who can first speak the marketer’s language rather than IT’s language. Over the past 30 years we have trained a cadre of application sales people who are expert at interacting with IT organizations, speaking IT’s language. This was necessary because front- and back-office enterprise applications, regardless of who was using them, were mostly purchased by the IT organization. If the next generation of marketing application companies is to be successful, they will need to hire sales people who can interact with marketing executives.
- The sales cycles for these applications are becoming longer and more complex (see also here). Before the final decision for the licensing of these applications is made, IT is now becoming involved, and will continue to do so. Though the CMO’s prominence is rising, don’t expect the CIO’s role in marketing technology decisions to disappear. Over the past year our relevant portfolio companies started to see CIOs participating in important procurement decisions involving solutions for the marketing department.
- The application’s user experience must be tailored to the marketing department’s users. We are starting to see application developers creating user experiences that are more akin to the practices being established around consumer software, particularly PostPC consumer applications. To easily adopt the multitude of new applications offered to them, marketing departments must want to interact with them and must be able to do so easily and with little or, preferably, no training.
As corporations become more customer-centric and the move to online continues, data-driven marketing departments stand to reap big rewards. For this reason they are acquiring a new generation of applications to help them improve their interactions with customers and prospects regardless of channel. Marketing application vendors must understand this trend along with its positive and negative implications, as well as the evolving roles of CMOs and CIOs, in order to best capitalize on it.