CMO vs. CIO Throwdown

Brian Wood Blog

Matt Mullen of 451 Research produced the article / analysis below discussing the much-hyped topic of whether marketing teams are starting to drive more organizational IT spending than traditional IT teams themselves.

Speaking as a marketing guy: “Oh, were that the case!” Evidently my current and recent employers never got that memo. (Heh heh heh, just kidding, bosses)

My favorite line from the article is one of the simplest: “In essence: to generate revenue for yourself, focus on how revenue is generated by others.” Too true.

Emphasis in red added by me.

Brian Wood, VP Marketing

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The CMO vs. the CIO – who will win the battle for IT?

Over the past 12 months, it’s been almost impossible to avoid the repeated claim that, soon, the CMO will become the enterprise’s largest spender on software and services – displacing the CIO.

This is the message driving the ‘customer experience management’ marketplace. During 2012, there was considerable M&A activity as some of the largest players in the industry either consolidated their positions, or added missing functionality to meet what appeared to be the central tenets of this emerging CMO-driven sector.

It’s possible that these claims conflate two separate, apparent truths: that marketing departments are buying more software to manage both customer acquisition and retention activities; and that because both these activities are aligned directly to a line of business and revenue generation, they are receptive buying centers for software companies to focus upon.

As important as they undoubtedly are, the suggestion that supporting customer acquisition/retention will shortly involve the majority of enterprise IT spend seems difficult to swallow.

In our interactions with marketers and the software firms that target them, we have seen little evidence to challenge our skepticism, and much to support it. Digital marketing is surely important and a growth area. However, budgets remain tight and requirements demanding – and the situation is unlikely to change anytime soon. But certainly, there’s an opportunity for both parties: for the enterprise to increase its reach in social media and automation of these activities, and for software vendors to take a greater role in supporting direct revenue generation.

The challenge is that the momentum in the sector – around funding and acquisition values – is creating the very real possibility of an overheated market. One that is hot, without yet delivering real revenue on the value proposition it promises.

In order to understand the codependent relationship driving this CMO-focused effort from the industry, it is necessary to look at some of the moving parts in more detail.

Why the CMO?

The moniker CMO, much like its younger sibling CRO (chief revenue officer), is a relatively new entrant to the CxO landscape. (Most people will have greater familiarity with the more common and mature synonym of marketing director, or sales director for CRO.) As such, neither are natural positions at the top table of organizational structures, but they are recognized as key in planning and management activities.

The CMO’s primary responsibilities are around generating field marketing: creating and managing the flow of new leads for a sales force to turn into revenue, as opposed to brand recognition and more traditional marketing activities. This, perhaps oversimplified, definition of marketing priorities today explains to a high degree why the CMO represents such an attractive target for software companies to sell to. Anything that helps customer acquisition succeed to some measurable degree not only helps individuals address their targets, but is also associated directly with new revenue. Software and services that are so associated are far easier to sell, and to sell at a notionally higher price.

It should be noted, however, that the CMO is also an immature buying center, and so has no real experience of the rigor of implementing enterprise-scale tools. No surprise, then, that in many instances, the role of advisers and change agents is falling back on incumbent digital agencies, with the external agency being the selecting party.

Defining ‘customer experience’

For many organizations, realizing one of the most important truisms of the new online economy – that you must meet and engage with your customers in the channel of their choosing – has been painful process. If a customer wishes to buy from you through the Web, then any attempts to redirect them toward another purchasing route is likely to result in lost sales. This is especially true of interactions via social media, where to some extent, users are beginning to expect their cries for help to be discovered, rather than them approaching the supplying or supporting party directly. It is in part this set of requirements – proactive identification of customer-service issues or strong brand promoters/demoters – that has created the market for social media-monitoring tools and the increased popularity of sentiment analysis within them.

The measurability of these transactions, both successful and otherwise, across channels is central to why so much attention is now focused on the digital marketer, which needs the ability to generate, score and nurture sales leads through outreach programs into social media or around inbound events (such as webinars). This requirement is now baked into many single-vendor suites (albeit clumsily in cases). Beyond the suite approach, a plethora of startups and émigrés from more traditional email-marketing scenarios are trying to extend their capabilities beyond push and measure campaigns, and move into true marketing-automation tasks such as lead scoring, tracking and nurturing.

The CMO toolkit

It is important to note that no de facto or generic set of tools exist that the modern digital-marketing-savvy CMO should have for customer acquisition. To generalize the CMO role is difficult, because every organization differs to some extent, as do industries and the balance/focus on important distinctions such B2B and B2C customer scenarios. That being said, there is a loose, common set of technology requirements in the vast majority of enterprises, or at least identified on their short-term shopping lists.

While not designed to be exhaustive, the following table provides some insight into elements of that common set.

Common technology requirements in enterprises

Tool type Central purpose
Web content management Creation, management and publishing of content for websites
Marketing automation Management of Web-based campaigns and lead management
Testing/multivariance Targeting and testing of content against segments of Web traffic
Social media monitoring Identification of terms or brands within social media
Social media marketing/social customer acquisition Creation and management of content specifically designed for social media campaigns
Web analytics Measurement and analysis of Web traffic

Although many of these areas have considerable overlap, some upper-tier suites such as Adobe’s Marketing Cloud roll-up of acquisitions could be said to encompass almost all of the above elements. And many mid-tier WCM vendors have begun to position their products as one-stop shops for SMB customers, developing and OEMing additional capabilities that have been bolted onto their existing tools. Neither approach, as it stands, offers a complete answer.

At a high level, there is often little to differentiate between the suites. The messaging, and even the names themselves, are nearly identical – Adobe Marketing Cloud vs. Salesforce Marketing Cloud – making it challenging to understand how the offerings differ. There are considerable differences, however, at the point where the various pieces in these digital suites actually integrate.

Salesforce.com’s approach, for example, is ultimately one of a single repository – the CRM – being the hub around which all activities take place. Even its WCM platform is really designed around the exposition of data that is maintained within the CRM in the form of basic data repeaters. There is, as a result, very little horizontal integration between the ‘spoke’ applications in the stack. Adobe, by contrast, tends to opt for a more distributed approach, even if its CQ WCM (and allied digital asset management) systems inevitably contain the bulk of marketing materials in its version of the world.

Vendor landscape

There has been a long-running (but slow-burning) acquisition pattern in this marketplace. Adobe, Oracle and Salesforce.com have all made considerable investments to bolster their core primary databases or CRM businesses. (Or, in the case of Adobe, to instigate an enterprise software business from scratch.) The rate has increased of late, mainly due to social media becoming part of the orthodox marketing mix for enterprises and (aside from limited ‘push’ publishing capabilities) traditional Web publishing platforms being unable to cope with the increased demands.

In the main, the M&A cycle for WCM is reaching the end of its natural life, due to its relative maturity as part of the digital-marketing stack. Marketing automation, social-media monitoring and social customer acquisition, however, continue to display a lively amount of activity, both in terms of consolidation within those markets and top-down acquisitions. In areas such as marketing analytics/media mix modeling (ThinkVine) and social-media marketing (Hubspot), there continues to be disruption not only within established digital-marketing tenets, but also at the point where digital marketing meets ‘big data’ and large-scale analytics.

Recent acquisitions appropriate to customer experience

Acquirer Acquired company Vendor type Date/value
Oracle Eloqua Marketing automation 12/12 $945m
Adobe Day Web content management 7/10 $242.7m
salesforce.com Buddy Media Social media marketing 6/12 $689m
ExactTarget Pardot Marketing automation 10/12 $95m
SDL Alterian Social media monitoring 12/11 $106m
Oracle Collective Intellect Social media monitoring 6/12 Unknown
Adobe Efficient Frontier Social media marketing 11/11 $400m
Adobe Omniture Web analytics 9/09 $1.8b
IBM Tealeaf Testing/multivariance 5/12 $500m
salesforce.com Radian6 Social media monitoring 3/11 $326m

Source: 451 Research M&A Knowledgebase

The 451 take

While we don’t expect the CMO to become the largest spender on enterprise software in the foreseeable future, it’s understandable if the position becomes the primary value target for a software industry looking for new business growth in the short- to mid-term. To date, much of marketing-department spending is in the world of ‘shadow IT’ – that is, bypassing the strategic and formal processes to set up locally managed, tactical solutions – and its velocity is increasing in a world of easily available SaaS and cloud solutions. The apparent market momentum suggests that buying from this historical tactical base is expanding to investing in strategic enterprise platforms, to support some eye-watering valuations of vendors in the space. Some caution is advised.

The new orthodoxy of digital marketing means that engaging in social media and wanting to monitor and manage customer and prospect interactions no longer feels like an outsider activity. Rather, it’s becoming an activity that joins core enterprise sales, support and delivery processes.

This presents a considerable opportunity for those looking to develop products and services in this market; however, it’s essential that vendors focus on the specifics of how they might plug into – in particular – the mindset of the field marketer. A product will need to be shown to deliver a fast rate of return on any investment, and to meet the needs of the sales department in supplying convertible leads at a fair cost.

In essence: to generate revenue for yourself, focus on how revenue is generated by others. Those that succeed will either be best aligned to deliver a tightly focused vertical approach, or will have enough flexibility to easily play with others in the digital-marketing mix. We’ll be watching this situation evolve closely in the coming months – it promises to be a very interesting process for all involved.

https://451research.com/report-short?entityId=75890