Thursday, February 17, 2011

Constant Contact Adds Social CRM: Should Marketing Automation Vendors Be Worried?

Small-business email provider Constant Contact yesterday announced the acquisition of "social CRM"* vendor Bantam Live. This is a major expansion for Constant Contact, placing it more squarely into competition with CRM and marketing automation vendors. As I've noted previously, small businesses are particularly likely to adopt a single platform for all of their marketing and customer management needs because the inefficiencies of multiple platforms are so obvious and painful in a small organization.

Email vendors like Constant Contact are especially well positioned to grab this business because they are one of first technologies that businesses adopt. (Other entry points: accounting software like Intuit Quickbooks, email clients like Microsoft Outlook, personal productivity suites like Microsoft Office, Web hosting companies like GoDaddy, and of course CRM like Salesforce.com.) As a point of reference, Constant Contact says it is used by more than 400,000 organizations, compared with maybe 10,000 for all marketing automation systems combined. The company expects more than $200 million in revenue in 2011, which about equals my estimate for 2010 revenues for all B2B marketing automation. And Constant Contact is just one of many small business email providers.

I've been meaning for some time to write a post about the small business sector of the marketing automation industry, because I really see it as very distinct from marketing automation for mid-size and large businesses. But this Constant Contact announcement underscores one the major points I had in mind: that the low number of current marketing automation installations in this field doesn't mean it's a wide open market. Rather, it means that there are plenty of other partial solutions in place at most firms. Expanding the solutions to offer reasonably complete marketing automation just isn't that hard, technically. And any vendor who does this has a major advantage because they can sell marketing automation as a product extension to their existing clients.

Finding a way to displace these existing vendors is the real challenge for small business marketing automation systems, since small businesses are not likely to add a new system without getting rid of an old one. The other big issue is that the existing solutions often cost only a few dollars per month (for example, Constant Contact averages under $50 per month per client). This means the $300 per month of even the cheapest marketing automation systems is a big increase that many small businesses will not be willing to pay.

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* I put "social CRM" in quotation marks because I personally am not quite sure what it really means. According to their Web site, Bantam Live offers the usual sales automation functions (contact management, profile management, pipeline management, sales analytics, calendar sharing, file sharing, workgroups) plus a bucket of social media capabilities including social search, network feeds, messaging, discussions and collaborative workflow.

6 comments:

bob said...

David, first, thanks for staying on top of these developments with good analysis...very useful.

In my experience, companies that build capabilities are more successful than those who acquire and try to integrate. The DNA is different: innovation vs. acquisitive, the latter suggesting the company doesn't really know what the market wants until someone else figures it out, then plays catch up.

In this case, the above hypothesis is also based on my experience with CC, in which they seem to provide the least innovation (features, integrations, etc.) of almost any email marketing platform. To me they are the mass market provider who are satisfying the broadest set of needs. The question is whether they can make smart acquisitions and smoothly integrate them.

Best regards,
- Bob London

President
London, Ink
www.londonink.com

David Raab said...

Hi Bob,

I agree -- both that it's very hard to really do a good job of integrating acquisitions, and that CC (which I've used just lightly) is less than fabulous.

I was trying to make a larger point that marketing automation vendors face a strategic threat from several classes of systems that already have large numbers of small business clients and could logically extend to include marketing automation. CC probably isn't the most likely to succeed at that but some of the others might.

I've also been having a side conversation this morning about how many small businesses need to move beyond basic email marketing to full blown marketing automation. There's an argument that many don't do the kind of careful lead nurturing that marketing automation provides. I haven't formed an opinion one way or the other.

clate said...

David:

First off, I always appreciate your thoughtful analysis. Thank you for the work you do covering marketing automation. I love reading your stuff.

Your point about the reality many small businesses deal with when it comes to managing multiple platforms is spot-on. In fact, we have a name for it: multi-system chaos. We see it on a daily basis inside small businesses everywhere. Too many face the challenges of trying to grow a business with technology that requires manual labor. We liken it to using manual tools, like a handsaw or screwdriver. It does the job, but boy do your hands get tired! What the more advanced small business marketers recognize is that a power tool makes the job a heck of a lot easier; it’s less manual and you get better, more consistent results.

What we’ve found is that small businesses are already paying dearly for the inconvenience of different systems because when you add up all of the point solutions they have, the cost adds up to more than they realize—not only in hard dollars, but also in time, as well as opportunities lost from inconsistent marketing and sales funnel leakage.

Over the last 9 years, we’ve grown to become the largest marketing automation company serving small businesses. We serve 6000 small businesses that use Infusionsoft as their main system for marketing, sales and customer management. And we’re pretty proud of that.

We think this move by Constant Contact is a good thing for educating small businesses on the benefits of email marketing and customer relationships. A subset of Constant Contact’s customers will eventually want benefits that can only be achieved when automation is at the foundation of the small business suite. When that subset is ready, we’ll be here ready to scoop up that business.

For more on what we think, you can see here where I blogged about it. http://www.infusionblog.com/technology/small-businesses-crave-automation/

Keep up the great stuff.

Clate Mask
Co-founder & CEO
Infusionsoft
www.infusionsoft.com

SimonDL said...

Hi David,
I think this is a interesting post. My choices are almost a case in point.
Context: My business somewhere between a one-man band and a small consulting firm. I partner with several brands / companies in different service areas. This can make thinking about marketing a headache. I have a repeating problem with timely lead generation.

Bought SendPepper and upgraded quickly to OA to get the relevant bits of functionality for a campaign I was doing. So my subscription went from $30 pm to $300 in about 3 months. (I was happy tho' - I think OA is excellent value against other offers.) This was in 2009.

Anyway, the campaign stalled and use of OA stalled - so I dropped it.

In 2010, going back in to lead generation (and systems generally), I took a different route - Google Apps. Today I have Capsule stitched together via API with Freshbooks, Expensify and Xero. All except Xero provisioned in an instant from Google apps.

This covers: sales - projects - time bills - expenses - accounting. All for about $90 pm for a team of 5.

There are also lots of bits of functionality not covered. The upgrade path is going to be strongly influenced by ease. A big factor is being able to take small steps. Another factor is not having to replace existing systems - and all the embedded learning that go with them. Being able to stitch systems together helps to meet these criteria.
- Capsule has a built-in API to MailChimp
- Freshbooks seems to have APIs for everything

So, it's a slightly a different angle to your first point, the issue is less about getting one system that extends / can extend into marketing automation; more about where I can extend it easily and with what.

So when I am ready to do more complicated / careful lead management I will be looking to add parts rather than replace whole. Key will be:
- How well the part does its job
- How easily it links to the other parts

BTW - I think on these points I think OA does a good job. Small steps and API.

Simon

David Raab said...

Thanks for the mini-case history, Simon. Very interesting. I suppose ease of linkage is key to your approach, since the biggest problem I've seen is moving data among separate systems. (Same point that Clate made.)

The other thing I'd consider is support -- an integrated product like OfficeAutoPilot or Infusionsoft comes with a support team that helps you get things done. I think that's actually a very large part of the value they provide, especially for a small business where the boss isn't a trained marketer or technician. Of course, you're both, so this might not weigh as heavily in your calculations.

Sam said...

David - as usual, solid insight and analysis, though I disagree with you on one point: that smaller businesses will tend to buy single vendor platforms that include marketing. The challenge I see with this analysis is that there are only 1-2 vendors who offer this kind of “be-everything-to-everyone” solution for smaller companies and, while you rightly point out adding marketing features to an Intuit platform is not technically challenging, it’s a harder problem than you make out to solve on the whole. Adding the features is one thing; adding the scale, email deliverability, tracking and analytics is quite another.

That said, this is indeed an interesting move from the team at ConstantContact and it shows just how important Social Marketing is becoming. CTCT serves the lowest end of the market where email has been a linchpin of digital marketing for the past 20 years. Recently, many local/very small businesses (both B2B and B2C) have found the impact of social marketing to be even more productive than email and providing tools to better utilize, manage and measure those channels is becoming critical to businesses large and small. This is something that we (Genius.com) noticed a few years back so we focused the direction of our product to serve this market need, allowing users to track and respond to social media (and any other online activity) and it’s really starting to take off. Our Genius URL shortener (gURLs) combined with our best in class email services offers marketers (of all shapes and sizes) the right solution for their needs. We have recently launched a completely Free Email Marketing \ Automation offering aimed at Small Business that includes Social Marketing features and we are seeing pretty dramatic growth there. No doubt in our minds that the VSB\Small Business Markets are ripe for these kinds of features.

Thanks again for the post.
Sam Weber
GM & COO
Genius.com