6 Key Marketing Measures That Don't Include Revenue

Ask most marketers how they measure performance, and they’ll tell you they look at results: incremental revenue or return on investment if they’re available, or response rates if they're not. Industry experts take a similar approach, focusing largely on the need for better revenue measures. The situation – and barely concealed frustration – is captured perfectly in the headline from a recent Forrester Consulting study sponsored by Silverpop: “Response Metrics Are Used To Evaluate Success, Leaving Customer Or Business Impact Metrics Largely Ignored”.

I agree that revenue is important, but humbly suggest that there’s more to marketing measurement than ROI. Marketers need several types of information – and shouldn’t let the quest for performance measures prevent them from meeting other requirements.

Here are six non-value measures that marketers should build into their reporting systems.

• Benchmarks. Sure, marketing’s job is to generate revenue, but is generating $1 million good or bad? The only way to know is by placing the number in context, which could be this year’s marketing plan or last year’s actual results. Even if marketers can’t measure revenue, they can  set benchmarks for metrics like number of leads generated, funnel conversion rates, or cost per order. In fact, measuring components that contribute to results gives better insights into marketing performance than reporting on the results themselves. For this reason, marketers who can’t directly measure marketing-generated revenue should think twice before creating complex indirect estimates that are hard to understand and have limited credibility. The money would probably be better spent on reports that provide a clearer picture of what’s actually happening.

• Projections. Past results are interesting but the future is more important. Again, the real need is to understand the factors that determine future results, such as response rates and funnel velocity. Changes in these can give early warning of risks and opportunities.  The trick is to distinguish real trends from random variations, so marketers react quickly without chasing too many false alarms.

• Operations. It’s easy to make mistakes in setting up a marketing program, especially one with multiple stages, lead scoring models, and decision rules. Even careful testing can’t always capture all program steps or contingencies. Marketers need reports on the number of people in each program stage and receiving each message, and they need a model that lets them know whether those numbers are reasonable. Reports should show both program-to-date and weekly or daily results: cumulative data show major errors such as bad program logic, and short-term results capture small problems, such as a missed processing step, that could get lost in a program-to-date aggregate.

• Exceptions. Projections and benchmarks put data in context, but marketers don't have time to comb through every figure.  They need exception reports to highlight the most important variations, both positive and negative.  Marketers also need tools to drill into the exceptions so they can understand what happened and identify new opportunities.

• Testing.  Formal tests are the most certain way to understand the impact of marketing projects, but they often require special reporting tools such as ways to compare results for different customer groups over time.  Incremental revenue is the ultimate measure for test evaluation, but often other metrics such as response rates or velocity are easier to capture and more directly relevant.  Reaping the full benefit of tests also requires systems to distribute results and catalog findings for future reference.

• Strategic Goals. Marketing plans should be based on corporate strategy, but long-term goals fade into the background once marketers start making tactical choices based on day-to-day results. The reporting system should provide direct measures of strategic objectives – things like penetration of new market segments and exploration of new channels – so marketers can see the cumulative impact of deviations from the original plans. Many strategic goals, such as process change, staff training, and systems deployment, are not measured in revenue at all.

The types of measures I’ve just described don’t replace revenue and ROI reporting.  Rather, they meet needs that revenue reports alone cannot. Ideally, all these types of information will be combined in a marketing dashboard that provides a quick overview of critical information and allows drilling into details when necessary. Marketers should realize that the contents of this dashboard will change over time as their focus shifts to different programs and strategic goals. They should also recognize that good reporting will generate new questions as it uncovers risks and opportunities that would otherwise have gone undetected.  The system should make those questions easier to answer, but marketers shouldn't expect their total work to decrease.  What they can expect is that better reporting will increase the value created by their efforts: yet another new metric, Return on Reporting, should go up.

Experian Buys Conversen Marketing Automation to Strengthen Its Offerings

Experian Marketing Services yesterday announced its acquisition
 of marketing automation vendor Conversen. This is the third marketing automation acquisition in the past month, following Intuit’s purchase of Demandforce and FICO’s purchase of Entiera.

Conversen is somewhat similar to Entiera in offering sophisticated multi-step campaigns, although its main differentiator is multi-channel dynamic content that makes it relatively easy to deliver different messages to different segments across multiple channels. See my review from February 2010 for a more detailed explanation. But while Entiera was selling directly to marketers, Conversen's clients were mostly ad agencies and marketing service providers who offered it to their own customers. When I last spoke with Conversen about a year ago, they had more than 35 partners with more than 150 end clients. That’s a respectable installed base for this type of product.

Experian’s stated rationale for the acquisition is to allow more sophisticated cross channel marketing dialogues than its existing tools provided. The transaction is part of a larger drive for Experian to revitalize its Marketing Services group, which has been investing in new people and technologies over the past couple of years.

Like the Entiera acquisition, the Conversen deal removes another independent player from the ranks of large scale consumer marketing automation systems. Marketing service providers looking for a system to license will be particularly unhappy, since they already had few choices and won't like licensing from a competitor. Experian hasn’t said it will withdraw Conversen from existing partners, but its main goal is clearly to use the system for its own massive client base.

Conversen will be a key component in a larger digital marketing suite from Experian. If there’s a real trend in the recent acquisitions, it’s that a handful of large companies are building digital marketing suites and either offering them as software (IBM, Teradata, SAS, Oracle, SAP) or combined with marketing services (FICO, Experian, maybe Harte-Hanks). I’ve argued forever that big integrated suites will ultimately swamp products that specialize in one field such as email, Web content management, or online advertising. The scope of the suites makes it hard for specialists to compete, especially as ever-tighter integration becomes necessary to meet customer expectations for seamless service across channels. Experian, which already has huge businesses in online advertising, email and social marketing, is one of the few service vendors with the resources to build and update its own systems rather than purchasing from third-party vendors.

As someone who views things mostly from a marketers’ perspective, I'm not thrilled at this development. Fewer competitors make it harder for buyers to get a good deal and big suites tend to be less innovative than small specialists. Of course, there are still plenty of small marketing automation vendors, but the gorillas will  attract many of their clients and scare away potential investors. It’s probably no coincidence that the recent acquisitions have been small companies, not the better known marketing automation players: the buyers have wanted technology, which is hard to develop, more than market position, which they already have. Nor is it surprising that acquisitions have been consumer marketing systems rather than B2B marketing automation: there’s ultimately more money in consumer marketing and the vicious dogfight in B2B marketing automation in the past few years has made profitability almost impossible for anyone. There’s little reason for an outsider to buy in such an unpleasant neighborhood.

FICO Buys Entiera Marketing Automation: Another Independent Option Gone

Three weeks ago, Intuit shook up the low end of the marketing automation universe by purchasing small business marketing shooting star Demandforce. Last week the action shifted to the high end, where FICO announced its purchase of Entiera, one of the few remaining enterprise class products.

FICO, the company formerly known as Fair Isaac and originator of the influential FICO credit score, first dipped its toe into marketing automation services and software when it acquired DynaMark in 1992. Since then, the company has continued to grow its marketing offerings, through acquisition and internal development.  But it sell these largely as add-ons to its core predictive analytics products. FICO statements make clear that Entiera will continue this strategy, both by providing new capabilities for event-triggered to existing clients and by making the full set of FICO products available to smaller companies.

FICO’s backing will certainly allow Entiera to sell to more companies. But, in sharp contrast to the Intuit/Demandforce deal, I see this acquisition as shrinking rather than increasing competition in the relevant market segment. Entiera was one of the few independent vendors still chasing the business of mid-size and enterprise marketing automation buyers. This group had already been reduced with the acquisition of Alterian by SDL last December and of SmartFocus by eMailVision the previous April. Of the firms on my list of B2C options from last September, only a handful (Neolane, Decision Software Inc, RedPoint and ClickSquared are primarily selling marketing automation software. The others are either more oriented to email services (ExactTarget, and I should add Responsys and Silverpop) or have minimal industry presence (MarketingPilot, Pitney Bowes' Portrait Software, Conversen, SmartSource Online, etc.).

In theory, FICO could finance a significant expansion of Entiera’s independent business. With $620 million in 2011 revenue and over $100 million operating cash flow, the company could certainly afford it. But marketing services are clearly just a sideline for FICO. So it’s likely they’ll use Entiera’s technology to support sales of their core analytical products to current customers and perhaps to deliver them more cost-effectively to new customers. That’s great for FICO and for Entiera’s founders. But in a segment where most of the major products are already owned by giant corporations (IBM, Teradata, SAS), marketers now have one less young vendor hungry for their business.

What Brain Research Teaches about Selecting Marketing Automation Software

I’m spending more time on airplanes these days, which means more time browsing airport bookshops. Since spy stories and soft core porn are neither to my taste, the pickings are pretty slim. But I did recently stumble across Jonah Lehrer’s How We Decide, one of several recent books that explain the latest scientific research into human decision-making.

Lehrer’s book shuttles between commonly-known irrationalities in human behavior – things like assigning a higher value to avoiding loss than achieving gain – and the less known (to me, at least) brain mechanisms that drive them. He makes a few key points, including the importance of non-conscious learning to drive everyday decisions (it turns out that people who can only make conscious, rational decisions are pretty much incapable of functioning), the powerful influence of irrelevant facts (for example, being exposed to a random number influences the price you’re willing to pay for an unrelated object), and the need to suppress emotion when faced with a truly unprecedented problem (because your previous experience is irrelevant).

These are all  relevant to marketing, since they give powerful insights into ways to get people to do things. Indeed, it’s frightening to recognize how much this research can help people manipulate others to act against their interests. But good marketers, politicians, and poker players have always used these methods intuitively, so exposing them may not really make the world a more dangerous place.

In any event, my own dopamine receptors were most excited by research related to formal decision making, such as picking a new car, new house, or strawberry jam. Selecting software (or marketing approaches) falls into the same category. Apparently the research shows that carefully analyzing such choices actually leads to worse decisions than making a less considered judgment. The mechanism seems to be that people consider every factor they list, even the ones that are unimportant or totally irrelevant.

It's not that snap judgments are inherently better. The most effective approach is to gather all the data but then let your mind work on it subconsciously – what we normal folks call “mulling things over” – since the emotional parts of the brain are better at balancing the different factors than the rational brain. (I’m being horribly imprecise with terms like “emotional” and “rational”, which are shorthand for different processes in different brain regions. Apologies to Lehrer.)

As someone who has spent many years preparing detailed vendor analyses, I found this intriguing if unwelcome news. Since one main point of the book is that people rationalize opinions they’ve formed in advance, I’m quite aware that “deciding” whether to accept this view is not an objective process. But I also know that first impressions, at least where software is concerned, can’t possibly uncover all the important facts about a product. So the lesson I’m taking is the need to defer judgment until all factors have been identified and then to carefully and formally weight them so the irrelevant ones don’t distort the final choice.

As it happens, that sort of weighting is exactly what I’ve always insisted is important in making a sound selection. My process has been to have clients first list the items to consider and then assign them weights that add to 100%. This forces trade-offs to decide what’s most important. The next step is to score each vendor on each item.  I always score one item at a time across all vendors, since the scores are inherently relative. Finally, I use the weights to build a single composite score for vendor ranking.

In theory, the weighting reduces the impact of unimportant factors, setting the weights separately from the scoring avoids weights that favor a particular vendor, and calculating composite scores prevents undue influence by the first or last item reviewed. Whether things work as well as I’d like to believe, I can’t really say. But I can report three common patterns that seem relevant.

- the final winner often differs from one I originally expected. This is the “horse race” aspect of the process and I think it means we’re successfully avoiding being stuck with premature conclusions.

- when the composite scores don’t match intuitive expectations, there’s usually a problem with the weights. I interpret this to mean that we’re listening to the emotional part of the brain and taking advantage of its insights.

- as scoring proceeds, one vendor often emerges as the consistent winner, essentially “building momentum” as we move towards a conclusion. I’ve always enjoyed this, since it makes for an easy final decision. But now I’m wondering whether we're making the common error of seeing patterns that don’t exist.  Oh well, two out of three isn’t bad.

Perhaps I could reduce the momentum effect by hiding the previous scores when each new item is assessed. In any event, I’ve always felt the real value of this process was in the discussions surrounding the scoring rather than the scores themselves. As I said, the scores are usually irrelevant because the winner is apparent before we finish.

Still, having a clear winner doesn’t mean we made the right choice. The best I can say is that clients have rarely reported unpleasant surprises after deployment. We may not have made the best choice, but at least we understood what we were getting into.

I guess it’s no surprise that I’d conclude my process is a good one. Indeed, research warns that people see what they want to see (the technical term is “confirmation bias”; the colloquial term is “pride”). But I honestly don’t see much of an alternative. Making quick judgments on incomplete information is surely less effective, and gathering data without any formal integration seems hopelessly subjective. Perhaps the latter approach is what Lehrer’s research points to, but I’d (self-servingly) argue that software choices fall into the category of unfamiliar problems, which the brain hasn’t trained itself to solve through intuition alone.

Intuit Buys Small Business Local Marketing Vendor Demandforce: There's a New Gorilla in Town

Intuit  last week announced an agreement to acquire local business marketing vendor Demandforce  for $423.5 million. That’s a hefty sum for a company with a reported revenue of $37.5 million, although it has been growing at a blistering pace – more than doubling last year – and now has over 35,000 customers. Still, the move makes perfect strategic sense, giving Intuit a stronger foothold in the marketing side of its small business customer base. (Intuit dominates the market for small business accounting with five million Quickbooks users.)

Demandforce focuses on local service businesses like dentists and auto body shops. It’s not a typical marketing automation vendor, since it provides appointment management, referrals, reviews, social campaigns, local advertising, post cards, and search marketing in addition to email. Its most direct competitors in the marketing automation world would be Infusionsoft and HubSpot, although neither has the same depth of appointment-related features. The price point of $200 to $300 per month is also similar to those systems.

Because the micro-business segment is pretty distinct from the rest of marketing automation, the impact of the Demandforce acquisition will initially be limited to its direct competitors. Within that group, Intuit’s penetration and clout should make it an immediate superpower – with the caveat that the accountants who are Intuit’s primary connection with its customers are not likely to sell them marketing services. Still, Intuit should be able to expand its network of channel partners fairly quickly. The local marketing business is a huge opportunity that hasn’t had a dominant player. I can claim some bragging rights for having suggested nearly two years ago that Intuit might take this role.


The more interesting question for the rest of the marketing automation industry is whether Intuit will move beyond Demandforce’s current target customers. In the short term, probably not: the opportunity is large enough to keep them busy for quite some time. But local marketing involves more than small businesses, so Demandforce has a natural growth path in that direction. A modest functional expansion could also make Demandforce competitive at the lower end of the standard B2B marketing automation world, where products like Act-On, Marketo Spark, and Genius contend. From there, it could creep upwards. Again, that’s down the road but it does put a ceiling on the pricing and growth prospects of companies currently serving those segments.

It's also worth considering the financial aspects of the deal. On the one hand, the $400+ million price – more than 10x revenue – has to be heartening for other marketing automation vendors contemplating an exit. But Demandforce is far from typical. It is already larger than all but a handful of marketing automation companies, is growing faster than anyone of similar size, and has made all this progress on a mere $11.8 million of investment. It also offers benefits that are more clearly defined and easier to deliver than marketing automation provides to larger companies. And the very fact that Intuit is now playing in the industry will make it harder for others to grow – especially if Demandforce moves quickly. Given all these advantages, it’s not clear other vendors will come close to duplicating the terms that Demandforce received.