Marketo Spark Targets Small Business Marketing Automation

Marketo today announced the launch of Spark, a new brand aimed at small and mid-size business. Functionally, Spark is pretty much identical to the standard Marketo system. Exceptions are advanced features including revenue cycle reporting, email deliverability assistance, API access, fine-grained user rights management, and the Sales Insight salesperson application. Most of these aren’t of interest to small business, and several involve additional charges even for Marketo’s regular packages.

So the news here is price. Spark starts at $750 per month with no annual contract, compared with Marketo’s $2,000 per month minimum and annual contract for its full-featured Professional Edition. Marketo has discontinued its $1,200 per month Small Business Edition, which lacked some features now included with Spark.

In other words, this is a price cut. To me, it looks like a reaction to the success of other low cost small business systems, including HubSpot, Act-On Software, and Pardot. (HubSpot and Act-On have similar pricing to Spark, while Pardot runs a bit higher.)  Some of those firms are actually growing at a faster rate than Marketo, although on a smaller base.  Spark should help to blunt their momentum while increasing Marketo's own client total -- a closely watched metric, regardless of the associated revenue per client.

Whether Marketo actually makes any money at Spark's price is questionable. It really depends on the sales and support costs, and Marketo doesn’t appear to have changed how those are delivered to keep them down. Other small business specialists have designed sales and support models that are not as staff-intensive as traditional approaches. By contrast, Marketo is stressing that Spark includes services to help clients take advantage of their systems.

Of course, Marketo could have lowered its entry price without creating a new brand.  So why bother to launch Spark?

One reason may be to avoid cannibalizing sales of its other, higher-priced editions.  But, let’s face it, any sentient buyer will notice that Spark is out there. I think the more important reason is that Spark lets Marketo address small businesses separately from larger companies.  The two groups do have different needs and neither wants a system designed for the other.  Spark lets Marketo position itself as a small business specialist when selling to small businesses, without alienating big-business marketers who would consider a small business system an unsuitable toy. 


This is a delicate game.  For one thing, "small business" means different things to different people.  Small business specialists like Infusionsoft and OfficeAutoPilot actually serve a different market -- one that I label "microbusiness" and put at under $5 million revenue.  Those products have a different configuration from Spark, HubSpot, Pardot, or Act-On.  Specifically, Infusionsoft and OfficeAutoPilot have starting prices around $300 per month and offer built-in shopping carts and CRM.  (Other micro-business specialists like Genoo and MakesBridge also have a sub-$500 monthly price, but no CRM or shopping.)  Although Spark is not aimed at the micro-business market, some people may not recognize the distinction.


Nor it is clear that the Spark brand will be enough let Marketo play in both the small and mid-size business segments ($5 to $500 million revenue, by my definition) and the big business segment (more than $500 million revenue.)   Nearly every other marketing automation vendor focuses on one or the other.  The main exception is HubSpot, which is also trying to add larger clients without losing its small business base -- and facing some positioning challenges of its own.  

Spark also poses a financial challenge.  Marketo has said it will earn around $30 million revenue in 2011, and will have an average of around 1,100 clients.  That comes to about $2,500 per client per month, a figure Marketo has been striving to increase.  A large number of Spark clients at $750 per month would dramatically reduce its average.  The profit margins, if any, will surely be lower as well, again dragging down the corporate average.

Now, this is all interesting stuff, but does it matter to anyone who isn't a Marketo investor?  Probably not.  Spark may push prices a little lower and may put a small crimp in some competitors' growth rates.  It may also give small business marketers another fine set of resource materials to complement those from HubSpot and others.  But the bottom line is that similar capabilities were already available at a similar price point from Marketo and others. Spark just doesn't change much.