How Do You Classify Demand Generation Systems?

I’ve been pondering recently how to classify demand generation systems. Since my ultimate goal is to help potential buyers decide which product to purchase, the obvious approach is to first classify the buyers themselves and then determine which systems best fit which group. Note that while this seems obvious, it’s quite different from how analyst firms like Gartner and Forrester set up their classifications. Their ratings are based on market positions, with categories such as “leaders”, “visionaries”, and “contenders”.

This approach has always bothered me. Even though the analysts explicitly state that buyers should not simply limit their consideration to market “leaders”, that is exactly what many people do. The underlying psychology is simple: people (especially Americans, perhaps) love a contest, and everyone wants to work with a “leader”. Oh, and it’s less work than trying to understand your actual requirements and how well different systems match them.

Did you detect a note of hostility? Indeed. Anointing leaders is popular but it encourages buyers to make bad decisions. This is not quite up there with giving a toddler a gun, since the buyers are responsible adults. But it could, and should, be handled more carefully.

Now I feel better. What was I writing about? Right--classifying demand generation systems.

Clearly one way to classify buyers is based on the size of their company. Like the rich, really big firms are different from you and I. In particular, really big companies are likely to have separate marketing operations in different regions and perhaps for different product lines and customer segments. These offices must work on their own projects but still share plans and materials to coordinate across hundreds of marketing campaigns. They need fine-grained security so the groups don't accidentally change each other's work. Large firms may also demand an on-premise rather than externally-hosted solution, although this is becoming less of an issue.

So far so good. But that's just one dimension, and Consultant Union rules clearly state that all topics must be analyzed in a two-dimensional matrix.

It’s tempting to make the second dimension something to do with user skills or ease of use, which are pretty much two sides of the same coin. But everyone wants their system to be as easy to use as possible, and what’s possible depends largely on the complexity of the marketing programs being built. Since the first dimension already relates to program complexity, having ease of use as a second dimension would be largely redundant. Plus, what looks hard to me may seem simple to you, so this is something that’s very hard to measure objectively.

I think a more useful second dimension is the scope of functions supported. This relates to the number of channels and business activities.

- As to channels: any demand generation system will generate outbound emails and Web landing pages, and send leads them to a sales automation system. For many marketing departments, that’s plenty. But some systems also outbound call centers, mobile (SMS) messaging, direct mail, online chat, and RSS feeds. Potential buyers vary considerably in which of these channels they want their system to support, depending on whether they use them and how happy they are with their current solution.

- Business activities can extend beyond the core demand generation functions (basically, campaign planning, content management and lead scoring) to the rest of marketing management: planning, promotion calendars, Web analytics, performance measurement, financial reporting, predictive modeling, and integration of external data. Again, needs depend on both user activities and satisfaction with existing systems.

Scope is a bit tricky as a dimension because systems will have different combinations of functions, and users will have different needs. But it’s easy enough to generate a specific checklist of items for users to consult. A simple count of the functions supported will give a nice axis for a two-dimensional chart.

So that’s my current thinking on the subject: one dimension measures the ability to coordinate distributed marketing programs, and the other measures the scope of functions provided. Let me know if you agree or what you'd propose as alternatives.

Trust Me: Buyers Worry Too Much About Software Costs

I ranted a bit the other week about buyers who focus too much on software license fees and not enough on differences in productivity. The key to that argument is that software costs are a relatively small portion of companies’ total investment in a business intelligence system. This is self-evident to me, based on personal experience, and seems fairly widely accepted by others in the field. But it’s always nice to have hard numbers to cite as proof.

In search of that, I poked around a bit and found several references to a 2007 study from AMR Research . The study itself, Market Demand for Business Intelligence and Performance Management (BI/PM), 2007 will cost you $4,000. But statistics from it were quoted elsewhere, and showed the following distribution of estimated spending for 2007:

31.4%...internal labor costs
24.7%...software costs
16.2%...integration costs
15.4%...hardware costs
12.3%...outsourced services

The most relevant tidbit is that software accounts for just one quarter of total costs, while labor and outside services combined account for over 40%. I’m not sure what counts as “integration” but suspect that is mostly labor as well, which would raise the total to nearly 60%. This confirms my feeling that people should focus on more than software costs.

A February 2008 study from Aberdeen Group, Managing the TCO of Business Intelligence (payment required), addresses the question of whether buyers do in fact focus primarily on software costs.

The short answer is yes. The long answer is it’s often hard to interpret Aberdeen findings. But when they asked buyers which direct cost criteria were ranked as critical at the time of purchase, the highest rating was indeed software license cost. Looking just at what Aberdeen calls “best-in-class” companies, the figures were:

42%...software license cost
37%...implementation consulting costs
15%...user training services offered
10%...additional hardware costs

Aberdeen also reported priority rankings for indirect costs and ongoing costs. Software fees don’t play much of a role in those areas, but, even so, people still didn’t focus on labor. Instead, the top priorities were “ease of use for end users” for indirect costs and “scalability of data volumes and users” for ongoing costs. Ease of development and ongoing support costs did finally show up as the second and third ranked items under ongoing costs, but that’s digging pretty deep.

Of course, you can’t really combine these two sets of figures. But if you could, you might argue that they show a clear skew in buyer priorities: 42% give highest priority to software costs even though these account for just 25% of expenses. Even though the numbers don’t really prove it, I’d say that’s very close to the truth.