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Marketing to the Data Driven Customer

Customers with digital DNA expect data driven value
The digital native generation is bringing new expectations to brand relationships. They are mobile first, crowd sourced, and data savvy. Their first and most frequent interaction with your brand will be digital and mobile. They find out what’s cool, what’s trending, and what’s most likely to work best for them from their social networks. They don’t have emotional attachments to brands because the product is compelling or the advertising is cool. Their emotional engagement comes from unexpected insights that make them more successful. This is the new basis of customer loyalty, advocacy, and lifetime value.
Of course you still need a compelling product and cool ads (or messaging.) But once the prospect is a customer, continual engagement depends on over the top data driven insights. It’s no longer enough to just sell the hammers and saws and let the buyer go build their house. You need to monitor how they are using the hammer and saw. You need to deliver success by guiding their use of your product based on the behavior of your most successful customers. You need to leverage your position as the center of your customer universe to share best practices quickly and efficiently. The only way to do that at scale is through data.
Data Ownership vs Data Stewardship
In between the lines, you should be hearing a new philosophy with respect to customer data. Even though legally you “own” it, the data driven customer expects you to act as a data steward. You must treat their data as an asset to be used for their benefit, not just as the basis for driving revenue. Everything you provide to your customers should be designed to bring data back. Your customers should learn that the more data they provide, the more value they get in return – without negative side effects like having their data sold to an irrelevant ad network. Give to get and maintain the trust.
This has tremendous implications. Not only for marketers. Data marketing requires coordination with product development, IT, finance, fulfillment, point of sale, customer support, consulting services, sales. All these groups interact with customers and capture data on different aspects of their behavior – product usage, purchasing, problem resolution, planning, advocacy, etc. They all need to be understood to identify the most successful customers and the traits that drive their success. You can create tiers of services based on the level at which customer provide data. You can create cohorts of customers that exclude direct competitors. You can support exchanges within your customer ecosystem that enable strategic accounts to benefit from preferred peers. You can be extremely creative about how you structure your data marketing services.
The message is that in a world of shrinking product cycles, cheap knockoffs, and copycat services, data marketing is the new source of differentiation. No one else has the data you (should) have on how customers can be most successful with your products. Use it to attract and retain the best and leave the rest to your competitors.

To continue the conversation on data marketing and the data driven customer, contact me: gmurray (at) idc (dot) com.

Are Ad Agencies Keeping Pace with the Marketing’s Massive Digital Uptake? (Hint: Maybe Not)

Today, marketing’s equivalent to the Brady Bunch’s “Marcia, Marcia, Marcia!” just might be “Digital, Digital, Digital!” This is with good reason. Since 2009, digital marketing spend within large B2B tech companies has grown, and is growing, at an enormous rate. As you might have seen, IDC expects the entire tech industry to pass the 50% mark of digital spend vs non-digital spend by the end of 2016! This is the client side, but what about on the agency side, are these important partners keeping pace with their clients? At the end of April, Ad Age published their most recent “Agency report”, it shows the agency industry’s digital revenue over the past 5 years. While, agencies’ digital revenues are growing and, as a percentage, these revenues are comparable to what their clients are spending on digital – the lack of substantial growth for agencies’ digital revenue is notable. 
As seen from the image above, 5 years ago agencies were already generating over 1/4 of their revenue from digital, where as tech companies were spending only 13% of their budgets on digital. Since then, these same digital marketing budgets have grown at a CAGR of approximately 21% – agencies’ digital revenue have grown closer to a 6.5% CAGR, a third the rate of tech marketer’s digital budgets. This begs the question, are agencies keeping up with digital innovation? Does the agencies’ slower digital revenue growth give us a glimpse into the future where in-house marketers are the digital experts?
Below are two comments that I think help parse out this story:
  1. Chapter  7 in Scott Brinker’s (AKA: @chiefmartec) marketing book, A New Brand of Marketing, “From Agencies to In-House Marketing”,  lays out the in-house vs agency shift perfectly. Traditionally agencies’ bread and butter is within the advertising campaign – as advertising has moved digitally, ad networks and ad-tech have continued to mature allowing practitioners to work directly with these networks and/or utilizing programmatic ad buying to optimize their spend. In a sense, cutting out the middle man (agencies). This might help explain the large difference in growth between digital revenue growth at agencies and digital spend from the practitioner. While companies are spending more dollars on digital, it is more of a do-it-yourself approach.
  2. Anecdotally, through my conversations with clients and marketing executives, on more than one occasion I have heard marketers bringing core agency work internal. The two main reasons for this action are:
    •  Scope: For marketing executives who are trying to build a full scale demand engine or attribution models, they are finding it very hard to identify an agency partner who can deliver this vision from start to finish, particularly with expertise across the entire project. (A fair caveat is very few companies can do this internally!) They are still utilizing agencies, but typically for projects around high level strategy or vision and/or very specific tactical portions of their larger campaigns.
    •  Speed: To truly compete digitally, marketers have realized that speed is an asset. From content creation, to adjusting advertisements in real-time and to making sure the latest and greatest technologies are being tested and used, speed is a factor. Advanced marketers are often realizing by bringing many of these activities in-house, it is much easier to increase speed – it is also much easier to retain the talent that can execute in the manner necessary to succeed.
The above instances and the overlying data are something for marketers to be aware of and agencies to be concerned about, but, like with most changes this is not a black and white scenario. With agencies, similar to most marketing organizations today, it’s about reinvention. My colleague Gerry Murray, outlines some of this reinvention that IDC expects to happen within the agency (or more specifically marketing services) world in his latest blog post, Marketing as a Service (MaaS): The next wave of disruption for marketing tech. Ultimately, the vendors that continue with business as usual, relying on media buys or traditional agency/client relationships, risk stagnant digital revenue growth and an outdated offering.
What success are you seeing within your “in-house marketing team” and how are you continuing to leverage your agency partners? I would love to hear your opinion in the comments below or by reach out to me on twitter @SamMelnick

2014: The year of Digital Marketing…Wait a Second, What Exactly is Digital Marketing?

Or maybe 2014 will be the year of mobile, or the year content marketing. Ok, Ok, I can guarantee one thing, 2014 will be the year of the horse.

While 2014 might not be the year of digital marketing, digital will continue to be deeply important to the marketing organization. As digital spend continues to increase, the focus grows. Despite this, there can be a lack of clarity around the topic. What exactly falls within digital marketing? How much budget is actually being spent on digital? And how does it all meld together?

Let’s dive in.

Digital Marketing Budget Trends:

From 2009 to the end of 2013 digital marketing program spend has increased from 13% to 34% of the total marketing program mix. For 2014 IDC’s CMO Advisory Service expects this to increase to 39% and to 50% in 2016 (highlighted within Kathleen Schaub and Rich Vancil‘s IDC Chief Marketing Officer (CMO) 2014 Predictions). While this level varies depending on sector and size, the upward trend is clear. 

What is Digital Marketing:

At this point all marketers agree that digital is important. That is all well and good, but without a consistent definition around the topic, digital marketing may mean different things to each person or organization. To be successful in building a digital marketing practice, having clear definitions is imperative. This will drive consistency throughout the organization leading to proper tracking and staff allocations.  Below is IDC’s definition of which marketing programs fall within “digital marketing.”

For specific definitions for each area please view IDC’s Worldwide Sales, Marketing, and Market Intelligence Taxonomy, 2013.

Digital as an Organizational Practice:

Defining and tracking digital marketing is important, but the modern marketer understands it must be executed in orchestration with the full marketing strategy. A key guidance for 2014 is to create “systems not silos.” In short, rather than creating another walled practice within marketing (think, advertising vs email marketing, vs events), make digital an organizational practice that spans across all tactics and staff. Separating digital and non-digital marketing will create more complex challenges for the organization. Avoid this approach and make digital a strength across all of marketing.

3 Take Aways:

  1. Digital marketing spend is growing, FAST, it will be 50% of the (multi-billion dollar) B2B tech marketer’s program budget by 2016. 
  2. Work to define digital marketing so everyone in the organization is speaking in the same terms. 
  3. Do not separate digital from the rest of marketing, it is too important to sit on an island. 
Now it’s your turn, what are you planning to do within digital marketing for 2014? What other suggestions do you have for your peers? What did I miss?
Follow Sam Melnick on Twitter: @SamMelnick