Who's winning in marketing automation? Round-up for 1st half of 2014

by Dan Freeman 
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One of the most important metrics in evaluating the ultimate value of any cloud software product is its customer retention rate, a number that encapsulates the value obtained versus client expectations. Retention rate takes into account usability, support, expectations set, and impact on marketing and/or revenue goals. Companies that receive value in excess of expectations will generally renew; those that don’t will opt out.

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Though supremely valuable, customer retention is a number that marketing automation vendors are loath to release. Vendors’ sometimes publish data on the number and growth rate of their customer base but not a single one lets on to retention rate, or its inverse—churn.

Not to worry. Another class of marketing technology companies to the rescue.

Software tracking company Datanyze scans over 15 million of the world’s most-trafficked websites, hunting for Javascript embeds and web tags that indicate the presence of hosted software—in this case a marketing automation platform. Website additions/losses over time are an indication of platform success in the marketplace.

The chart below shows the total number of websites using selected marketing automation platforms as of 6/30/14. Note that websites do not equate with customers as a single customer may use marketing automation software on dozens or even hundreds of websites.

But wait.

Further analysis shows that the leader, Hubspot, offers a variety of product packages, including a Basic package that includes many inbound features as well as email marketing, but does not include the most salient marketing automation features such as lead scoring and automated workflows.

I estimate that at least 60% of Hubspot’s customers are Basic and if we reduce their numbers by 60% the chart looks like this.

Using the Datanyze data, I also looked at websites that added and dropped marketing automation software during the first six months of 2014. The chart below shows the website additions (blue), drops (orange), and net changes (grey) among six of the most active marketing automation vendors.

Marketing Automation Customer Retention Q2 2014

by Dan Freeman 
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New numbers are out for changes in marketing automation platform usage, and in dynamic markets, things change quickly. Demand for marketing automation software is growing at a healthy clip, but aggregates can mask marketplace turbulence. Behind the 40 plus percent growth rate lies a multitude of customer experiences that determine the ultimate winners and losers.

As businesses struggle to get a handle on the new world of digital marketing, they experiment with new marketing platforms. Marketers try to master this software—to leverage its promise to generate more and better leads, and to streamline marketing processes. In highly competitive markets like marketing automation software, nuances in product features and ease-of-use can make all the difference. The way a new customer is on-boarded, the support or self-help tools provided, and even the reality of the customer experience versus the expectations set by vendors can have a major impact on retention.

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And in the Software-as-a-Service (SaaS) business model, retention is key. Vendors often lose money on new customers during the first year. It’s not until an annual renewal, or at least a period of several months, that customers become profitable. The most profitable customers are usually those with the longest tenure; they've ramped up usage and generally require less support.

Vendors tout their success with press releases about new customers and sometime even publish customer counts and growth rates. What’s not revealed are the dropped customers—the churn.

Until now, that is.

Working with the tech data sleuth firm, Datanyze, I looked at websites that added and dropped marketing automation software during the first six months of 2014. The results indicate that churn is higher than many would believe. For the top 11 marketing automation platforms, the ratio of websites adds to drops was 1.8, meaning that for every 9 websites that added a marketing automation platform, 5 website dropped one.

Price vs. Features: First Time Marketing Automation Buyers and Experienced Users Care About Very Different Things

by Dan Freeman 
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I wanted to share this recent VentureBeat article in which I was interviewed....

If you own a marketing automation system, chances are you care most about features. But if you’re looking to buy a marketing automation system, chances are you care most about price. That’s just one of insights in a new report from VB Insight on the expanding field of marketing automation. (VB Insight is VentureBeat’s research platform.)

“That makes perfect sense,” report author Dan Freeman, the president of marketing consultancy Marketing Growth Strategies, said. “First-time implementers are just trying to do the nuts-and-bolts, simple stuff like landing pages or knowing who is visiting their website, while those who have been doing marketing automation for six months or a year are looking at the next stage … full nurture programs, automated workflows, and more.”

Current owners who are either adding to their system or switching to another rank features and ease of use as the most important parts of a system. New buyers who don’t currently use any marketing automation system, however, rank both total cost of service and monthly price above ease of use and price.
The two groups are looking for different functionality, and have different ideas about what to expect from their software, Freeman told VentureBeat.

“First-time buyers don’t know much about implementation … they kind of have in mind that the cost of the marketing automation effort equates to the cost of the software,” Freeman said. “But owners understand there’s more to it … both in costs and in returns.”
Read the full VentureBeat article...

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Marketing Growth Strategies LLC has been engaged in research, analysis, lead generation, and client implementation in the Marketing Automation sector since 2009 and has recently revised its highly successful 2014 Marketing Automation eBook.

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