The Marketing Automation Phenomenon – Unparalleled Growth but Insignificant Market Penetration

Once upon a time, in the not too distant past, a great marketing campaign consisted of a ‘catchy’ newspaper ad, radio spot, or (for the big players), a TV commercial. This, indeed, was representative of a very different era in the world of communication.  We have entered (like it or not) into a dizzying reality of complexity, immediacy, and flux in all aspects of our lives, but none is as fluid and changeable as the way we now deliver and consume media and information.

In business, the marketing ecosystem has had to weather some very deep and cataclysmic changes in order to survive the pace and complexity of the changes taking place in and around the business environment. The very concepts of selling, delivery, relationship building, etc. have been turned on their heads. For all business (small, medium, large, and global), not understanding and not acting on this premise can result in a company’s failure to prosper or even to survive in that business.

Marketing automation software has moved quickly to fill the void of knowledge and new skills required to navigate this unfamiliar marketing terrain. In fact, marketing automation is growing so quickly – 50 percent annually, according to some numbers – that some industry analysts have turned their attention to the possibility of a ‘marketing automation software bubble’.  

Possible, no doubt. More than two thousand marketing technology vendors have entered this space; is it even conceivable to speak in terms of continued growth in this market without, at least, discussing the necessity for consolidation of the field to avoid a bubble burst?

All these questions make for some interesting analysis, but perhaps equally interesting, if not more germane, is a question that has received a lot less scrutiny.

Why has this fast-growing marketing automation field only achieved three percent penetration in the non-tech mid-market sector? For almost all companies in America, marketing automation is still very much an unknown quantity in the business world. The high-end of the market has about a 20 percent rate of penetration. These numbers are almost baffling given the 50 percent growth rate in the field and the fact that marketing automation software can provide valuable benefits for business growth and relevancy.

Why a Three Percent Penetration Rate for Mid-market Companies?

This, in many ways, is a good news (with some bad news) story!

While it may be a challenging market for many marketing technology vendors, the ones that do survive in this market have tremendous growth opportunities.  Furthermore, the opportunities for vendors to reach out to small and medium sized businesses (SMBs) could not be better. Marketing automation may not yet be commonplace among many businesses but the value of participating in this transformative marketing solution is beginning to reach beyond the high-end corporate and global organizations. Marketing solutions are no longer a nice to have piece of technology that can be substituted with grit and stamina, but an essential business tool that companies of all sizes must put to work in order to maintain their place in and their share of the marketplace.

The mid-size market (namely, less than $500 million in annual revenue) represents about two million companies (in the US) and about $6 billion to $8 billion in market opportunity. Almost none of them, with the exception of tech companies, have invested in marketing automation to date. This under-penetrated market, however, while presenting an unequalled targeting opportunity for vendors, also presents some challenges that vendors must focus on in order to successfully penetrate this market. Does the low adoption rate in this area, in fact, reveal a larger issue among SMBs that resurfaces at different times and in different circumstances in the area of technology?

For vendors, tackling this issue head-on may help alleviate some of the obstacles facing SMBs in their adoption of new technology. Taking a look at a couple of the more persistent ones may be helpful. Perhaps the single most challenging obstacle facing SMBs when considering the investment in new technology and software solutions is cost. Up until not too long ago, IT and software solutions meant heavy investments in tech departments. Consequently, it was mostly large scale enterprise solutions that dominated the market. Importantly (for SMBs), cloud computing, Software-as-a-Service (SaaS), and mobile apps have changed the landscape considerably for midsize companies. These new players in the market mean great value for little effort and reduced cost – a boom for SMBs. This change represents a true reshuffling in the marketplace, with the smaller players afforded a true opportunity to compete for business opportunities. Tools focusing on market automation, for instance, offer small companies simple, low-cost, easy-to-implement and low-maintenance solutions. And yet the adoption lag between the SMB market and the larger players is still significant, despite the efforts to democratize the playing field.  

The answer(s) to this puzzle is not simple and has been tackled in numerous ways by numerous experts. But part of the answer may be found hidden in plain sight. Many small businesses are run by entrepreneurs who are very hands on and used to jumping in and getting things done as quickly as possible and in their own way. If the task cannot be delegated, they will take it on with whatever means they have at their disposal. This is, in fact, the attitude that has helped build many successful businesses. But all successful businesses and their managers/owners reach a plateau in their business strategy when they must consider how to optimize the time and efforts of all the players to collectively build on the successes that they have had to date.

This ‘obstacle’ is not easy to overcome because it involves a big intangible – an attitude. A person’s behavior is probably one of the most challenging things to change because it is rooted in a lifetime of experiences. But it is doable and business owners are, generally speaking, motivated to succeed and will face many hurdles to do so. Overcoming this challenge involves an open mindedness on behalf of the entrepreneur, as well as a willingness on the part of the software vendor to perhaps speak more openly and honestly about the software’s merits and shortcomings. The reluctance by SMBs to plunge head first into this type of business investment will not be overcome by a software vendor’s insensitivity to their real life concerns – cost, fees, up-front work and maintenance. These are the areas of the sales pitch that are often obscured behind the many claims that vendors make about marketing automation.

Marketing automation is a great way to improve sales and profit but it is not a solution that will replace the work of the marketing team. It is a tool to automate and simplify marketing tasks. The responsibility lies with the vendor to present the software realistically while extolling its benefits and with the entrepreneur to research and understand the potential of marketing automation. A business owner that understands the responsibility of running a successful business will do the work that is required and assess what type of software will function best with an existing marketing strategy.

Conclusion

For many small and midsize companies, the move to a fully functioning and efficient digital environment is still a far reach. However, the natural evolution of people and practices in the business world is trending in that direction. Good marketing automation takes into account the evolving needs of a company’s marketing strategy across all of its marketing channels. The benefit to all businesses from this type of intervention will ultimately seep into the business consciousness and sound marketing automation software will prevail over skepticism.

Contributed by Gabriel Gheorghiu – Experienced consultant and analyst focusing on business software and customer interactions