Over the past few years technology has transformed the way businesses and customers engage with each other. The landscape has grown increasingly complex as new platforms and avenues for communication continue to open up. As businesses shift towards cloud computing and implementing ‘big data’ tools, the infrastructure is now in place for companies to collect and analyze the multiple touch points they have with consumers. Marketers have realized the value that engaging and developing a relationship with consumers provides fruitful results that ultimately impact the bottom line in one form or another. However, the influx of platforms and complex sales strategies that come along with them have made managing these processes very difficult. Businesses that want to remain ahead of the curve have to invest into automating these processes. In fact, Gartner projects that by 2017 CMOs will spend more on IT than CIOs, and that B2B marketing budgets will remain higher than IT budgets (almost 3x). Lo and behold, marketing automation startups are springing up to handle the growing need and frustration of handling engagement, collecting data and discovering relevant insights behind the scenes.
Marketing automation is growing at a tremendous pace – some sources estimate 50% annually – and that the B2B market is already a billion dollar industry. The strategy is transitioning from something companies do to innovate, to something companies do to keep up with their competition. With all the hype and attention this segment has seen it is interesting to note that one CEO in this space, Raghu Raghavan of Act-On, mentioned that he “only sees 3% penetration of non-technology mid-market companies… and only 20% at the high end of the market (companies with over $500m in annual revenue).” Act-On has tripled in size over the last three years, as it focuses on the middle market. Let that sink in. While technology’s penetration into the mindset of CMOs is largely recognized (as is the landscape), the absence of focus on the middle market has been understated.
Some might figure that these companies have tighter purse strings and would be more hesitant to invest in technology, which explains the low penetration. However, Raghavan also stated that 50% of his deals don’t face any competition and that his clients don’t need to be educated about marketing automation. Attribution has always been a major problem marketers wrestle with. With these tools CMOs can garner some color regarding ROIs on their campaigns and adjust their operations accordingly. CMOs recognize the importance and added value that this type of technology provides them and they are willing to pay for it, they are just not the ones being sought after.
Although the current ecosystem is ripe for marketing automation companies, much of the current landscape targets the sexier ‘whales’ that manage to pull in over $500m in revenue, annually. While these clients might be able to provide credibility, prestige and a consistent paycheck, the keys to the kingdom might actually lie within the forgotten middle market. Technologists and entrepreneurs might be underestimating the desire and capability that middle market companies have to invest. Instead of developing tools to serve larger clients, perhaps this sector of startups might face more success by focusing on the Small to Medium Enterprises (SME) sector that drives most of the economic activity of this country. Not only are these clients trying to improve their digital footprint, they also are more likely to have relatively ‘lower hanging fruit’ than larger clients. The software can produce results for the clients and the automation companies would likely build traction from happy customers. Perhaps more B2B startups should take notes from Act-On’s success and refocus their efforts on the lower to middle market segments. Gain traction and momentum from the bottom up as opposed from the top down.