New Technologies of Marketing Optimization

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The aspiring customer-focused business must transform its relationships with suppliers and partners but especially with customers. This transition will require dramatic changes in how marketing is managed and organized. Marketing -- the de facto owner of customer relationship building -- will become a pervasive, enterprise-wide activity that touches customers in real time and at every point of interaction.


Success, however, also will depend on smart investments in marketing software and systems. Indeed, there are many benefits associated with marketing optimization software that promise to contribute to both the top and bottom lines. Based on interviews with companies that have implemented marketing optimization software, here are some of the most frequently cited benefits:


* more effective cross-sell and up-sell;


* higher customer retention and loyalty;


* higher customer profitability;


* higher responses to marketing campaigns;


* more effective investment of scarce resources.


In our research, we have found tangible business payoff for investing considerable resources in relationship management initiatives. In fact, a large number of offerings fall under the heading of customer relationship management. They encompass sales, marketing and customer service as well as other enterprise functions.


The Knowledge Capital Group considers CRM a subset of what we call enterprise relationship management. While we think relationship technology is critical to scale and success, we also think it is essential that relationship management encompasses multiple constituencies within and beyond the enterprise. It is our view that marketing strategy solutions should be looked at within the context of CRM, and that CRM should be looked at within the context of ERM. One cannot effectively address customers' preferences and priorities without considering the capabilities -- whether products, services or solutions -- that a company can profitably deliver. This is the reason a company's wider relationship strategy must encompass not only customers but also suppliers, partners and employees.


Customer focus alone is too narrow. Yet few companies will be able to compete successfully in the fast and unforgiving markets of the future without mastering the management of customer relationships. As a result, the strategic decisions that companies make with regard to marketing in the coming years are bound to prove more consequential than ever.


Marketing Optimization: The Payoff


Marketing is a profession that has always defied automation. Some consider it an art -- a creative profession -- that doesn't lend itself well to productivity-enhancing approaches. Marketing executives, in the meantime, have had very few software power tools customized for their own unique needs, and many have never even had a technology line item in their budgets.


While it is clear that much of the marketer's role will, in fact, always elude automation, there are nevertheless vast opportunities for implementing new technologies that will not only streamline the marketing process but also optimize it. Indeed, the automation of many aspects of marketing will unleash human and financial resources to focus on more creative, high-order tasks related to enhancing the customer's experience. It also will enable marketers to take on complex customer management tasks that were too difficult or too costly to address using conventional methods.


Based on the Knowledge Capital Group's extensive research, surveys and interviews with enterprise software executives and leading corporate end-users, we have identified three critical elements of the marketing process that are open to automation and have mapped these elements to the emerging marketing software marketplace. While these three major segments of the marketplace can be further segmented, we believe our market segmentation captures the essential elements of a marketing strategy that emerging technologies promise to address and enhance.


As we see it, however, the three central aspects of marketing strategy that can be enhanced by the new tools are customer analysis, campaign management and customer interaction.


Customer Analysis


Numerous vendors provide tools and capabilities that enable marketers to more effectively analyze, model and mine their customer data. These tools are critical to marketing optimization in the sense that they help companies segment their customers and understand them, which is the first step in determining how resources should be invested to develop the most profitable relationships possible. We have broken this segment down into two categories: prospective and retrospective analysis. One provides data analysis technologies that enable marketers to predict or estimate the future actions or values of customers, while the other provides a multidimensional conceptual view of current activities, which can be sliced and diced and examined quickly.


Campaign Management


At the heart of all marketing initiatives, one finds the campaign. Campaign management software automates and integrates the planning, execution, measurement and refinement of marketing campaigns. The software is designed to help marketers monitor selected channels of execution -- whether it's a call center, the Web, e-mail, point of sale, a store or direct sales.


Customer Interaction


We concern ourselves here with the technology, particularly software, that enables companies to manage the customer experience, deliver marketing offers and conduct a dialogue. Customer interaction is becoming increasingly vital to the marketer's overall mission. It enables us to provide information and generate feedback, which is critical if we hope to make the right offer at the right time in the right channel to the right customer. Marketing no longer ends in a department; it reaches out and includes the active participation of the customer.


We have treated these topics with extensive care in our recent report, "Marketing Optimization Solutions," available at www.knowledgecap.com. We describe these activities and the payoff associated with them, and we point to key product providers. All marketing activities, however, rely on foundations of information. For this reason, we consider customer information management to be another key element of marketing optimization. And while many companies will choose to address the aforementioned activities inhouse, we see significant opportunities for outsourcing marketing activities. This led us to include marketing services outsourcing in our market map.


Finally, software solutions cannot be implemented in a vacuum. To ensure success, numerous business, organizational, technological and cultural challenges must be addressed. That's why we recognize consulting and integration as another element in our map of the marketing optimization world. All of these elements must be considered in the development of a high-impact marketing strategy and, ultimately, a far-reaching relationship strategy.


The Evolution of Channels and Technologies


We clearly are witnessing the emergence of a new economy -- one in which information and technology are critical enabling forces and in which relationship management is central to corporate success. Within corporate marketing, the two most visible signs of this vast transformation can be found in the changing concept of the channel and in the dynamic evolution of marketing technology.


As marketing systems mature, they are being drawn ever closer to becoming mainstream applications. In many cases, they are being elevated to the realm of the strategic application -- blessed by everyone, from the CEO on down; supported by corporate IT departments; and used as the foundation for a whole new class of applications that understand and interact directly with customers. Today's market for applications that facilitate marketing is exploding, both in numbers of vendors and in breadth of functionality offered.


These new technologies have contributed to and have helped to facilitate the management of channel proliferation. Looking ahead, it is clear that the somewhat distinct channels we discuss will become increasingly integrated. In many cases, the call center, the Web and other channels are likely to converge, creating dynamic, multimedia interaction centers. Even the indirect channel, which encompasses resellers, distributors and other partners, is likely to become increasingly manageable as we integrate it with our direct channels.


Such trends will make it easier to manage customer relationships across multiple channels. This is as it should be. Resellers and distributors are no longer "the channel." Direct and indirect are no longer "the two channels." Now, many channels must be managed and integrated. In order to thrive in the years to come, corporations must develop an integrated, multichannel perspective and establish far-reaching, technology-enabled customer management capabilities to match.
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