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The 2nd Elephant and 2nd Gen Marketing Automation

Ok, this post is huge and may be painful if you’re not a huge fan of the Gartner Hype Cycle, Crossing the Chasm, Marketing Automation Tools, Inbound Marketing and marketing campaign analytics. To spare you a headache, here’s the bullets you need to know and you can decide if you want to read on.

  •  Tom Webster asked “Is Inbound Marketing Actually Profitable or Just a Slogan.” over at Jay Baer’s blog
  • The time is ripe to ask with new data available as part of Hubspot’s IPO, which confirms they are burning a lot of cash (like everyone else from startup to Amazon)
  • If the Gartner Hype Cycle holds, Inbound and Social Media are overdue for a beating from the press
  • Don’t believe the hype, effective inbound campaigns trump everything
  • Inbound is the right message for the mass market, and will continue to be even if the press beats on it. If it gets really bad they can easily switch the message to “Best of Breed Marketing Automation”
  • 2nd Generation Marketing Automation will be about improving campaign performance based on the data vendors have aggregated. Easy to use automation of email and social media is just the price of entry for the market
  • Questioning inbound’s effectiveness is the 1st elephant in the room. Why so many marketing automation programs fail is the 2nd.
  • Hubspot’s competitors won’t bash inbound because the same arguments undermine marketing automation in general. This scores an amazing combo – unique story and unbreakable defensive position

Tom’s post is an excellent read with a lot of great comments, but to boil it down for you: Does a $34 million loss on $77 million of revenue after 8 years make you think that inbound marketing is not the cure-all that it’s advertised as?

Inbound Marketing has run the normal hype cycle, lots of press, books and events, all while Hubspot, a hometown hero for Boston, has kept this story at the core of their value proposition. Unfortunately I think both inbound and social media are overdue for some bad press, once you learn about Gartner’s Hype Cycle you can’t unsee it. A topic starts with a small group of innovators (for inbound I say the family tree starts at Seth Godin’s Permission Marketing), and the press hypes it up as the cure for everything for a couple of years. Eventually those stories stop attracting attention, then negative stories start getting published because they are controversial. Usually the size of the plunge is equal to the rise the topic enjoyed and as the tomato-tossing articles stop pulling clicks it’s reached the “Trough of Disillusionment.” At this point the press doesn’t care to write about it anymore and the market determines if it survives or not. Finally, at this point, press has nothing to do with it, if it sells and customers deem it fit to survive, it does. This is just how the press works, it’s independent of whether or not “Inbound Works.”

Aside: It wouldn’t surprise me if some variation of one-to-one marketing is the “post-inbound” marketing to get hyped. “Imagine tailoring your marketing campaigns to every individual prospect and customer based on the big data in your grasp.” That makes a good story, even if it’s not possible.

The story of Inbound Marketing is critical to the mass market of people that buy marketing automation. These are the marketers that only move in fear, their primary motivation is “Don’t screw up this gig” and they are not going to experiment unless someone else has already proven it works (this is the group under the big part of the bell curve, where the money is made, and if you want to learn more about the difference between the early adopters and the mass market check out Moore’s Crossing the Chasm). These are people that loved buying ads and knowing that they would get 1% of the audience back as prospects or customers. This group needs all the stories of companies that spent significantly less money by blogging, creating videos and white papers and were able to generate all kinds of business. These people are the ones that have been crushed by the information that buyers now have at their fingertips thanks to the internet. By giving these prospects some marketing campaign options that are less expensive by an order of magnitude at the same time as old sales and advertising campaigns are becoming less effective by an order of magnitude it’s no wonder everyone is excited to talk about Inbound.

As a company that both sells and practices Inbound, Hubspot has a picture of the world that anyone who follows marketing would love to get their hands on. They have the data on how well campaigns work and where the breaking points are. They no longer produce their weekly video show, but they are advertising on Facebook so at some point the return on some kinds of inbound isn’t there compared to outbound advertising. Oh, and they have similar data for all their customers too.

So, does Inbound work? Based only on my personal observation of around 100 companies, I have no doubt whatsoever that “Inbound Works”, but the funny thing is I don’t ever think in terms of “Inbound/Outbound”. You just pick some campaigns to work on, do the work and see if they grow the business. Anything that helps you do more, or better measure what you have done will be a valuable tool.

Another reason the effectiveness of inbound is questioned is that not all marketing automation customers are equal. All the marketing campaign tools on earth won’t fix a product customers don’t want. My gut is that this is why you hear churn come up as an issue for marketing automation, there are too many customers that think marketing automation will be a silver bullet for their crummy product rather than a tool to automate already successful programs.

Yes, entrepreneurs have burned a huge pile of money on email and social media monitoring software. They don’t care. The usual model is: get to $100M to please The Street for The IPO. The Street knows that companies do “Grow At All Costs” to get to the IPO, they bet on the business model being sound so that if they want to scale back on the new customer acquisition and do some layoffs the profits will magically appear.

The savvy investors here are looking forward to the next generation of software that can determine if your marketing is doing as well or better than the industry standard, and if it’s not, prescribe how to fix it. It will be able to say “Well, the average campaign like yours that sells to IT professionals in banking normally does 5x better so obviously your product must suck or your messaging is garbage.” Marketing automation companies will be the first companies ever to have this kind of data and that’s what this space is all about for investors.  If you have enough data, eventually you can build a map of all the inbound/outbound marketing campaign types and rank them in order of possible effectiveness and return. A lot of today’s marketing campaign choice is rummaging around in a dark room. The future of marketing automation is a flashlight to see how well certain types of campaigns do on average rather than having to trip over them.

One question I had after reading the original article was “Why doesn’t a Hubspot competitor take shots at Inbound?” it would be easy for someone like Adobe to say “How’s your blog doing? Yeah, we thought so. Let us tell you about outbound stuff that’s better than ‘The Top 5 blog lists nobody wants’.” In the comments of the Convince and Convert post my discussion with Lee Dalton led me to see the second elephant in the room: Tom’s original question isn’t just for Inbound, it’s for all marketing automation vendors. Do these tools make you more money? Unfortunately many times the answer is no. Many customers focus more on the tools than doing great marketing programs. Customers can go one of two ways – they buy a marketing automation tool, have a great product, do a bunch of great marketing and all is good. The other way, either the product stinks and no amount of marketing will get people to buy, or they thought that buying a marketing automation tool would write all those great blog posts and email for them and they end up only using 25% of the system’s functionality then dropping the tool or losing their job over the next 18 months. UPDATE: Kathryn Korostoff published a wonderful courageous post about a $30k marketing automation failure that’s a common testimonial in the vein of “Marketing Automation is like giving someone’s kid an espresso and a free puppy.”

Inbound is why Hubspot does a better job of marketing than the other marketing automation vendors out there. They have a unique story with Inbound, yet no other vendor is willing to challenge it. The arguments that could be made against inbound also challenge outbound activity and would destroy the stories used to sell these tools – in other words, nuke the entire market.

What does Hubspot do? If Inbound gets to a point where it’s no longer an advantage they can change the message to “Marketing Automation” with no difficulty. I would guess that’s the real roadmap and the reason behind the IPO is to provide the funds so that they can make acquisitions to create the ultimate marketing automation suite.

The next step for marketing automation is clear: it’s not about providing the tools, it’s adding expertise so that their customers run better campaigns. They know when the messages should drop, what subject lines work, what offers pull. The first marketing automation vendor to leverage their data and generate a decent 12 month calendar and mail schedule for any vertical will be the first steps in second generation marketing automation.  Last generation’s marketing automation systems made great marketers more effective. Next generation marketing automation will make all marketers more effective.