Will Digital Marketing replicate the mistakes of the CRM market?

The nascent digital marketing industry is currently growing very rapidly (c. at 20% to 30%) and is attracting a plethora of competitors. But what can it learn from the similar CRM growth market of the late 1990s? And how can it avoid the mistakes and the damaged reputation that the CRM market has suffered from?

The CRM market grew fast on the strategic premise that ‘by managing your customer relationships, customer churn falls, retention rises, and sustainable cashflow and share price gains follow’. However, building trust, loyalty, and lifetime value takes many years. Venture capital-backed vendors and customers needing to show a fast ROI took a more short-term view.

So CRM became mainly used for capturing, measuring and controlling sales activities – the feared ‘stick’ with which to punish salespeople. End users that followed the original ‘customer relationship’ dream found vendor promises inflated beyond product capabilities, and millions of customer IT dollars were wasted. Gartner reported CRM implementation failure rates of 80%+. The king of the market (Siebel) was toppled, replaced with a lower-cost and more flexible Cloud-based alternative (Salesforce.com).

In digital marketing, the original strategic promise was to ‘engage with customers, have relevant conversations, and build products to meet their needs’. In this scenario, marketers listen, analyse, and predict customer buying behaviour and optimise their offerings to meet customer needs.

As with CRM, in digital marketing short term is trumping longer term brand building considerations. Customers use digital marketing primarily to run price discount email campaigns, and analyse and target web site visitors. The results can be surprisingly crude. For example, Groupon does not even differentiate its email promotional offers between men and women. Hence men are regularly invited to women’s spas for pampering weekends. Irritating.

At last week’s ad:tech show in London, the focus was how to increase sales ‘conversions’. Cost Per Acquisition (CPA) is the key metric describing the cost to ‘buy’ a new customer. We customers need to be ‘monetized’. One vendor boasts of “quickly transforming conversations into conversions” another is an expert in “the art of building and monetizing a social following”. They offer quick profits rather than ‘satisfying customer needs’ – which is what marketing is supposed to be about.

‘Multi-channel marketing’ is another key message which means sending the same adverts to your email tray, your mobile phone, and where you browse on the Internet. Then there is ‘re-marketing’ as championed by Criteo, which means that a web site visitor can never escape from adverts following them around. For example, whenever I surf the Internet a box pops up advertising John Lewis’ pillows, as I viewed them on the John Lewis web site but didn’t buy. Irritating.

The advertising industry has always championed creativity and brand distinctiveness. Digital marketing today is focused on where to push the next potential customer ‘over the cliff’ into becoming a user. Hence online betting companies such as Littlewoods and Betfair give you money to start gambling with them. Others are following.

Digital Marketing is in danger of becoming a ‘snake oil’ – a cure to all marketing ills. In truth, all companies need some digital marketing. But what you buy has many dependencies – your IT infrastructure, your online presence, your industry, the size of your company, your culture, your business model, your customer attributes, your stakeholders, your product portfolio etc.

Do not be fooled by the rhetoric, there is no such thing as a generic digital marketing strategy. One size does not fit all. Hence an informed consulting approach is required, rather than random purchases of free or low cost digital marketing products that may not scale nor integrate.

An industry champion like Siebel has yet to emerge, however few would bet against Google and even Facebook having a big say in how the digital marketing industry develops. They own the customer data after all. For sure, the traditional enterprise vendors IBM (Unica), Adobe (Omniture), and Webtrends need to dramatically increase their speed-to-market, thought-leadership and innovation if they are going to continue to set the agenda and drive the market.