So, CMOs’ budget for martech is sinking: is that bad news? I don’t think so, as there are a few good reasons behind this trend.
First, as Gartner says, budget for CX and digital commerce technology – and martech mostly falls into these categories – shifted to become a strategic priority at most companies. CTOs and CIOs looking to modernize their stack is HUGE news both from a brand and a consumer perspective as it generally means a concrete step toward a better omnichannel. In this context, the main challenge for marketing and IT departments is to join forces and present a solid business case together.
Second, companies are increasingly relying on agencies and third-party services for their marketing operations. That’s because the lack of internal resources and expertise doesn’t allow them to get the most out of the expensive tools they licensed. But filling the gap between the potential tool capabilities and what it’s actually being used inevitably leads to one thing: a better user experience.
It took over 10 years (and counting) for martech to become a thing, but it seems like brands are finally getting “serious about CX data and technology”, fulfilling Forrester’s wishes from 2020.
This post will explore how we got here and what’s coming next.
Have you been in martech for years and are now feeling lost among a sea of acronyms? Hopefully, I will help you get in the loop for 2023.
Are you a marketer and this martech thing still feels like a buzzword? No probs, I also receive dozens of emails-I-never-asked-for presenting the latest tool. But if you are open to rethinking how your company engages with its customers, give this read a chance.
Are you an IT person? Within companies, there’s a huge need for people capable of navigating the extreme complexity of the CX tech stack. With marketing technologists now being called “business technologists” and the hype around no-code and low-code tools, you know how much technology is changing: your colleagues from business departments need your help more than ever.
2014: The rise of Martech
At this point in time, e-commerce sales accounted for less than 10% of turnover. Marketers couldn’t keep up with the fast-paced scenario and were frustrated about being at the bottom of IT’s priorities.
But martech was ready to help, and it boomed quickly, supporting a wide range of use cases with marketing automation at the top of the list and focusing more on the dream of hyper-growth (a.k.a., lead generation) than customer needs (like tailored emails and enhanced personalization).
It all sounded cool and exciting, but with marketers blinded by shiny new tools every week, the growth of the martech tech stack was chaotic and siloed, with IT people not realizing the impact the cloud was having on marketing ops —and marketers, too.
Chief Marketing Technologists were “change agents, working within the function and across the company to create competitive advantage”, said the Harvard Business Review in 2014. But, you know, easier said than done.
2018: The dawn of Customer Centricity
In 2018, martech took up to 29% of the average CMO’s budget; it was top of the list, followed by labor, paid media, and agency fees (source: Gartner). Marketers understood that growth is nothing without channel-specific and data-informed CX initiatives.
All businesses agreed that a better customer experience only comes with a proper customer data strategy. And this translated into reality. In 2018, CRM – the backbone of customer centricity – experienced “the highest growth of any application software market, becoming the largest enterprise software market, with a whopping $48.2 billion in sales” (Gartner, 2019).
2021: The dream of CDP
Data, data, data. Over the previous years, everyone craved data to enrich their cool data visualizations. But these were hiding a big underlying problem: Most of the time, data didn’t turn into action. To paraphrase the famous tweet by Dan Ariel, data-driven marketing was like teenage sex: everyone was talking about it, nobody really knew how to do it, everyone thought everyone else was doing it, so everyone claimed they were doing it.
Not only were brands unable to extract actionable insights from the data they had, but due to a fragmented martech tech stack and the lack of internal expertise, even basic tasks such as email marketing segmentation were not accomplished.
On average, marketers use only 42% of the capabilities in their martech stack, Gartner found, based on a survey of 324 marketers in May and June. This is a marked decrease from 2020, when marketers reported that they used 58% of their tech stack. (Gartner, 2022, source)
While common sense would suggest starting with small wins to validate a personalization strategy, Customer Data Platforms became the cool new kid in town, considered by 69% of marketers “as the key to realising their organisation’s customer experience vision” (Martech Alliance).
CDP was promoted as the biggest promise to single customer view and omnichannel personalization, but hype quickly waned due to time-to-market, uncertain ROI, and a siloed approach (more on my blog post “No, customer data platforms will not be adopted by the majority of companies by the end of 2022”).
Covid definitely accelerated digital transformation, but it also led to more pressure on CMOs to prove the impact of marketing efforts. CDP fell right in the middle: it had a huge impact on CX but involved a big effort both from a license-cost perspective and a marketing ops one. Wrong timing?
2022: Martech is now mature, but what about brands?
Not even Covid was able to bring the level of digital transformation we were excepting as customers, with ecommerce penetration back to the expected trends in a pre-covid scenario.
Not surprising, though, as the best in-store experiences are based on very accurate rituals. Most of the time, I can’t seem to find the same level of accuracy in online experiences, as you may have noticed from this post.
However, something in the way brands operate changed. Whether it’s an increase in sales through omnichannel (for B2C) or automation (for B2B), or operational efficiency through centralization (for marketing) or tech consolidation (for IT), understanding and leveraging martech is key in most use cases.
And now, here we are.
Circling back to the first chart of this blog post, Gartner’s prediction from a few years ago now translates into CX and digital commerce, which have become “enterprisewide strategic priorities”.
Still, as I said at the beginning, with an increasing pressure on proving the impact of expensive experience programs, the only chance for CMOs, CIOs and CTOs to succeed is 1) to partner on shared business cases and 2) to build new engagement models with external partners to deliver against shared KPIs.
What’s coming next?
With over 10k martech tools, picking the right one is still complex, and the 2015 Rjmetrics’ research that said that “companies justify their lack of public pricing based on solution complexity because there are too many factors that go into a price” is still valid.
Navigating the martech offering will remain complex, and the key differentiator will be integration capabilities, as true personalization at scale will only be possible through a composable tech stack (Yes, even if you choose to go with Adobe or Salesforce). This is already happening with CDPs (Customer Data Platforms) moving to composable CDPs, CMSs (Content Management Systems) moving to composable content architectures, and DXPs (Digital Experience Platforms) moving to composable DXPs.
If you don’t know what composable means, there are tons of articles to check out. These are a couple I would suggest if you want to know more about these topics:
- DXP, Composable DXP, and MACH Explained from the Agility CMS blog
- How Headless Commerce Will Change How and Where We Buy from the a16z Future blog
- There’s still a short-sighted vision around composable, and this Linkedin post from Sana Remekie explains why
Projecting the ROI of a composable stack is currently quite hard, and I think it will continue to be. But when it comes to innovation, following your gut should be allowed. Hopefully, once we leave recession times behind, intuition will become the true differentiator for brands.
“Are you intentionally omitting web3?”
No, I’m not. A few ideas come to mind when I think about the intersection of martech and web3, which I hope to write about soon. If you are curious about it, sign up below (no, no newsletter; just a little email almost as short as a tweet to report updates) or keep an eye on LinkedIn.