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⚙️ TMW 100: An update
It’s now been a few weeks since we launched TMW 100, and I want to say a big thank you to everyone in this community for sharing it, creating memes, and generally supporting this new awards event for the Martech industry.
TMW 100 is clarifying which companies are building the future of Martech, and applications are coming in thick and fast as our 25% off early bird discount closes next week on Friday the 15th of July.
Here’s a snapshot of the types of companies that have registered for TMW 100. As you can see there’s a lot of love coming from the CDP category, but there are plenty of other types of Martech companies in there too.
I recently had a conversation with a longtime colleague. He told me this story of an enterprise brand. From working with this company close to a decade ago to catching up with them recently, he found out that nothing in their Martech program has changed.
No new use cases, no new ideas, no new growth, but somehow, millions were spent on Martech and on the talent to make it work; everything to CDPs, personalization platforms, AB testing programs, and a long list of many other tools.
I suspect that there are a lot of brands out there that share a similar story. Despite the growing appetite for spending on marketing technologies and a growing Martech industry adding at least a thousand new companies each year, after all this time, we’re yet to figure out the problem of companies just not using a lot of their stacks.
And off the back of the Martech buying spree during Covid-19 in response to changing consumer preferences for online channels, there’s now what appears to be a shift in how Martech people working in brands are thinking about how they’re using marketing tech. Indeed, when it comes to Martech, more than ever marketing technologists are asking do we really need this?
An unlikely agreement
Over 2023, almost all State of Martech reports are in rare agreement with each other: there’s a juxtaposition of brands buying more Martech, but the utilization of these technologies is on the decline. This leads me to think that we’re heading towards a bubble in Martech that is sure to pop. The telltale signs are growing companies and the number of companies entering the space, coupled with a lack of real, tangible value that these companies are creating for their customers.
A survey released this week from Productiv looks at all SaaS spending and use in small, medium, and enterprise companies. And it illustrates this juxtaposition well: Companies are buying more apps but using less of them.
Most reports talk about the fact that Martech is consolidating and that there is a considerable drawdown in spending. Reports such as Nielsen’s 2023 Annual Marketing Report are forecasting that 10%-30% of Martech spending will be cut in 2023. Ascend2 is reporting that almost 80% of marketers are using less than 50% of their Martech stack. Gartner says that only 42% of marketing technologists are using the full gamut of their Martech capabilities, which has decreased since 2020.
Similar statistics can be found in Integrate’s State of B2B Marketing Budgets report where Martech is in the top 3 most affected by budget and staff cuts, with half of the respondents saying they have a large amount of unused Martech, and a recent Optimizely study suggesting that implementing Martech is one of the major challenges for marketers.
And with this wealth of reporting from the industry all agreeing that Martech is not being used enough, it got me thinking: What’s actually causing this? How can marketing leaders justify all this spending on Martech if it isn’t leading to generating revenue and delivering on customer experiences, but instead is sitting on the shelf?
This essay is about the underutilized – the Martech companies, apps and services that despite their potential, growth, and case studies, are just not being used enough. What’s causing this underutilization?
It’s very hard to find Martech products that do one thing really really well. Especially as the larger a Martech company gets and its products and services diversify. To survive as a startup you only really need one essential product, but as soon as product-market fit starts to emerge and the growth level is pulled, companies shift from building one thing well to extending themselves into a platform with multiple features, price points, and packages.
And many do this way too early. When someone buys an email marketing platform, they probably don’t want or need a landing page builder, or a content studio – they just need to send emails. But with every single app, whether it be the small business email marketing champion Mailchimp to enterprise products like Salesforce Marketing Cloud, there are just way too many features.
CabinetM has tracked this over the years and has found that the amount of features each company is launching is growing year on year. Take, for example, a sampling of Martech feature releases for quarter 1 from 2021 to 2023. Each company on average is adding more features each year.
The philosophy underpinning this problem of feature bloat is both strategic in that more features can lock more customers in, but also adversarial – there are more features customers don’t need.
Knowing full well that the road to success for leaders in the industry like Salesforce and Adobe was paved by pursuing a lock-in strategy to develop multiple points of reliance with their customers it has become a template for new companies with a growth ambition. It’s well-worn advice in the Martech industry that to build a low-churn, high-LTV product, you need a way to keep customers reliant on your platform for more than one thing.
This has led to a strategic way of thinking about products that say that to really grow, you need to go deeper into each company and offer a unified platform that has multiple features. And it’s not all the fault of Martech companies. Customers ask for new features all the time for their edge cases and needs. And growing companies with customers asking more from the tech is usually a good problem to have, and let’s face it – they will build it.
So we have a product philosophy that says that to really grow and retain customers you need to be building more features into your product, while customers ask for things all the time. I think this is part of the problem. But there’s something deeper here that correlates with Martech companies becoming feature factories to dig their customers deeper into their ecosystem: The need to create a single view of the customer.
The futility of unified data
A lot of Martech is trying to address a massive problem in large enterprise businesses and is mostly failing: How do we unify all the data we have on our customers? And I think this is what’s causing so much feature bloat. I think back to when Klavio – an e-commerce email marketing tool – launched its own CDP, and many other companies that have no business being in the CDP domain followed suit.
Why? Their customers want a unified view of all their customer data for a range of different reasons, and each Martech company is offering features to make this work. It just isn’t working very well. Most companies cannot achieve this goal of a customer 360 view. Even Forrester has suggested that it’s a pointless goal to try and achieve this, despite Martech companies offering it as a solution to major identity and segmentation problems in the enterprise:
“Believe it or not, an exhaustive view of every single aspect, attribute, and interaction of your customer might not be necessary to deliver personalized messages or next-best experiences. The right approach will always depend on your maturity and your use case. You might not need to spend the money, effort, and time on building a comprehensive view of your customer if you can meet your objectives with less. In other words, you don’t need to build an airplane for a trip to the grocery store.”
Instead, a lot of Martech companies add segmentation, integrations, and identity resolution capabilities to their products, adding bloat and unnecessary features. This is the domain –the fruitless attempt to harmonize customer data – where so much of Martech is not utilized and is one of the main reasons why brands waste so much money on Martech.
This adds to the complexity of what Martech companies actually do. In the pitch or RFP process creating a single view of the customer makes sense, but in practice, platforms and tools and integrators are left on the shelf for more pressing matters, like, I don’t know, making money.
Compounding this problem is that Martech is now famously buzzword rich. What’s the difference between an omnichannel marketing platform, a customer engagement platform, or a digital experience platform? Beats me. But this indirectly contributes to the underutilization.
When Martech companies don’t accurately describe what their product does and instead focus on the end outcomes, the benefits and the pain points, it makes it easier for a buyer to say: “We need this tool to increase our conversions,” and not say: “We need to run AB testing on our website” which is the more accurate description of what you’re buying.
Confusion between buying tech because you need it and the aspirational outcome pitched to you is perhaps why we are seeing so many misdirected purchases in Martech.
If language could be simplified and Martech tools delivered what they promise instead of engaging in Martech gobbledygook, then we might see marketers using more of the tools they are already buying.
Of course, it’s worth mentioning here that marketers are constantly wanting to experiment with new channels, tools, ideas, and of course technology, and it’s a big reason why Martech is underutilized – if only for the simple reason that most Martech experiments don’t work out.
I don’t think the bright shiny thing syndrome is altogether a bad thing. But if you’re running a Martech practice in a brand and you’re spending all your time trying new tools, you’re probably not going to get anywhere.
But if you’re strategically trying new technologies to find leverage or opportunities, to gain a competitive advantage, or differentiate your experiences for customers, I think this is mostly a good thing. And if a lot of Martech goes unused, so be it. At least there’s some layer of creative exploration happening here.
This is the positive effect of underutilized Martech. Maybe it’s time to use more tech, try more things, and discard them quickly. We’ve now been through three consecutive mainstream hype cycles with the Metaverse, Web3, and now Generative AI. Not to mention the increasing hype around data warehouse-native Martech and third-party cookie replacement technologies.
All of these shifts in the landscape require experimentation, because all of them are paradigm shifts to managing a Martech stack, whether it be how your data is going to be managed, addressing new channels for growth, or dealing with the death of old technologies marketers have relied on for a long time.
We’re going through one of the most dynamically changing times in Martech where foundations are shifting, new technologies are invented, and the status quo is challenged. If you’re not experimenting or trying new Martech tools, then you’re probably not doing your job as well as you could be.
On the other side, the job of the Martech company founder is to figure out if their solution is an essential piece in the stack or a bright shiny thing that’s fun to play with for 30 minutes until serious marketing needs to get done. In 2023, the goal is not new customer acquisition, but making your product so essential to marketing teams that they will find a budget for it.
Is Martech becoming too complex?
Another question that you might like to ask is: Is all this underutilized Martech a problem for marketers dealing with greater technological complexity?
I don’t think so; the fundamentals of digital marketing haven’t changed in a long time. As I mentioned in TMW #124 | The unbearable weight of new Martech, despite more than 11,000 companies in the Martech space, the things that underpin marketing on the internet have not changed at all:
“If Martech is to continue to grow in its diversity and variety, it will need two things: New ideas and new channels. Like the Jerusalem of today, most of Martech is built on top of old channels for customers to access products and services. Social media gave us almost 600 software products, and the ability to send email has enabled more than 1,000 companies to build valuable products. And even though we’ve seen in recent years the growth of new paradigms for things like TikTok as a new social media channel, it’s still firmly in the category of social media, and marketers approach TikTok like they would Instagram – it’s just another social channel.”
But what has changed over the years is that some companies have gotten very big, and have transformed into monolith platforms over time. This has created a different kind of complexity: not that of dealing with channels or protocols, but navigating the app ecosystems, platforms, and marketing suits that have become central to doing digital marketing in big brands.
For example, Salesforce’s app ecosystem is making more than $21 billion, and Shopify’s growing app store has thousands of apps that sit across the entire e-commerce supply chain. HubSpot’s ecosystem is forecasted to create billions in value. What is happening here in Martech is that these platforms are so huge and multifeatured that there’s an entire economy of apps that function as a workaround for the larger platforms, to make them more usable, integrated, and valuable to marketers.
But it also adds more complexity to the Martech stack. McKinsey has recently reported that 70% of digital transformations have failed, which is yet another signal here for why so much Martech goes unused – the grand ambitions to digitally transform a retailer, a bank, a non-profit or a healthcare institution have been historically too big, too complex and too ambiguous to achieve. In the wake of every failed digital transformation is unused Martech, with no one with the skills to use it and the knowledge for why it’s there in the first place.
Essentialism; the next chapter in Martech?
2030 is shaping up to be the decade where pragmatism, cost savings and consolidation will dominate what founders build in the Martech industry, and how it’s purchased and used.
We’re already starting to see this with the shift to the cloud, as more tools pivot to relying on a central platform like a data warehouse to do more of what’s needed in the Martech stack and hiring software to do specific tasks for marketing. In this way, the shift to the cloud is an embrace of minimalistic Martech, doing more with fewer tools that are more powerful.
The Martech companies that can respond or build solutions for this trend will become essential; it’s the number one goal every Martech company should be focusing on right now as marketers cut budgets and staff. After all, who doesn’t like saving money?
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