Interview: Marketo CEO Phil Fernandez on customer expectations and competition

Marketo's global leader shares how the data and technology skills gap impedes customer engagement, and why Marketo can win the race for marketing technology vendor supremacy

Marketo CEO, Phil Fernandez
Marketo CEO, Phil Fernandez

The data and technology skills gap existing inside marketing organisations today is the single biggest impediment to customer engagement and the success of the CMO, claims Marketo CEO and co-founder, Phil Fernandez.

In an interview with CMO during a quick visit to Australia, Fernandez said the issue of what skills are needed to effectively run a modern marketing function and meet customer expectations was a hot topic that dominated recent meetings with CMOs here and abroad.

“The skills needed to operate a modern customer engagement and digital marketing platform, to design customer journeys and put them into actions, and to combine with creative and analytics, are scarce,” Fernandez said. “Nobody learns this at school – it’s all on the job training. And these skills have only been needed in recent years.

“It’s the single biggest impediment to growth in this market and the success of the market.”

Fernandez flagged two specific gaps. The first is being able to define ever-more detailed personas for the buyer. “Personas are of course well understood in marketing, but it’s far more granular than ever before,” he claimed.

“Then there’s the process of creating ‘journey maps’ and the design of interactions with customers – what kinds of things do we want to do, and how do we not only communicate but listen and interpret what customers are saying? For example, what do clicks on the website mean in terms of buyer intent? That is not well understood.”

The other less familiar skillset is around multi-touch attribution, and understanding metrics for measuring buyer engagement and value, as well as thinking about metrics in a highly segmented world, Fernandez said.

“I was with the head of marketing at a bank yesterday and he told me that as they market to finer segments, the ability to get lift from marketing campaigns, given people are segmented into higher propensity buyers already, needed to be thought about in a completely new way,” he said. “They didn’t have the vocabulary or metrics to talk about that new world.

“The gap between what is going on and how the business interprets and makes decisions, then of course how marketing communicates that up to the executive layer – nobody has the skills to know what the right metrics are, let alone produce an interpret them.”

CMO had the opportunity to ask Fernandez about the role of marketing automation and viability of Marketo’s independent offering in an increasingly integrated and competitive enterprise technology landscape. Here are key highlights from the interview:

Moving from marketing automation to customer engagement

He might be the leader of a marketing automation company, but Fernandez admitted he has never liked the term ‘automation’. What these technologies are designed to do is address the wider objective all marketers share today: To build more valuable relationships with customers over time.

“What we’re doing with marketing automation technology is achieving this [customer engagement] at scale,” he said. “No one is ‘automating’ the market; what we’re doing is scaling up personal interactions with the customer.

“Today, marketers are talking about what is actually the goal: To have more engaging, personal and individual relationships with customers and sustain those over time. You have customers that activate more thoroughly, spend more, become better advocates on social media, and that’s what we all want.

“From my point of view, we finally found our term, as opposed to just an evolution of technology. We’ve now figure out what to name this thing: Customer engagement.”

Historically, Fernandez agreed “customer appeal”, rather than “customer engagement”, has been marketing’s job.

“In the mass market world, you may have been engaging with the customer but you couldn’t see how individual marketing campaigns tied to individual customer behaviours or how those customers then impacted the market at large. You’ve never been able to measure engagement,” he commented.

“With digital technologies, a marketer can now measure and see if a customer listens to their communications, by reading their email or engaging with a mobile app; if they respond, meaning they convert or accept an offer; or if they advocate, meaning they spread messages to fans through social media. All of those things are directly measurable.

“For the first time, the marketer can take the same craft, which is creating an emotional and personal appeal, but measure it on an individual basis and talk about engagement. Before we could only theorise.”

Marketo’s future in the face of marketing technology consolidation

The big commercial question hanging over Marketo’s head is what future the company has in a world where marketing technology management is quickly maturing, and its rival are increasingly acquiring to provide an integrated, all-in-one solutions stack.

Rapid consolidation is currently occurring across the marketing automation and platform space, driven by larger and traditional technology vendors such as IBM, Oracle, Salesforce and Adobe. All of these players are racing to provide an integrated alternative to CMOs, and all claim marketers are going to increasingly need harmonised solutions, rather than independent, best-of-breed point solutions, if they’re to obtain that holistic view of the customer they’re searching for.

Fernandez agreed marketing has gained importance as a substantial and meaningful category in the software solutions map. He noted that while other lines-of-business, such as HR, finance and sales, have undergone a technology transformation and gained their own platforms, we’re only just on the cusp of marketing’s evolution through IT.

I believe we are still only in the first five years of a 20-year arc for marketing platform

“Dawning realisation of that whole white space category is obviously going to attract the bigger players like Oracle, IBM and Salesforce,” he said. “With the continuing success of the smaller companies exploring that opportunity, it’s no surprise to me those vendors wanted a piece of that action.”

But Fernandez continues to believe there is a place for independent vendors to offer strategic and specific platforms to the key four or five lines-of-business platforms. In this cloud software world and to back up his view, he pointed to independent platforms such as NetSuite or Zoom for finance, for sales, Workday for the HR department, as examples of independent and successful vendors in those areas.

“Innovation in category leadership gets created through the independent leaders in these spaces, and that the inevitable arc in technology is that the big boys try to swallow them up. But I believe we are still only in the first five years of a 20-year arc for marketing platforms,” he claimed.

“The market is changing so rapidly, it puts a premium on thought leadership and innovation leadership and that plays to the advantage of an independent player like Marketo.

“I believe we have a very long runway ahead of us to be that innovator and catalyst for defining the market. There will be customers that want that, and who are more leading-edge, and there will be more mainstream customers that want to have what they perceive to be safer, albeit less advanced technologies like someone from Oracle.”

Related: Marketo raises US$79m in IPO listing

Fernandez identified two key but distinct trends influencing marketing technology’s maturity. The first is the need to integrate data. The second is the business processes supporting value creation activities in each line-of-business.

“At the data layer, integration technologies have become incredibly good, in the sense of how relatively inexpensive it is to integrate data,” he said. “The integration that Marketo now does in the cloud with, SAP, Microsoft Dynamics and others, happens effectively for free and in minutes. That would have been a multimillion dollar integration project with a consulting group just a few years ago. So the economics of data integration have really changed.

“That’s what makes us plausible as independent innovators – we can harmonise the data layer through integration. But then each line-of-business has very different processes for building, engagement, messages and experiences for customers. Marketing’s are different from the sales organisation, or doing payroll in finance.

“We are going to see a single unified data layer, whether from one vendor or multiple vendors, then each line-of-business can have the tools that help them excel with what they do best. That I think puts a premium on an independent innovator that can build tools that better support those processes in marketing. They don’t have anything to do with sales, finance or product.”

Related: How imagination and marketing automation helped Navitas' digital marketing agenda

Single view of the customer

For most of his 25 years in the marketing technology space, Fernandez has stated obtaining a single view of the customer has been too hard a task to achieve. But his position is changing.

“We are just at the dawn of an era where this is actually attainable,” he claimed. “Digital, mobile and social have become so ubiquitous, it is possible to bring various customer behaviours, actions and likes together in one big data repository and interpret that in a holistic way. That is still very hard, and there are very real privacy and governance issues, as well as systems issues, we need to work through. But in the last 2-3 years and thanks to the cloud and big data era, we’ve seen a watershed as this becomes possible.”

Systems complexity, and legacy infrastructure within large enterprises, makes this tremendously complex, and there is a lot of plumbing still to be done, Fernandez said. “But we have plumbers who can build water systems. That’s a matter of time and commitment around technology,” he said.

Arguably, the biggest issue is cultural, Fernandez continued. “We’re still defining the norms of engaging with customers, obtaining their permission and not being creepy in the process. There’s work to be done on realising how do engage while respecting the customer’s rights and privacy, needs and expectations,” he said.

“The cultural norms have changed – we would never have imagined just how much information consumers are willing to share on social media a few years ago. I think we have five more years before we bring together what’s possible with what consumers want, allow and will tolerate.”

One thing Fernandez said he was amazed by was how similar the conversations have become with marketers across diverse industries and sectors. Whether it’s a consumer brands manager, or a B2B marketer working at a financial services institution, all are striving to build customer loyalty and tackle the issue of better customer engagement, he said.

“There’s this common view of customer engagement is central to valuable creation, which is tremendously interesting,” he added. “And everyone has a common view of what it means: Customers are spending time across multiple digital channels, and they know they can talk to them there and build more valuable relationships.”

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