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Personalization Vendors Clamber to Course Correct

By Jennifer Polk | February 06, 2020 | 0 Comments

MarketingCustomer ExperienceDigital CommerceMultichannel MarketingTechnology and Emerging Trends

This week, software company Salesforce acquired CDP and personalization engine vendor Evergage. Alone this deal may not be noteworthy. But coupled with market growth, multiple mergers and acquisitions and predicted vulnerability of personalization investments—this latest move bears a closer look.

  • What’s the common thread between these deals?
  • What is implied about personalization engine and CDP markets?
  • What does this mean for marketing leaders?

The pieces of the puzzle

In early 2019, McDonald’s bought personalization engine vendor, Dynamic Yield. In a seemingly benign move, Dynamic Yield continues to operate, just restricted from serving McDonald’s competitors. Taken alone this raises questions about the rationale for the acquisition. Maybe McDonald’s saw the long-term benefits of owning a key martech capability. But it didn’t seem to signal anything major—until, of course, it did.

This would prove to be the first of many deals reshaping the vendor landscape: 

Putting the pieces together

There’s a distinct narrative behind each move.

  • Brands buying, rather than leasing personalization, a capability that could be an integral part of the go-forward business strategy

  • Combining a personalization engine and CDP to aide in data integration, possibly increasing “stickiness” and yielding better personalization results

  • Acquiring competitors—possibly in a defensive move to eliminate a competitive threat, while also filling strategic gaps in a vendor’s own solution

The true intent behind each movement may never be unknown, but the external market forces are evident.

Marketers have been investing an average 14% of their marketing budget into personalization. It’s estimated 44% of personalization spend goes toward technology. Amid pending economic downturns, marketers must brace for budget constraints and heightened ROI expectations. In this environment, double-digit spending on a personalization is risky business. This is especially true if that spend fails to make a measurable impact on revenue growth.

Gartner predicts by 2025, 80% of personalization efforts will be abandoned due to lack of measurable ROI or the costs and challenges of data privacy and data ethics.

 

Technology alone won’t solve marketers’ data problems. Yet, deeper integration of first party customer data:

  • Raises the switching costs of moving between personalization engines, and
  • Sharpens marketers’ ability to deliver measurable ROI in personalization

These outcomes benefit marketing leaders facing pressure to prove results from their MarTech spend. But they also help software sellers looking to acquire and retain clients in an increasingly homogeneous market.

There’s another possible benefit to providers.

The market for personalization engines has been largely funded by private equity.  As investors look to recoup their investment ahead of any economic downturn and decreased access to capital, it makes sense to solidify the market position of the software. Buying a CDP can strengthen their offering, readying them for acquisition. Lining up a buyer, such as a major brand and client or an enterprise platform provider looking to fill gaps it in its offering, can give investors an exit strategy.

Making sense of the puzzle

What does this all mean for marketing leaders?

If you’re currently using one of the platforms that’s been bought, in the near term, it seems to be “business as usual” for most vendors.

But, it’s important to ask:

  • What capabilities will remain or be shared across their solution?
  • Will the personalization engine operate standalone or will it be consolidated?
  • If you’re adding a CDP, will it be operable with third-party personalization engines?
  • If you’re licensing a personalization engine, will it work with third-party CDPs?
  • What cost savings and efficiencies are available through the combined solution?
  • How will integration into a larger platform impact data and consent management?
  • Regardless of the solution selected, how is the vendor supporting client success?

If you’re considering one of the platforms involved in these acquisitions:

  • Consider if and how a personalization engine fits into your martech stack.
  • Use your personalization strategy—you should have one—to identify tech needs.
  • Fill tool gaps based on capabilities your team will use in the next 12-18 months.
  • Allocate people to the process of finding  and using the tool, including training.
  • Be aware of content needs. Tools alone won’t deliver personalization.

As martech providers make “boss moves”, equip yourself and your team to make a smart decision. That decision is often less focused on which personalization solution you need and more focused how you’ll drive the greatest, measurable return from that investment.

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