Daniel GonzálezWhen it comes to marketing technology it is easy to fall for the positive expectations generated by the promises of performance and sales generated by the software vendors themselves, after all if so many companies have managed to increase their sales with a specific solution, why wouldn’t your company be able to do so? Nevertheless, I write this article to give a bitter yet necessary opinion: your next project will (probably) have a negative ROI.
This is not to say that a Martech/Adtech project cannot be profitable, on the contrary what I am trying to convey is an undeniable reality: the odds of a negative ROI are higher than we would like to admit. It is a reality so uncomfortable and so tangible that by 2023 75% of CMOs found themselves under pressure to reduce their technology spend according to a Gartner survey. Of course, Gartner cites two main causes: inflation and the questioning of how profitable it can be to chase customers to a point where it becomes intrusive.
Other analysts such as Andrew Birmingham also makes reference to this reality where CFOs question the financial results obtained by investing in martech, as well as finding cases where a CMO could be spending the same amount on technology as a CIO. I quote from his article:
“Most CFOs believed marketing technology has failed to meet enterprise expectations and even as martech bloat increases, utilisation of the software that’s already in place is actually falling.”
Andrew Birmingham
The first is that Martech spending already accounts for 24% of the marketing budget and at the same time only 42% of marketing teams use their technology stack. Clearly, under-utilising (or not using at all) those tools that should increase sales is a guarantee of a negative ROI.
This reality is not new, in fact Martech.org reported in its article “The state of martech in 2023” significant changes in the market among which it recommended precisely the reduction of redundancies in the technological stack of marketing teams to save on unnecessary costs. In any case, the reduction in investment and the conservative approach of companies in marketing led Martech.org to call 2023 “the year of rationalisation”.
Now the question is why does this happen? In the following I will go into some fundamental points that explain this reality and I will also give some fundamental advice on how to achieve a positive ROI in a Martech project.
Why Martech projects have negative ROI
Despite the promise of revolutionising marketing strategies, many Martech projects fail to deliver a positive ROI. This is due to several critical factors that, if not managed properly, can significantly skew expectations and results. Below, we explore the underlying reasons that contribute to many of these projects generating negative ROI, with particular emphasis on common mistakes and areas of risk to consider for future marketing technology investments.
Inappropriate choice of technologies
It is more common than it seems, but many companies choose the wrong technology stack motivated by the wrong incentives, which are mainly political, economic and ignorance.
Certainly marketing teams are no strangers to politics, in many cases business favours or private agreements between companies lead teams to use the wrong tools. On more than one occasion I have had the experience of seeing large companies invest large budgets in licences that make no sense whatsoever to the reality of their own business. Strange as it may seem, many opportunities for optimisation and business growth using better tools are lost because “the global department forces us to use this technology” or “it is IT who has decided that we must operate with this vendor”. Business policy, directly or indirectly, often leads marketing teams to inevitably use the least appropriate technology.
In addition, we cannot overlook economic motives that often have a considerable influence on purchasing decisions. Often, especially in decisions made by purchasing teams, price plays a more prominent role than it perhaps should. Herein lies a common misconception: assuming that a low price guarantees savings, or that a high price is synonymous with higher quality or technological sophistication. However, the real dilemma lies not in considering price as a critical factor in the purchasing decision, but in treating it in isolation. It is crucial to evaluate price in conjunction with the specific use cases of the technology – that is, in terms of the ‘price-use case’ relationship. This ensures that the technology investment is not only economical, but also effective and aligned with real business needs. By linking price to intended use cases, companies can make more informed and strategically sound decisions, thus avoiding the pitfalls of cheap solutions that do not meet expectations or expensive ones that exceed real needs.
Another important factor is knowledge, very few companies have marketing teams with deep technical knowledge which makes autonomous decision making impossible. Usually the best way to overcome this challenge is to rely on consultancy companies that can provide fundamental support in decision-making.
Excess of tools
As marketing technologies evolve and expand their capabilities, many companies remain wedded to implementation structures that have become redundant and obsolete. Take, for example, the evolution in the field of marketing automation. A decade ago, it was common for companies to have standalone tools dedicated exclusively to marketing automation. Today, however, most automation functions have been integrated by CRM vendors, who now offer these capabilities as part of extended packages.
In this modern context, does it make sense to maintain a separate tool for marketing automation, a separate one for CRM and a third one for emailing? Probably not. Persisting in keeping these technologies separate when they could be consolidated under a single platform not only increases costs unnecessarily, but also complicates data management and campaign execution. This redundancy in martech structures is one of the most counterproductive factors in maximising ROI. Companies should critically evaluate their technology stacks and consider consolidation as a key strategy to reduce complexity and increase efficiency.
This phenomenon also occurs when the implementation of any technology does not pursue a strategic vision but a short-term solution: “I need to personalise these SMS, and as this tool allows it, I will hire it”. An implementation should never be carried out with a view to the short term, this is never good either for budgets or for an orderly organisation of the different technologies.
It is worth noting that about 50% of small and medium-sized businesses have redundant martech structures which significantly penalises the efficiency of their marketing budget.
Under-utilisation of technology
Having a tool, no matter how powerful and sophisticated, is no guarantee of increased sales; knowing how to use it properly is crucial to achieving results. Under-utilisation of martech technology is a common problem that can have a significant impact on ROI. Many companies invest in sophisticated tools such as CRM and automation software, but then fail to fully integrate them or utilise their full functionality. This can be due to the complexity of the technologies, which often require specialised knowledge and detailed planning to be effective. In addition, lack of end-user adoption can lead to these investments becoming non-returnable expenses, rather than value-generating assets (involving issues such as resistance to change).
To mitigate this problem, it is crucial that companies invest in training and ensure that staff understand how to fully integrate and use these tools within their daily workflows. It is also beneficial to conduct regular audits of the Martech stack to optimise its use and better align it with business objectives.
Hidden or underestimated costs
In many cases, the implementation of a Martech technology ignores various technical, strategic or knowledge needs that eventually come to light as an unforeseen cost. From Business Intelligence projects that do not conceive of data engineering work to CDP implementations that ignore the need to clean and transform data from the Data Warehouse.
I particularly like the article by Mitchell Olszewski who mentions different dimensions that are often ignored in the implementation of a project: administrative costs, amortisation, licence cost overruns, etc.
Although hidden costs are almost impossible to avoid in their entirety, it is important to understand that we must always have a prior study before estimating any project in order to minimise the existence of these costs and as a general measure it is always positive to add a 15% item in the cost tables for unforeseen costs within the project.
Vendor lock-in
Perhaps the most obvious risk that any company can run is that of being tied to a single vendor that provides a 360º marketing solution. It is increasingly common to find companies opting to contract 100% of their martech stack with vendors such as Adobe or Salesforce due to several obvious advantages: easy integration, interoperable tools, lower maintenance costs and a shorter learning curve. However, there is an obvious risk: when 100% of your marketing technology depends on a single vendor and you don’t have an alternative, you will be at a disadvantage when negotiating licensing costs.
From personal experience I can speak of scandalous cases in the industry, where a vendor can offer specific add-ons at costs 10 or 20 times higher than the market average or even increase licensing costs by 200% year-on-year. These are all personal experiences in which I have been involved, and they are experiences that allow me to say that this risk is real and should be avoided as much as possible.
There are interesting articles that can help you understand how to negotiate better with technology suppliers, however there is one key recommendation in all this: always have a plan B, never rely on a single supplier.
Poor strategic planning
The lack of planning is what most punishes the ROI that can be obtained from a martech project. On many occasions companies decide to carry out technological analyses or even technical evaluations of suppliers without even carrying out an analysis of the use cases for which the martech project is necessary. How is it possible to even consider which tool to hire if there is no prior knowledge of what its practical use will be? It is simply too damaging a position for business results. This practice is mentioned in almost every article related to the implementation of a Martech project, prior research is crucial.
Recommendations
The intention of this article is not to discourage the use of technology in marketing projects, on the contrary, the intention is to encourage the proper use of a good Martech stack considering the risks and good practices that should be applied at all times. As a general point every CMO should work as a team with IT and always have these aspects in place: Strategy, supplier diversity, internal talent and good planning.
