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Dec 27

How Cloud Computing Is Accelerating Context-Aware Coupons, Offers and Promotions

Retailers and marketers often face the challenge of getting coupons, offers and promotions delivered at the perfect time and in the right context to their customers.

The rapid advances in cyber foraging, contextual computing and cloud computing platforms are succeeding at revolutionizing this aspect of the retail shopping experience. Context-aware advertising platforms and strategies can also provide precise audience and segment-based messaging directly to customers while they are in the store or retail outlet.

What makes context-aware advertising so unique and well adapted to the cloud is the real-time data integration and contextual intelligence they use for tailoring and transmitting offers to customers. When a customer opts in to retailer’s contextually-based advertising system, they are periodically sent alerts, coupons, and offers on products of interest once they are in or near the store. Real-time offer engines chose which alerts, coupons or offers to send, when, and in which context. Cloud-based analytics and predictive modeling applications will be used for further fine-tuning of alerts, coupons and offers as well. The ROI of each campaign, even to a very specific audience, will be measurable. Companies investing in cloud-based contextual advertising systems include Apple, Google, Greystripe, Jumptap, Microsoft, Millennial Media, Velti and Yahoo.

Exploring the Framework of Me Marketing and Context-Aware Offers

A few years ago, a student in one of my MBA courses in international marketing did their dissertation on cyber foraging and contextual mobile applications’ potential use for streamlining business travel throughout Europe. As a network engineer for Cisco at the time, he viewed the world very systemically; instead of getting frustrated with long waits he would dissect the problem and look at the challenges from a system-centric view. The result was a great dissertation on cyber foraging and the potential use of Near Field Communications (NFC) and Radio Frequency Identification (RFID) as sensors to define contextual location and make business travel easier. One of the greatest benefits of teaching, even part-time, is the opportunity to learn so much from students.

I’ve been following this area since, and when Gartner published Me Marketing: Get Ready for the Promise of Real-Time, Context-Aware Offers in Consumer Goods this month I immediately read it. Gartner is defining Me Marketing as real-time, context-aware offers in grocery stores. Given the abundance of data on transactions that occur in grocery stores, Gartner is predicting this will be the most popular and fastest-growing area of context-aware offers. The formula for Me Marketing is shown below:

The four steps of the Me Marketing formula are briefly described as follows:

Consumer Insight and Permission – The first step of the framework and the most difficult from a change management standpoint, this requires customers to opt in to receiving alerts, coupons, offers and promotions. The best retailers also have invested heavily in security and authentication technologies here too.

Delivery Mechanism and In-the-Moment Context – The real-time offer engine is used to determining which coupons, offers and promotions are best suited for a specific customer based on their shopping patterns, preferences and locations.

Select Best Offer – Next, the real-time offer engine next defines a very specific product or service offer based on location, previous purchase history, social media analysis, predictive and behavioral analysis, and previous learned patterns of purchasing.

Redemption – The purchase of the item offered. Initial pilots have shown that less frequent yet highly relevant, targeted offers have a higher redemption rate. It is encouraging to see that early tests of these systems show that spamming customers leads to immediate opt-outs and in some cases shopping competitors.

A Short Overview of Contextual Advertising and the Cloud

Cloud-based systems and applications are necessary for retailers to gain the full value that contextual advertising can provide. This includes the social context, with specific focus on aggregation and analysis of Social CRM, CRM, and social media content, in addition to behavioral analytics and sentiment analysis. It also includes the previous browsing, purchasing, returns and prices paid by product for each customer. Cloud-based integration architectures are necessary for making contextual advertising a reality in several hundred or even thousands of retail stores at the same time.

Geographical data and analysis is also essential. RFID has often been included in cyber foraging and contextual advertising pilots, in addition to NFC. As Global Positioning System (GPS) chip sets have dropped in price and become more accurate, companies including Google, Microsoft and Yahoo are basing their contextual advertising platforms on them. Finally the activity or task also needs to have a contextual definition.

Combining all three of these elements gives the context of the customer in the retail store. The figure below is from Three-Dimensional Context-Aware Tailoring of Information. This study also took into account how personas are used by companies building cloud-based contextual advertising systems. The taxonomies shown in the figure are used for building personas of customers.

There are many pilot projects and enterprise-wide system tests going on right now in the area of cloud-based contextual advertising. One of the more interesting is an application suite created entirely on Google App Engine, Android, and Cloud Services. The pilot is explained in the study Exploring Solutions for Mobile Companionship: A Design Research Approach to Context-Aware Management. The following figure shows a diagram of the suite. This pilot uses Cloud to Device Messaging (C2DM) which is part of the Android API to link the Google App Engine server and Android client. Google will most likely add more depth of support for C2DM as it plays a critical role in contextual system development.

Benefits of a Cloud-based Contextual Advertising Platform

For the customer, cloud-based advertising systems over time will learn their preferences and eventually impact the demand planning and forecasting systems of retailers. This translates into the customer-centric benefits of products being out of stock less. In addition, customers will receive more relevant offers. The entire shopping experience will be more pleasant with expectations being met more often.

For the retailer, better management of product categories and more effective gross margin growth will be possible. Having real-time analytics of each coupon, offer and promotion will also give them immediate insights into which of their selling strategies are working or not.

For the manufacturer, the opportunity to finally understand how customers respond at the store level to promotions, programs including the results of co-op funds investment and pricing strategies will be known. The manufacturers who partner with retailers using these systems will also have the chance at attaining greater product differentiation as their coupons, offers and promotions will only go to the most relevant customers.

References:

Me Marketing: Get Ready for the Promise of Real-Time, Context-Aware Offers in Consumer Goods Published: 24 December 2012 Analyst(s): Don Scheibenreif, Dale Hagemeyer

Tor-Morten Grønli, Ghinea, G., & Bygstad, B. (2013). Exploring Solutions for Mobile Companionship: A Design Research Approach to Context-Aware Management. International Journal of Information Management, 33(1), 227. http://www.sciencedirect.com/science/article/pii/S0268401212001259

Tor-Morten Grønli, & Ghinea, G. (2010). Three-Dimensional Context-Aware Tailoring of Information. Online Information Review, 34(6), 892-906. http://www.emeraldinsight.com/journals.htm?articleid=1896452

Dec 18

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First Steps to Creating a Cloud Computing Strategy for 2013

2013 will be one of the most pivotal years for cloud computing because trust in these technologies is on the line.

Expectations are high regarding these technologies’ ability to deliver business value while reducing operating costs. Enterprises’ experiences have at times met these high expectations, yet too often are getting mixed results. Managing cloud expectations at the C-level is quickly emerging as one of the most valuable skills in 2013. The best CIOs at this are business strategists who regularly review with their line-of-business counterparts what is and isn’t working. These CIOs who are excelling as strategists also are creating and continually evaluating their cloud computing plans for 2013. They are focusing on plans that capitalize the best of what cloud computing has to offer, while minimizing risks.

CIOs excelling as strategists are also using cloud computing planning to punch through the hype and make cloud technologies real from a customer, supplier and internal efficiency standpoint. Lessons learned from these cloud computing planning efforts in enterprises are provided below:

Cloud computing needs to mature more to take on all enterprise applications, so plan for a hybrid IT architecture that provides both agility and security. This is a common concern among CIOs in the manufacturing and financial services industries especially. As much as the speed of deployment, customization and subscription-based models attract enterprises to the cloud, the difficult problems of security, legacy system integration, and licensing slow its adoption. There is not enough trust in the cloud yet to move the entire IT infrastructure there in the majority of manufacturing companies I’ve spoken with.

Reorganizing IT to deliver greater business agility and support of key business initiatives will be a high priority in 2013. The gauntlet has been thrown at the feet of many CIOs this year: become more strategic and help the business grow now. Cloud is part of this, yet not its primary catalyst, the need to increase sales is. IT organizations will increasingly reflect a more service-driven, not technology-based approach to delivering information and intelligence to the enterprise as a result.

Recruiting, training and retaining cloud architects, developers, engineers, support and service professionals will be a challenge even for the largest enterprises. There isn’t enough talent to go around for all the projects going on and planned right now. State Farm Insurance has 1,000 software engineers working on their mobility applications for claims processing and quoting for example. And they are hiring more. Certifications in cloud technologies are going to be worth at least a 30 to 50% increase in salary in specific positions. This is very good news for engineers who want to differentiate themselves and get ahead in their careers, both financially and from a management standpoint.

Measuring the contributions of operating expense (OPEX) reductions is going to become commonplace in 2013. From the cloud computing plans I’ve seen, OPEX is being tracked with greater accuracy than in any other year and will be a strong focus in the future. The capital expense (CAPEX) savings are clear, yet OPEX savings in many cases aren’t. Cloud computing’s greatest wins in the enterprise continue to be in non-mission critical areas of the business. This is changing as cloud-based ERP systems gain adoption within businesses who are constrained by monolithic ERP systems from decades ago. Plex Systems is a leader in this area and one to watch if you are interested in this area of enterprise software. SaaS is dominating in the area of lower application costs and high user counts, which is the Public Computing Sweet Spot in the following graphic:

Source: 2013 Cloud Computing Planning Guide: Rising Expectations Published: 1 November 2012 Analysts: Drue Reeves, Kyle Hilgendorf

Start building a SaaS application review framework including Service Level Agreement (SLA) benchmarks to drive greater transparency by vendors. Gartner forecasts that the SaaS-based cloud market will grow from $12.1B in 2013 to$21.3B in 2015, with the primary growth factors being ease of customization and speed of deployment. CIOs and their staffs have SaaS frameworks already in place, often with specific levels of performance defined including security and multitenancy audits. SLAs are going to be a challenge however as many vendors are inflexible and will not negotiate them. At a minimum make sure cloud service providers and cloud management platforms (CMP) have certifications for ISO 27001 and Statements on Standards for Attestation Engagements (SSAE) No. 16, as this shows the provider is making investments in availability, security and performance levels.

Create a Cloud Decision Framework to keep technology evaluations and investments aligned with business strategies. Business and application assessments and the vendor selection process need to take into account application requirements, role of external cloud resources, and how the RFI will be structured. These process areas will vary by type of company – yet concentrating in application requirements goes a long way to reducing confusion and forcing trade-offs in the middle of a review cycle. The following is an example of a Cloud Decision Framework:

Source: 2013 Cloud Computing Planning Guide: Rising Expectations Published: 1 November 2012 Analysts: Drue Reeves, Kyle Hilgendorf

Mitigating risk and liability through intensive due diligence needs to become any cloud-based companies’ core strength. Regardless of how the HP-Autonomy litigation is resolved it is a powerful cautionary tale of the need for due diligence. And let’s face it: there are way too many SaaS companies chasing too few dollars in the niche areas of enterprise software today. A shakeout is on the way, the market just can’t sustain so many vendors. To reduce risk and liability, ask to see the financial statements (especially if the vendor is private), get references and visit them, meet with engineering to determine how real the product roadmap is, and require an SLA. Anyone selling software on SaaS will also have revenue recognition issues too, be sure to thoroughly understand how they are accounting for sales.

Design in security management at the cloud platform level, including auditing and access control by role in the organization. One manufacturing company I’ve been working with has defined security at this level and has been able to quickly evaluate SaaS-based manufacturing, pricing and services systems by their security integration compatibility. This has saved thousands of dollars in security-based customizations to meet the manufactures’ corporate standards.

Bottom line: 2013 is the make-or-break year for cloud in the enterprise, and getting started on a plan will help your organization quickly cut through the hype and see which providers can deliver value.

Dec 4

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Roundup of CRM Forecasts and Market Estimates, 2012

Showing signs of growth through 2013 and beyond, the latest round of CRM forecasts illustrate how quickly behavioral and predictive analytics, greater usability, integration with social media and mobility are transforming this market.

Even with the most usable, easily learned CRM systems, enterprises at times struggle with adoption rates however. That problem has venture capitalists very interested in finding the next Salesforce.com, which a few have told me will look more like Facebook than a traditional CRM application.

Facebook’s future is going to be defined by how well they manage their migration to mobility, and the same holds true for CRM. Today there are 110 CRM applications in the Apple App Store and 47 in the Android App Store. Gartner predicts an exceptional growth rate of 500% by 2014 for mobile CRM. For CRM vendors to get there from here, they need to make usability and streamlined user experience a high priority.

Key take-aways from the latest CRM forecasts and market estimates are provided below:

According to Gartner, Salesforce.com’s worldwide CRM market share was 16.7% in 2011, second only to SAP. Gartner is predicting Salesforce.com will be the leading CRM vendor worldwide by 2013.

SAP continues to be the worldwide leader in CRM software sales, with Salesforce.com ascending to second place according to the latest available data. Oracle was displaced by Salesforce.com in 2011, a trend Gartner and independent analysts have predicted will accelerate through 2013. The latest market share analysis of the CRM worldwide market is shown below from the latest available report on market share. Source: Predicts 2013: CRM Goes More Cloud, Becomes an App, Has a New Leader and Changes Name. The following table provides the most recent CRM worldwide market share analysis from Gartner.

The role of CMOs relative to CIOs are changing with respect to who is responsible for defining the needs of an enterprise in the areas of CRM, pricing and channel management strategies. Gartner did a survey on this earlier in the year and found that 72% of the companies have a Chief Marketing Technologist, growing to 87% by 2014. A slide showing how the differences in marketing-led versus IT-led is shown below. You can download the entire slide deck from this location for no charge: High-Tech Tuesday Webinar: Profile of Marketing as a Technology Buyer.

The much-hyped area of social CRM will attain $1B in worldwide sales by the end of 2012, achieving 8% of all CRM spending this year, as Gartner has predicted often this year. Gartner sees the revenue breakout of this market as follows: Bazaarvoice generating $130M; Salesforce (BuddyMedia, Radian6, Chatter, Jigsaw), $120M; Oracle (Vitrue, Collective Intellect, RightNow and Involver), approximately $45M; Lithium, $45M; Jive, $40M and the revenues of approximately 250 smaller vendors with revenues of less than $2M in 2012 comprising the remainder of the market size. Predicts 2013: CRM Goes More Cloud, Becomes an App, Has a New Leader and Changes Name.

Gartner, Forrester and IDC have predicted that cloud adoption rates by CRM subcategory will vary through 2016. All agree Sales applications will see the majority of net new sales on the SaaS platform. Of these research firms, Gartner has the most aggressive forecast of CRM SaaS adoption, projecting 50% of all CRM applications will be Web-based by 2016. Gartner is also predicting 95% of Web analytics applications will be delivered via the Web by 2016, an uplift from the 40% of sales applications delivered via the cloud today. Source: Market Trends: SaaS’s Varied Levels of Cannibalization to On-Premises Applications

30% of sales organizations will issue iPads and tablets as the primary device standard issue for salespeople by 2014. From a personal computing device standpoint, tablets will be the fastest-growing segment, with average annual spending growth of 25% through 2016. Despite this rapid growth, Gartner predicts that by 2015, only 20% of organizations will have launched dedicated mobile applications for customer service use however. Source: Gartner CRM Vendor Guide, 2013.

Gartner predicts that by 2014, public social media networks will be in use by 80% of sales professionals with only 2% adoption rate of social CRM applications in the same time period. Source: Predicts 2013: CRM Sales.

Marketing automation will lead CRM application segment growth with a 10.7% compound annual growth (CAGR) through 2016, reaching a total market value of $4.6B. Sales will continue to be the majority of CRM software revenue reaching $7.9B in 2016. The following table provides an overview of the CRM Worldwide Software Revenue Forecast from 2009 to 2016. Source: Gartner CRM Vendor Guide, 2013.

Throughout 2013, Microsoft will quickly integrate Yammer throughout the entire Office Suite and demonstrate the value of using social graph databases to increase collaboration. Many have questioned the decision by Microsoft to spend $1.2B for Yammer. To see the full value of the acquisition, it’s necessary to get beyond SharePoint and look at the architectural elements of Office itself. Like Facebook, Yammer relies on a social graph database. For Microsoft, this architectural approach means they will move very quickly to the cloud in 2013, and also be forced to modify the Office architecture as well. You can find a presentation from 2011 Yammer produced on their integration strategies at this link: System of Engagement: Yammer Announces Activity Stream API, Open Graph for Enterprise and Yammer Embed

Source: Microsoft’s Changing Social Software Strategy: Yammer, SharePoint and the Role of Cloud Services Within Office

CRM projects lead by consultants and system integrators (SIs) were completed the majority of time for Oracle installations (26%) down from 35% in 2009. 11% of CRM projects completed by consultants and SIs were based on the SAP CRM application suite with 9% based on Microsoft Dynamics CRM. Salesforce.com has continued to rise in this area, with 16% of all projects completed in 2012, up from 10% during 2009. The most common projects were customer service and support at 82%; sales, 74%; customer data, 73%; and marketing, 44%. Projects ranged in size from $500K to over $10M. The following graphic shows the percentage of projects by large external service providers by year.