Personalisation vendors clamber to course correct

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

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

The pieces of the puzzle

In early 2019, McDonald’s bought personalisation 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:

• In May, 2019 ecommerce search and merchandising vendor Attraqt acquires personalisation platform Early Birds. This move from partnering to purchasing suggests providers see the value of an integrated solution that applies machine intelligence to optimise all aspects of an online shopping experience.
• By year-end, CMS and personalisation engine vendor Acquia announced plans to buy CDP, Agilone. This news reinforces a trend in Gartner’s 2019 Magic Quadrant for Personalisation Engines. CDPs and personalisation engines increasingly overlap. Both can integrate customer-level data from multiple sources—retail POS, ecommerce and more. A personalisation engine uses this data strictly to optimise campaigns, commerce and CX across touchpoints. Yet a CDP applies a marketing lens and supports various use cases.
• Kibo, an ecommerce platform owned by Vista Equity Partners, which already owned Certona, a leader in past years’ Magic Quadrants for Personalisation Engines, bought Monetate, another market leader and Certona’s key competitor.
• Barely a month into 2020, Salesforce completed its acquisition of Evergage. This deal reinforces what Gartner has long known. Personalisation is both a stand-alone tool and an embedded capability, as pointed out in Gartner’s Magic Quadrant for Multichannel Marketing Hubs.

Putting the pieces together

There’s a distinct narrative behind each move.

• Brands buying, rather than leasing personalisation, a capability that could be an integral part of the go-forward business strategy
• Combining a personalisation engine and CDP to aide in data integration, possibly increasing “stickiness” and yielding better personalisation 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 per cent of their marketing budget into personalisation. It’s estimated 44 per cent of personalisation 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 personalisation is risky business. This is especially true if that spend fails to make a measurable impact on revenue growth.

“Gartner predicts by 2025, 80 per cent of personalisation 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 personalisation engines, and
• Sharpens marketers’ ability to deliver measurable ROI in personalisation

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 personalisation 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 personalisation engine operate standalone or will it be consolidated?
• If you’re adding a CDP, will it be operable with third-party personalisation engines?
• If you’re licensing a personalisation 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 personalisation engine fits into your martech stack.
• Use your personalisation 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 personalisation.

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

*This article is reprinted from the Gartner Blog Network with permission.