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What is the TAM (total addressable market) for B2B marketing software companies? How is this broken down by market segment (e.g. SMB, MidMarket, Enterprise)?
Marketing technology software automates marketing activities. B2B marketing software companies provide marketing automation systems used to generate and qualify sales leads. Marketing departments use the systems to schedule and track email marketing campaigns as well as for mass business to customer communications. The following brief delves into the drivers of interest in marketing automation, a description of the firms investing in marketing automation, estimates for the total addressable market size for B2B marketing software firms and examples of B2B marketing software customers.
Reasons for the interest in marketing automation
A survey conducted by Software Advice to establish why companies buy marketing automation systems revealed that 40% of firms are driven to invest in marketing automation to improve lead management. Specifically, firms need to nurture leads until they are sales ready and to qualify leads to determine when buyers are sales ready. A secondary driver reported by 30% of firms is the need to automate processes like sending emails triggered by customer behavior. The most requested features of these systems are lead nurturing (81%), reporting/analytics (70%) and lead scoring (64%).
Firms that invest in marketing automation
Technology companies form the largest group of buyers at 23%. Consulting firms make up the next group at 11% followed by manufacturing at 8%. Half of these companies typically have less than 50 employees whereas 15% have more than 500. Furthermore, 76% of buyers have annual revenues less than $50 million and around 18% generate revenues more than $100 million.
Total addressable market size estimates for B2B marketing software firms in the united states
The most recent in depth attempt to quantify the market size for B2B marketing automation software is Raab Associates' B2B Marketing Automation Vendor Selection Tool (VEST) Report published in 2015. The report calculated market size by multiplying total installations by revenue per installation for at least 28 vendors which yielded estimates of $1.2 billion for 2014 and $1.8 billion for 2015. The VEST report further provides a breakdown of client numbers and market share percentages for 4 market segments for 2014 as follows:
Market penetration numbers for each segment were:
Examples of B2B marketing software customers
Four top B2B marketing software platforms for 2017 are Hubspot, Act-On, Marketo and Oracle's Eloqua. Examples of each company's customers are highlighted below.
HubSpot customers:
SNP's software services help firms execute technical or commercial changes in business applications. The firm invested in Hubspot to connect with leads better which subsequently increased leads by 69X, revenue by 2X and organic traffic by 10X.
Townsend Security is a data security company that provides corporate data encryption and key management services. The company signed up to Hubspot to enhance its content strategy and experienced 55% growth in organic traffic and 80% growth in leads.
ACT-ON customers:
InsideSales provides on-demand software-as-a-service (SaaS) telephone voice technology tools. Investing in Act-On simplified the company's email management, improved email results and enhanced cohesion between sales and marketing.
Mission Restaurant Supply is a food service equipment distributor. By taking up Act-On the firm's small team with limited resources revamped its marketing efforts and reached its audience with timely messages.
Marketo customers:
Centurylink is a telecommunications company that serves both home and business markets. Using Marketo's lead nurturing and scoring, the company went from 100 leads a month to 2,000 qualified leads a month in 5 years.
Panasonic Systems Communications Company Europe (PSCEU) offers products that help organizations capture, compute and communicate image, voice and textual data. Marketo enabled PSCEU to increase marketing campaign output by 5X and improve marketing output's contribution to revenues from under 10% to 26%.
ORACLE Eloqua's customers:
Cvent is the world's largest provider of online event management, meeting site selection, and web survey software solutions. Investing in Eloqua enabled the company to augment its content marketing thereby increasing monthly readership to 125,000 and sales-ready leads by 325%. Cvent is also expecting $1 million in ad sales from blogs.
Avalara provides sales tax automation services to small and mid-size firms. Eloqua provided the company with relevant targeting and segmentation as well as campaign management resulting in a 45% response rate, 189 net new customers from partner referrals and a $500,000 campaign pipeline.
Conclusion
Estimates for the total addressable market for B2B marketing software companies in the US stood at $1.2 billion in 2014 and $1.8 billion in 2015. The segment breakdown was micro businesses 57%, small businesses 22%, mid-size businesses 16% and large businesses 5%.