How Do You Give Marketing Relief From Spreadsheets?: An Interview With Unica’s Yuchun Lee

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Yuchun Lee and two friends from his days at MIT founded Unica with the aim of using their background in data mining to develop a tool that would solve the paper-pushing nightmare marketers typically find themselves in over creatives and collateral. CRMGuru.com founder Bob Thompson speaks with Lee about how Unica positions itself in the market in this edition of Inside Scoop. The following transcript was edited for length and clarity.

Enterprise Marketing Management

The market

The competition

Bob Thompson

I’m very pleased to welcome to our program, Yuchun Lee, founder and CEO of Unica Corp. Yuchun, welcome.

Yuchun Lee

Thank you. Glad to be here.

Bob Thompson

Today I’d like to explore what’s going on in the marketing-related tools industry. It seems to be a very hot space. Unica’s doing well. I’m hearing your company’s name pop up from analysts and customers as one of the up-and-coming stars of this category, and I’d like to dig a little bit deeper to find out what’s going on and your perspective in the market and Unica.

Yuchun Lee

Sure.



Bob Thompson

To get us started, could you please tell us about your background and why you founded Unica?

Yuchun Lee

I started Unica with two other co-founders—three of us old friends from MIT days. Our background was around the area of data mining and statistics. The technology, itself, is very horizontal. We can apply this technology to many different disciplines. Through the progress of the business, we discovered that marketing—and the challenges that marketers face—is a great fit for this type of technology. We focused the business and oriented the business strategy on providing an end-to-end solution for marketers.

Bob Thompson

When was Unica founded?

Yuchun Lee

Unica was founded back in 1992. Over 12 years ago.

Bob Thompson

Could you bring us up to date on Unica’s current focus? You mentioned marketing. Could you elaborate on specific vertical markets? How do you differentiate in broad terms from other players in the space?

Enterprise Marketing Management

Yuchun Lee

We coin our space Enterprise Marketing Management. We are an enterprise software vendor. The way to think about EMM is that this is an end-to-end platform to help marketers run the entire marketing operation. We discovered that the marketing organization is often the last area to be automated in a company. And we’ve found marketers are doing their day-to-day work in a few hundred Excel spreadsheets scattered all over an organization. They are writing custom code in sequel to manage direct customer communication. In essence, they lack the functional capabilities on the enterprise level to help them get their job done efficiently every day.

Our ultimate goal and vision is to be the leading vendor for marketing software. We are committed to providing an end-to-end platform, so marketers, when they come to work, have a solution they can depend on and work through—one which handles all the different parts of marketing, from customer interactions to customer analysis to marketing operations and resource management. We want to provide a solution that increases the effectiveness and efficiency of all of the different aspects of marketing.

Bob Thompson

So the marketing department’s got a lot of different things that they’re trying to do, and they’re trying to be more efficient and effective just like everybody else. Can you tell us the markets that seem to have the most demand for the tools that you’re offering?

Yuchun Lee

We have over 300 customers worldwide. Our customer base spans a wide variety of industries. Industries that have a high volume of strategic customer interactions would be most interested in this type of technology—for example, financial services, telecom, retail, hospitality. These are all industries where large volume and strategic relationships exist to drive their business.

The way I view it, companies within those industries understand the fact that marketers and marketing organizations, in general, are really the strategic driver of CRM initiatives. These companies know that the place within an organization to understand the customer, and leverage customer insight, is marketing. These companies are looking to marketing to coordinate all right customer treatment at every stage of the lifecycle. We find that companies that understand the need for strategic marketing are the ones that recognize the importance of EMM as an infrastructure to support marketing.

Bob Thompson

The types of verticals you mentioned, and the marketing challenge that you’ve talked about already, is not exactly a new idea. Why has it really taken off in the last decade? Given that there are other vendors competing in this space with you, what really distinguishes Unica as you go to market and try to capitalize on this demand?

Yuchun Lee

There is a pendulum of rediscovering the customer every decade or so. And you’re absolutely right: The idea around this type of solution is not new. What we found, though, is that in recent years, there have been several major trends driving the market to adopt this type of solution. No. 1 is, clearly, a much higher level of competition generally within any industry. The expectations of the customer, in turn, are shifting. Expectations are being raised across the board in terms of how customers want to be treated.

Second is, really, the Internet and the proliferation of channels. Twenty-five years ago, you could put an ad into one of the major TV stations and really cover 60 percent of the viewing audience, but today there are a lot of micro channels. There are tons of ways to reach your customer. And then, the Internet comes about toward the end of the 1990s and really blows this out to a completely different level. That level of cross-channel complexity, I think, increased the need for automation and consistency to a level where manual effort is just not going to cut it, anymore. One thing we don’t want to forget is also Moore’s Law, right? Five years ago, computers were too expensive or too slow to handle the volume of data that we need to extract valuable information about our customers. The convergence of these trends, I think, is helping drive adoption of marketing technology.

Bob Thompson

How do you differentiate Unica vs. other players that are trying to go after the same opportunity?

Yuchun Lee

Well, there’s no lack of noise around the whole CRM space, in terms of vendors handing marketing, sales and service functionality. But, frankly, we never believed there was a CRM market, as a single technology category. We believe CRM is a strategy, first and foremost, and it is supported by a large variety of technologies. And within the marketing area, there’s quite a bit of depth that’s needed to provide an end-to-end marketing solution. Some of marketing’s needs span well beyond what traditional CRM provides.

So, for example, if you think about branding and brand management as a function within marketing, it’s not handled by the traditional view of CRM. Another area is marketing operations, managing the development and approval of marketing creatives that are generated in the organization—none of those are sort of customer-related, if you will. Our view of the world is slightly different, so there’s a strategic difference between what we view as the end-to-end solution that companies are looking for and what some of the CRM competitors are looking to provide.

The market

Bob Thompson

Let’s hit one more question about the industry. Do you have any statistics you could share with us about the size or growth of the market in which you’re competing?

Yuchun Lee

There are definitely different sets of numbers coming from different analysts and industry analysts, but let me first caution that these estimates are pretty inexact. As you know, it’s an inexact science. So it really depends on where you draw the boundaries.



Bob Thompson

It depends on how you define and count the beans, right?

Yuchun Lee

Exactly—and which analyst, with what vantage point. IDC, for example, has pegged the marketing-automation market at about $1.6 billion for this year. Other firms, such as Forrester, have a smaller figure—probably in the range of $350 (million) to the half-a-billion-dollar range. I would say, in nearly all the cases, they view the marketing area as one of the fastest growing areas in enterprise software. IDC, predicts, for example, a 9.5 percent growth rate for 2005 through 2008.

Bob Thompson

That’s certainly what I’ve been hearing.

Yuchun Lee

And Gartner reported, I think, in December that the market growth is at 13 percent annually. We see this as a pretty fast-growing space, simply because we’re coming from a pretty low, un-automated base.

Bob Thompson

Let’s get down where the rubber meets the road, so to speak. Can you give us a quick example of an application—of real customers using Unica? What were the business problems? What did they do? What did they get out of it?

Yuchun Lee

Let me give you a couple examples. One is sort of inward-looking, dealing with the operation of marketing. The other one is sort of outward-looking, dealing with how a company uses our solution to interact with their customers. On the inward-looking front, we have a customer who is one of the largest credit union banks in the United States. Before their creative services group used our solution, they used a manual process to generate marketing creatives and collateral in the marketing organization and then shared them between the various branches and other parts of the organization that needed to use the collateral. They had people, literally, printing stuff out, handing the physical copies of those draft creatives to be reviewed by legal and by management. Hundreds of items were being processed in their organization at any one time, and you’d see things getting dropped. You’d see projects get delayed. You’d see errors get made and legal liability ensue from the mistakes.

With our system, the creative services group is able to have a near paperless transaction to manage the approval process—the project management aspect of this process. Automation has streamlined the process and greatly minimized the errors generated—and increased the velocity of the business. That’s one example of inward-looking.

Bob Thompson

What was the value they got out of doing all of this?

Yuchun Lee

They are still in the process of quantifying it. But there’s no question that they have gotten value from the solution, already. And some of our customers are not too keen about sharing with the world what they’re able to gain. But let me give you one example of somebody who can share with you their return on investment, if you will. BMO Bank of Montreal, one of the largest banks in Canada, recently won the NCDM Excellence Award. BMO is a longtime Unica customer. I think they have been a customer since 1999. They have a new credit card called Mosaik, which enables customers to customize their credit card. It lets customers pick their own rates, their own reward plan, their special features associated with the card—such as the fee structure. It’s a very one-to-one personalized credit-card option that they offered to their existing cardholders and new customers.

Our solution’s basically the backbone behind a multi-wave campaign to support this program. Using Affinium, BMO has experienced a 10- to 15-percent increase in share of market, and new customer accounts increased by 20 percent. BMO has also dropped overall customer attrition by 30 percent and realized yearly average revenue savings of $38 million. In addition, customer satisfaction scores increased, and BMO’s time to market for getting campaigns into production decreased by 400 percent. These are pretty significant numbers.

The competition

Bob Thompson

Obviously, marketing is a hot topic. There are companies like Oracle and Siebel and SAP that are talking about it. SAS, of course, has been in the industry for a long time, and there are many others. So you’re competing in a landscape that’s got a lot of players. One of the questions we get a lot at CRMGuru is, “How do I know whether I should buy from a specialty company, such as Unica, or buy from somebody that offers me a lot of different functions in one sweep?” What advice can you give our members?

Yuchun Lee

The first thing that is important here is that some of the vendors you’ve named are large software companies, but they’re actually very small marketing automation and EMM companies—meaning that the number of people and the resources that they put behind this particular market is very small. To some effect, Unica is one of the largest, if not the largest, vendor, in terms of investment in this area, because 100 percent of our energy is in this area. And as a result of that investment, we’re able to go very deep into solving the key challenges of marketing and providing all that a marketing organization needs, well beyond all the competitors you mentioned. In addition, one of the things we found is that there are software suite vendors out there, such as SAP and Oracle, that would like people to believe that the only and best solution for an organization is to standardize all the enterprise solutions onto a single platform, such as theirs.

In reality, what we’ve found is the dynamism of business is incompatible with that mental model. I mean that if your business changes rapidly, you cannot rely on a single vendor. For all practical purposes, most companies have multiple vendors. They have a heterogeneous IT environment. Our solution, actually, is known in the market to function extremely well in the heterogeneous IT environment. Frankly, it presents the best option for any organization, in terms of moving forward, because you know what? No matter how they change, they will be able to move our software to new platforms and continue to utilize the software.

Back to the last question about advice for executives planning to invest in a marketing solution. In general, the ROI in this space is astounding, and there is a lot of low-hanging fruit. We have provided many ROI examples, as have other vendors in this space. Executives and CMOs should take a look at them. They’re proven. For a dollar investment, you can get $5 worth of no-brainer return. I think people should really understand the business case and start to allocate budget for marketing software.

Once you have decided to invest here, I would recommend organizations really drill deep, to ensure they need to select a vendor that can fit the bill. Because, just on a surface level, there are too many vendors in this market who claim they have something, when, at the end of the day, they don’t.

Bob Thompson

So do your homework.

Yuchun Lee

Do your homework. Drill in. And differentiate the hype from the reality. Unica’s reputation in this space is impeccable, and we’ve found that whenever somebody digs in, they’ll know why we’re the best solution.

The last thing, which is very important for success, is that people need to realize that acquiring an EMM solution is not a technology initiative. It is a change initiative for the organization. There’s business process change, organizational change. You may turn your organization into a segment-oriented company. There may be other types of initiatives that need to go hand in hand with this. I would encourage any executive who takes on this challenge to become the driver and the agent of change within the organization and not view this as a technology purchase, because it really isn’t.

Bob Thompson

That’s great advice. Final question: Can you give us a vision for Unica, say, five years from now? Where are you trying to take the business?



Yuchun Lee

We see quite a bit of growth within the EMM space. In the next 12 to 18 months, for example, we see ourselves continuing to build out the capabilities for the demand-generation suite and, also, marketing resource management within the suite. We see ourselves continuing to build out a very strong ecosystem for our business.

Again, this is not just about technology. What we bring to the table are customer communities that one can interact with to share knowledge and ideas among all the different companies who are trying to do the same thing. We also are bringing forward a partner ecosystem to help grow the business.

But, five years from now, to be honest, Bob, I think I would want Unica to be known for the success of our customers. I want people, when they are asked, “Oh, are you going to pick Unica for marketing software?” to answer, “Yeah. If you pick Unica, you’re going to be successful in this endeavor.” That’s what we want to be known for. That’s what we want to be branded as. Five years from now, my hope is that Unica will continue to be the leader in this space and provide the software for the marketing organization. We will continue to invest 100 percent of our energy into that area.

Bob Thompson

Thank you very much, Yuchun. You seem to be on the right path. I’ve been watching your progress for the last several years, and it seems as though the story just gets better and better. So, congratulations to you, and thanks for spending time with me on Inside Scoop.

Yuchun Lee

Thank you. My pleasure.

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