The new $50 Billion software category

October 1, 2012: 1:50 PM ET

By Al Ramadan and Christopher Lochhead, contributors

"Half the money I spend on advertising is wasted; the trouble is I don't know which half." John Wanamaker, department store magnate (1838-1922)

Al Ramadan.

FORTUNE -- New social, mobile, and cloud technologies are giving both consumers and marketers more power than ever. Today when we have an interest in a product or service we do most of our research, browsing, and buying digitally.  As consumers, we have more ability to dictate how we want to interact with a company's brand, customer support and sales channels. We have more power than ever to find the best prices and service levels. And websites like Yelp, Angie's List, Facebook and Twitter give us a platform to praise and pummel brands as we see fit.

This new technology is creating the biggest change in consumer behavior in a generation. Consumers are demanding compelling and relevant marketing, buying and customer service experiences.  And they want to interact with brands in the context of who, what and where they are, on the computing device of their choice.

Marketers also have more power than ever before.  Every time we make a digital move, we spread big data breadcrumbs for marketers to hoover up. Ever notice how quickly you see ads in Gmail for hotels in Montreal right after you and your friends fire up a thread about visiting La Belle Province? Or how you see ads promoting tickets to see KISS on tour after you "like" the band on Facebook? Savvy marketers are using new big data applications and analytics to capture, study and act upon a rushing avalanche of customer data.

This new customer behavior, coupled with these new software capabilities, have ushered in the "BIG Customer" era. BIG Customer is the emerging label to describe an all-encompassing category of big data based, customer focused technology and the consumers who conduct the majority of their research and buying online.  According to Wells Fargo Securities, BIG Customer technologies could represent more than $50 billion in new software investments over the next ten years.

"We think the BIG Customer represents the convergence of multiple and disparate customer-related technology systems. We think the new approach will result in the inevitable collision of advertising technology, marketing systems, customer-focused engagement apps, sales automation, service & support, commerce and, of course, analytics." writes Wells Fargo Securities Senior Analyst, Jason Maynard, in a new research report.

Christopher Lochhead.

We see 5 seminal drivers of the BIG Customer Era:

1)      BIG customers generate BIG data

Over the past five years we have experienced a massive up-tick in the amount of data available to marketers. According to IDC, the volume of digital content will rise to 2.7 zettabytes of data (equivalent to 2.7 billion terabytes) in 2012.  This includes video, images, files based on social media and Web-enabled workloads.  Just think of all the digital consumer behavior that exists today they didn't less than a decade ago. From liking, posting, thumbing up a song, tweeting, reviewing, recommending, pinning and checking in. Not to mention the explosion in Internet searches, each of which can be a new marketing opportunity.

2)      Monitizing data is the new competitive advantage

The material explosion in BIG customer data creates both threats and opportunities for businesses. Companies that figure out how to turn BIG data into big dollars will gain the upper hand. The BIG Customer Era lets marketers go beyond strategies shaped largely on intuition and opinion polls or Nielsen ratings.  It turns them into data scientists that use digital technologies to make the right offers, at the right time, on the right device to the right customer. BIG customer behavior is forcing marketers to re-imagine advertising, demand generation, revenue acquisition, customer retention, and loyalty strategies.

3)      BIG Customers have BIG power

The strategic shift from analog to digital engagement is empowering customers.  Consumers have powerful access to information about products, services, companies, and people with a swipe of a screen. Today, most consumers spend more time researching products or services online before visiting a store.  Social sharing, crowd sourced ratings, group buying, and other social commerce technologies have upset the marketing and sales process, putting customers in control of what, how, and from whom they want to buy. This has removed buying friction and increased transparency, materially changing the comparison-shopping game.

4)      Mad Men are Dead Men 

There is a $152 billion annual advertising and promotion industry in the US. And it is getting massively disrupted by the growth in digital media consumption and the decline in traditional media. If you're under 30 years old, chances are the only use you have for a TV is to figure out how to get your smart phone video content playing on it.  Never mind the fact that digital video recorders make it possible for people who still watch legacy TV to blast through ads.

This means marketing must shift from being more art than science, to being more science than art.  BIG customer technologies provide new, measureable ways of tracking investments in customer acquisition and retention like never before. New applications, services, and commerce options are delivering the sort of measurements, metrics and sales channels that marketers have been salivating after for decades. Modern software can analyze, target, predict and even suggest the way to deliver the perfect customer experience.

5)      Syndicated Commerce

Just as marketers and publishers have syndicated their content to gain the widest possible audience, the same is becoming true with offers, promotions, and daily deals.

Marketers are looking to go beyond advertising for awareness to digitally acquiring revenue. Correlating the identity, preferences, location, and context of a person can perfect the setup for commerce by providing the right offer, from the right source at the right time on the right device to produce new revenue. The future will most likely look like digital "commerce ads" that are embedded throughout the social/mobile web as CMOs strive to acquire more revenue through so-called performance marketing that is sprinkled around the digital world.  The syndicated commerce approach to advertising makes it more possible to link advertising dollars invested to sales transactions produced.

The BIG Customer Era brings marketers face-to-face with a meaningful new opportunity to drive revenue.  It also creates a $50 billion dollar opportunity for enterprise software companies as they strive to be the arms dealers to companies who aim to score big money from BIG customers.

Al Ramadan & Christopher Lochhead are co-founders and partners at Play Bigger Advisors (www.playbigger.com) http://www.twitter.com/playbiggeradv

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