Dynamics 365 for Marketing – A Giant Tripped by a Grain of Sand

Microsoft Dynamics 365 for Marketing has finally launched! It has been available for purchase since the first of this week. An awesome platform of modern technology, able to do things not even possible before. How many eager customers have clamored to jump on board this revolutionary marketing #FreightTrain of innovation? My guess…none.

The Product is…

Awesome! Compared to every other Marketing Automation platform out there, this one makes them all look like antiques. Microsoft Dynamics 365 for Marketing is a virtual showcase of everything Microsoft can bring to the table… and most of that, only Microsoft can bring to the table. It is built on the Modern Dynamics 365 UI, it runs on the Common Data Service, it utilizes the Custom Control Framework, it incorporates Azure Customer Insights, it leverages Voice of the Customer and Social Engagement. It makes all other Email-Centric Marketing Automation platforms look naked. More than just Marketing on Steroids, it also includes complete Event Management capabilities. The current list goes on, and the future roadmap is robust.

Who was it for?

Even the simplest of marketing automation platforms have some necessary complexity in order to achieve results. Successful marketing is a blend of Art and Science, and Dynamics 365 Marketing allows for both. But this ability to blend right brain and left brain creates some necessary complexity. So, it is not for the smallest of businesses. Nor is it for a larger business, with very simple needs. The sweet-spot is the mid-sized business, or a division of an Enterprise business, think 50-500 employees. Certainly there will be use cases for smaller or larger businesses, but this is the wheelhouse. It is also better suited for B2B than B2C. Fortunately for Microsoft, there are a ton of businesses that meet this criteria.

The Grain of Sand

“Steve, you seem highly impressed, why don’t you think people will buy it?” Obviously, a tremendous amount of time, energy and resources were brought to bear by the engineering team in building this marvel. We have been engaged with this team for over a year, and have witnessed them methodically craft each aspect of this product to become the New Standard in Marketing Automation. An incalculable number of man-hours went into engineering this marvel… and then an extra 5 minutes was added to determine the licensing model.

Umm….

So I am not exactly sure how this came about. In one picture in my head, I imagine an Intern, we’ll call him Justin, who is called into is boss’ office and told “Go figure out a way to license this new Marketing app, but don’t spend too much time on it, you need to get back to more important things like sorting our partner list alphabetically”. Justin thinks “Hmm.. marketing… maybe I will see how the other marketing apps do this”. A quick scan of the marketing apps that show up in the first page of a Bing search reveals that, many of them are sold based on number of contacts. That makes sense, and 5 minutes later Justin is bouncing back into the boss’ office. “Hey boss, I figured out that marketing app thing, we can base the cost on the number of Contacts”. “Great job Justin! Now get back to something really important, I want all of the pens in my top drawer arranged by color, starting with blue… no… red”.

The Licensing Model

Microsoft Dynamics 365 for Marketing is available to customers right now. Like many of the Dynamics 365 products, it is available as both a standalone application as well as an addon to other Dynamics 365 products. The standalone version costs $1,500/month, for up to 10,000 Contacts in your Database. You can add increments of 5K contacts for an additional $250/month. When purchased as an addon to an existing Dynamics 365 app, the cost drops to $750/month for those first 10K contacts, and the same $250/month for each additional 5K contacts. In both cases you are entitled to send 10 times the number of emails as your number of contacts. Well, this is indeed a pretty simple to understand licensing model. In fact, it is one of the simplest licensing models that Microsoft has for any Dynamics 365 product. It is so simple in fact, that I don’t even need a piece of scratch paper to see that none of my customers could even afford it.

Contacts vs Contacts

Contacts in competing Marketing Automation Platforms are quite different from Contacts in Dynamics 365. Yes, both records indicate a person, but in one case, the only reason the person is there is to market to them. In Dynamics 365 it is very common that the vast majority of Contacts in our systems are not being marketed to, and never will be. CDS promises to add even more non-marketable Contacts to that database from everything else it connects to, like ERP. Thousands of Vendor contacts for example. I have hundreds of Microsoft contacts. You may have customer contacts in your system that belong to your partners or resellers that you don’t market to. Inactive contacts, deceased contacts, competitor contacts, your own employees.. the list is really endless. We have Small Business customers with over 100K Contacts, larger customers could have millions.

Let’s do some math.

Let’s say I want to market to 10K people, which is a lot, and I’m gonna bang them with a message 10 times a month, which is also a lot. I already have Dynamics 365 Sales, so $750/month is a pretty good price for me to be this level of annoying! However, I also have 90K other non-marketable contacts. I obviously can’t just delete them, so I have to apply a force multiplier to my $750 number bringing my cost to $5,250/month. A non-starter. This is the point where the boss at Microsoft’s palm smacks his forehead.. hard. “Justin, you Idiot!”

I may be fat, but you’re ugly, and I can diet.

There is good news here. At least we are not working with a low cost offering that is actually crap. This is an awesome product… with a bad licensing model. Thankfully, this is fixable. I am sure that Microsoft was not counting in their projections that tens of billions of dollars would come in from this. This is a classic unintended consequence of a moronic action. Microsoft is not stupid. Well maybe Justin… and his boss, but everybody else is very smart. Based on their rising stock value, they clearly know how to grow a customer base, and also will recognize impediments to that, like for example an exciting product, that no one is buying. In fact, the simple fix is already within the solution.

How it should have been licensed?

Remember in the first paragraph, in the litany of features I rattled off – there was one called “Customer Insights”. This is an Azure Machine Learning Service that is attached to every Marketing Deployment. What “ultra sophisticated” job does this do? It counts shit. Okay, it does a lot more than that, but counting shit is one of the things it does, in order to do everything else it does. What does it count? Outgoing Emails, Email Responses, outgoing event invitations, event landing page views, etc. It is counting every damn thing. Of the multitude of things it is counting, many of these could be categorized as “Marketing Touch Points”.  You can probably see where I am going here. Dynamics 365 Marketing should be licensed based on the number of touch points. For example, for $750/month, you get 20K touches, or whatever the math is that makes sense.

Associating Cost to Value

The current licensing model has no more relation to the value received, than if Microsoft were to charge based on the number of hairs on your arm. A “Touch Based” model on the other hand, is directly tied to the value, at a one-to-one level. I send you a marketing email, boom, I touched you. I am more than happy to pay for that. Like cell-phone minutes, Touches should also rollover for seasonal businesses. Maybe my touches are lighter early in the year, but in November we blow out all our touches for the Christmas sale, etc. Touches are also what drive Microsoft’s costs for the service, so they are getting a one-to-one return on their cost.

I will now take a bow… {mic drop}.

15 Comments

  1. Nicholas Plant

    Fully agree with Steve’s comments and his proposed marketing model. I hope that Microsoft listens because I would like to crack on and start using the app but am unlikely to do so with the existing license structure. We have about 60K contacts in our database. Only about 10K of them have the necessary qualifications to use our products (they are surgeons). So why do we keep the other 50K – to use a crime drama analogy, so that we can eliminate them from our enquiries. We actively don’t want to end up spamming them to buy something that they can’t use. Plus, we will probably keep a (semi annual) watch on the public registers to pick up when members of the 50K contacts acquire the necessary qualifications and move them over to the 10K bucket. However, that is nothing to do with the marketing app. The only interaction with these 50K for the marketing app will have is simply be that sit in a segment named DO NOT MARKET – we have effectively opted them out – which is, of course, what as responsible marketers we should be doing and which the EU’s GDPR regulations effectively require us to do. Plus as Steve notes – why should I pay for my lawyer, plumber, accountant, contract staff, etc etc etc as part of a marketing app license – its nonsensical.

  2. Ha Steve, then we don’t have the same notion of touch points… I was also including clicks and page visits as touch points…

    As you describe it, it is based on a consumption model exactly as ClickDimensions which is their totally predictable and in my opinion the best option.

  3. Jamie

    A great piece of advice i received once, is that common sense is not common! Your approach smacks of common sense but alas Justin lacks it. The suggestion that you pay based on number of contacts is bonkers not only for the reasons you lay out but also due to the impending GDPR regulations where there is a real chance out of the 100k contacts you have, you can only market to 25% of them as they bothered to opt in.

  4. David

    My suggestion is to charge by number of contacts brought into actual campaigns. This allows customers to have as many contacts as they want and only pay for the ones they will market to. They talk about contacts but what about Leads?

  5. Hi Steve
    As I answered on LinkedIn I fully support your comment regarding the licensing model of Dynamics for Marketing.
    Being a full new solution it’s seems to compete closely with e.g. Marketing Cloud the solution I practiced in the last month and certainly for SME.
    Salesforce has also a very unclear licensing model not a reason why Microsoft has to use an fully outdated model…
    A touch points based model it’s the only viable for SME!
    But as you mentioned in another post Microsoft and the partners are missing Marketing Consultants to fully support the solution…
    Thanks
    Jean-Luc

  6. Really sceptical about your touch points licensing options. It makes the price totally unpredictable… And could quickly become more expensive than based on the number of contacts.
    Moreover Marketers and communication services generaly communicate with every stakeholders.
    Not only customers or leads.

    1. It depends on how you use Contacts, which in CDS, will ultimately include large numbers of non-marketable contacts. I think a consumption model is 100% predictable. If I plan to send an email campaign to a segment of 2,500 contacts, that’s 2,500 touches…

  7. Kyle Garrett

    Amen. I was excited about this product until I saw the licensing model. I also don’t see why it should be priced out of reach for small businesses (I.e. less than 50 employees)

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