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Each issue of CMO Close-up features an interview with a CMO, as well as other marketing executives answering that issue's "Big Question."
This week's feature:
Close-up with Laura Howard, CMO, ECI Telecom
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IDC: Tech marketing spending slowing
Kate Maddox
Story posted: September 15, 2008 - 6:01 am EDT
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Tech marketers will increase their marketing budgets this year, although at a slower pace than last year as the economy lags, according to IDC's 2008 Tech Marketing Benchmark study.
According to the study, based on an online survey and telephone interviews with more than 80 senior marketers at technology companies, tech marketers will increase their marketing budgets by 3.5% this year over last.
That figure is down from a 4.0% growth rate projected by IDC earlier this year. It is also down significantly from 6.1% growth in marketing spending by tech companies last year.
“Marketing continues to receive its share of pain as a result of market pressures,” said Michael Gerard, VP-research for IDC's CMO Advisory Practice, pointing to increased pressure on tech companies to implement cost controls in the slowing economy.
The study also found that tech marketing spending this year will lag global IT spending, which will increase 5.5% this year, according to the report. Last year, global IT spending increased 7.1% over 2006.
Marketing budget ratios, defined as marketing spending as a percentage of revenue, are also down this year, dropping an average of 5% to 10% below last year, the study found.
“In addition to short-term budget cuts, a period is being ushered in of more sweeping marketing organizational change,” Gerard said. “Staffing levels continue to be under pressure, and companies are shifting to new staff roles to help increase efficiency and effectiveness.”
In its report, IDC provided some guidance for CMOs at tech companies to help them deal with the challenging economy.
The first step is to look at transforming the marketing organization.
“As we look at marketing organizations, they are far too top-heavy,” Gerard said. “There is too much spending at the corporate level and not enough in the field closest to the prospects and customers.”
The study found that at tech companies with less than $500 million in annual revenue, 59% of the total marketing budget is spent on corporate marketing; 32% is spent on regional marketing; and 9% is spent on business unit marketing.
“As companies increase in size, there is more shifting to the regions, and corporate marketing begins to own less of the budget,” Gerard said.
At tech companies with more than $3 billion in annual revenue, 43% of the marketing budget is spent on corporate marketing; 36% is spent on regional marketing; and 21% is spent on business unit marketing.
“We feel this isn't enough—we'd like to see 50% being owned and spent in the regions,” Gerard said.
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PROVIDE CAMPAIGN MANAGEMENT SUPPORT
Another key piece of advice IDC offered tech marketers is to improve the relevance of marketing by providing more sales enablement and campaign management support.
“Marketing must improve its ability to get the right marketing assets to the right salespeople,” Gerard said.
The report also breaks down the marketing budget spending across programs. This year, events will make up the largest share of the marketing budget (22%), followed by advertising (17%), direct marketing (16%), marketing support and sales tools (14%), digital marketing (12%), PR (5%), collateral (5%), market intelligence (4%), analyst relations (2%) and other (3%).
Within digital marketing, 33% of the budget will be spent on display ads, 16% on search ads, 15% on Web site, 15% on e-mail, 7% on search engine optimization, 6% on events and 8% on other activities.
Respondents participating in the survey were from hardware companies (41%), software companies (40%) and services companies (19%).
The breakdown by company size was less than $500 million in annual revenue (30%), between $500 million and $999 million (12%), between $1.0 billion and $2.9 billion (26%), between $3.0 billion and $9.9 billion (17%) and more than $10 billion (15%). M
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