Tuesday, September 21, 2010

IDC: Tech Marketing Budgets Up, But Lag Revenue Growth

Enough being done to prove returns and drive even more investments in 2011?

IDC has just completed their annual Tech Marketing Benchmarks Survey, and the news is good for tech marketing teams.

The latest survey (completed 9/10) reveals that large technology vendors have increased their marketing budgets by 3.7% in 2010 compared to 2009 levels. This is quite a change from 2009 budgets, which declined 8.3% compared to 2008. This increase in marketing budgets is welcomed by stressed marketing executives who dramatically cut spending, campaigns and staff during the Great Recession.

The bad news for marketing leaders is that although the 3.7% growth “snapback” is significant, the average large tech vendor’s operating budget is still below 2008 spending levels.

Shift to Digital
Marketers are still being asked to do-more-with-less, and this is driving a significant change in go-to-market channels. According to IDC, tech firm advertising spending using traditional (print and broadcast) media is declining by 43%, compared to spending growth of 53% in digital programs. For technology vendors, this dramatic reallocation exceeds digital shifts in other industries, but we expect that as the recovery takes hold and digital media makes accountability easier, marketing budgets in other industry sectors will follow suit.

Marketing Growth Lags Revenue Growth
IDC also tracks and compares marketing growth vs. revenue growth, and for the first half of 2010 the survey revealed that IT vendor revenue grew at a healthy 5.8% world-wide, greatly exceeding the 3.7% market spending growth. Prior surveys over the past 8 years indicate that as a key driver of revenue, growth in marketing spending normally precedes revenue growth. However, the opposite is strangely reflected in these latest results.

Did the revenue growth perhaps catch budgeters and planners by surprise, or are marketers not doing enough to tie spending to performance in order to justify more spending? We have seen the later occur in IT spending over the past decade, where IT spending lag behind growth in revenue after the bursting of the technology bubble in 2001, and are wondering if the same will now be true of marketing budgets going forward?

Spending Justification a Requirement?
With revenue growth driving ahead of marketing spending, IDC believes that marketers are not investing fast enough in the recovery, and we agree. But marketers must realize that the playing field has changed, and two recessions in the past decade have resulted in Frugalnomics - changing the way that budget decisions are made by requiring quantifiable return on investment proof-points prior to investments.

To fight budgeting and planning Frugalnomics, marketing leaders need to do a better job convincing frugal executives to spend more on marketing, and proving quantifiable ROI from proposed spending increases and executed campaigns.

Marketing technology vendors and service providers need to do their part, helping marketers quantify the value of proposals to prioritize projects and garner investment, and verify that post-project expected returns were delivered.

The Bottom-Line
It is great news for weary marketers to see the return of marketing spending growth; however, marketers must recognize that the planning and budget strategies of two years ago are no more.

Frugal executives require bottom-line proof that each investment will reap rewards, and marketers must justify spending increases in order to garner their fare share.

The shift to digital media is one way that marketers are doing-more-with-less and driving higher accountability, but more needs to be done by marketers and solution providers to prove that investments in marketing technology, campaigns and resources are driving revenue and delivering bottom-line results.

A summary and insight by IDC on the Tech Marketing Benchmarks Survey can be found at:
http://www.techmarketingblog.blogspot.com/

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