2013 Tech Marketing Budget Trends: 3rd Platform Companies and Products Lead the Growth

Yesterday, IDC's CMO Advisory Service had our annual Tech Marketing Benchmark Webinar. This study goes out to close to 100 senior lever marketing executives and represents the largest B2B Tech companies in the world (this year the average company revenue was $9.1B.) The webinar was packed with great information and was a great success. However the overlying question each year is where will marketing budgets sit at the end of the year and what direction are they moving. The results are some good news mixed with trends that point to hard work that marketers need to do around their budgets. 

Good News: More Organizations are Increasing their Marketing Spend Than Decreasing

As seen in the graph below, across the entire tech industry a net of 15% of companies are increasing marketing spend versus those decreasing. While it may not always feel like it, there are marketing budget increases out there to be had!

Challenge for Marketers in 2014: Finding the Right Areas that Should Receive More Marketing Budget

Despite the fact more companies across the tech industry are increasing marketing budgets than decreasing, budgets at the aggregate levels are flat to slightly negative. IDC expects Marketing budgets to decrease 0.5% year-over-year from 2012 to 2013. So that leaves us with an interesting juxtaposition, more companies are increasing budgets than decreasing, but at the aggregate weighted level the data shows a slight decrease in overall budgets. Three reasons we are seeing this:

1. The largest companies within the Tech Industry are seeing flat to declining marketing budgets due to continued transformation within the industry. This brings the weighted levels down. 
2. Hardware companies (as seen in the above graph) are the only sector where more companies are decreasing marketing budgets than increasing. Companies within this sector are typically larger and the Hardware industry is feeling more affects from the industry's transformation. 
3. 3rd Platform companies and other high growth product lines and business units are driving much of the revenue growth and in turn are receiving much of the increases within marketing budgets. These companies are smaller, so they add the "n" value of companies increasing, but do not affect the weighted average as heavily. 

Illustrating the final point (#3) you can see in the graph below that Cloud Software Vendor's (who are right smack in the middle of IDC's 3rd Platform) Revenue Growth, Marketing Investment Growth, and Marketing Budget Ratio (total marketing budget / total revenue) are all at least 3X  that of their on-premise peers. Some of this can be attributed the size of the Cloud Vendors (typically smaller), but the growth being seen in the 3rd Platform areas is undeniable.

Note: If you would like to discuss cloud vendors marketing benchmarks further please email me at smelnick (at) idc (dot) com!

In closing the 3 budget takeaways we are giving for budgets in 2013 - 2014 are:

1. More companies are increasing (vs. decreasing) marketing spend. (This is good news!)
2. There is not enough "Peanut Butter" to go around... (so an even spread will not work this year)
3. Marketing Investment will inevitably find growth areas: products; markets;  segments; or geos. (So, work hard to find those areas and invest wisely)

Sam Melnick is a Research Analyst at IDC's CMO Advisory Service and manages the entire benchmark survey and study. You can follow him on twitter at @SamMelnick

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The State of Marketing Operations 2013

Companies simply cannot excel at modern marketing without strong Marketing Operations.  These professionals reinforce high performance by strengthening processes, technology, metrics, and best practices.  A recent study by IDC CMO Advisory Service, in conjunction with MOCCA, found that the Marketing Operations function is flourishing and expanding beyond its original charter.

 

Marketing Operations has been a rising star from its inception. I like to compare Marketing Operations to the structural frame of building. Try to scale without steel girders and you get a weak and wobbly high-rise.  Your marketing will also be weak and wobbly without Marketing Operations.  IDC first recognized Marketing Operations in 2005 in its annual Tech Marketing Benchmarks study.  Then, Marketing Operations represented 2.5% of the total marketing staff. The team became a fast-rising star – driven by the need for marketing accountability and the addition of marketing automation.  In 2012, tech companies averaged 4.4% of their staff in Marketing Operations.  IDC believes that the optimal percentage is between 4% and 6% of total marketing staff. Below 4%, a company will lack the necessary operational capabilities for solid management and transformation. Above 6%, a company should examine whether it's time to infuse operational capabilities into other functions rather than holding them in a single role.

IDC's Definition of Marketing Operations:  Internal staff responsible for developing and orchestrating the processes and systems required to enable efficient and effective marketing.  More specifically, marketing operations staff members are responsible for developing and managing the processes to ensure smooth operation of strategic planning, financial management, marketing performance measurement (including dashboard development), marketing infrastructure, marketing and sales alignment, and overall marketing excellence.

In this new study, called Marketing Operations Expands, IDC finds the Marketing Operations function expanding. It has progressed beyond its early charter of planning and resource management to become an important part of lead management and marketing technology among other areas.  More than 70% of survey participants say their role has broadened in the last year and more than 80% say it has become more important. The top six responsibilities for Marketing Automation are: automation, analytics, process improvement, campaign execution, and planning/budgeting. Survey participants, many who are members of MOCCA, the marketing operations professional organization, told IDC that Marketing Operations is also spreading out from its original corporate center to regional teams and beyond its origin in technology companies into new industries.

How should marketing leaders view the expansion of the Marketing Operations role? On the positive side, Marketing Operations can serve as an important and exciting pilot lab for new marketing science initiatives. However, in many organizations, IDC observes that Marketing Operations risks becoming the dumping grounds for not just critical operational tasks, but also for most of the “odd jobs” in the department. Too much expansion, or the wrong kind, results in performance degradation.

For more information on the IDC CMO Advisory Service Marketing Operations Expands research report (which contains important information on organizational structure, skills, job scope, success factors, and much more) check the MOCCA website or contact me at kschaub@idc.com.

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#CMOFact: IDC 2013 Marketing Investment Planner

With 2012 coming to an end, for many businesses planning for 2013 will bleed into the New Year. Marketers are no exception; in anticipation of the planning cycle each year, the CMO Advisory Service publishes our annual Marketing Planner in August/September, developing the B2B tech industry's leading marketing (and sales) benchmarking study. To anyone familiar with the industry, you are probably used to hearing that Marketing is transforming. What is so exciting about our Marketing Planner is we are able to provide specific guidance on changes, challenges, and successes within the industry through incredibly accurate industry data and qualitative information provided by you, the senior marketers. Marketers in turn are able to use this information to successfully plan for the upcoming year.

I’ve taken the liberty of pulling out some key facts below from our report that are particularly interesting or useful. Feel free to share them and remember to follow me on twitteror check out the CMOFact hashtag - we will continue to share some marketing goodness there.

#CMOFact Number 1:  In 2012 the average large B2B Marketing organization is in receipt of a 1.7% budget increase. This is 50% LESS than the 2011 rate.

#CMOFact Number 2:  The Marketing Budget Ratio for B2B tech companies has declined each year from 2009 through 2012. Marketing Investment is not keeping up with revenue growth.

#CMOFact Number 3: B2B Tech CMOs are spending approximately 30% of their budget on digital marketing programs. This is up from 12% in 2009. 

#CMOFact Number 4: For Large Tech Companies, only those in Software (vs Services & Hardware) are receiving increased budgets!

#CMOFact Number 5: The marketing automation train is picking up speed, and fast. Jump on now or prepare to be left behind. This is a new category in our survey and is already at 3.1% of programs budget and 1.6% of staff allocations.

These are just 5 nuggets from the 2013 Marketing Planner. The full version includes a complete overview of the current state of the B2B Tech Marketing it includes; program spend, staffing breakdowns, up and coming technology, and forward looking advice. For your own copy, reach out to Wendy Pemberton at wpemberton@idc.comor find it here. 

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