2014 Tech Marketing Budgets Showing Strength – Led by the Shift to the 3rd Platform

IDC’s CMO Advisory Service recently completed our 12th annual Tech Marketing Benchmark Survey and just last week had our client and participant webinar readout. With the results in, tech marketers should be excited; there are clear signs that marketing is gaining more respect, more responsibility, and more budget! For the first time since 2006, Tech Marketing Budgets will increase at the same rate as revenues (3.5% increases for budgets, 3.7% for revenues.) Coupled with this, the absolute number of companies increasing their marketing budgets continues to rise. Party time, right?

Well, maybe not quite.

The tech industry has hit an inflection point around the 3rd platform (cloud, social, mobile, and big data & analytics.) In fact, IDC is projecting that within the next 5+ years the 3rd platform will cannibalize revenue growth from the 2nd platform. Meaning, not only will 3rd Platform driven products account for all the revenue growth within the tech industry, but they will take market share from what was previously 2nd platform revenue.

What does this mean for marketers? 

A lot actually, tech marketers are in the fortunate (or fortuitous) position of being smack in the middle of this shift to the 3rd platform. Not only are the technologies being marketed transforming, but the day-to-day job of a marketer is being greatly affected. This is because the true impact of this shift is within next generation types of applications, industries – and ultimately – capabilities that the 3rd platform provides. Moving forward every marketer and every marketing organization must be updating skills, technologies, and processes. A lot is at stake and budgets are a clear indicator;  3rd platform marketing organizations are being funded at 6 to 8 times greater than 2nd platform organizations (see image below). The largest tech companies in the world are shifting to the 3rd platform and often (as they should be) the marketing organizations are exerting significant energy to be a large part of this company-wide shift. IDC sees moving to the 3rd platform as mandatory and marketing is no exception.

What can a marketing organization do to make sure they succeed in transforming rather than succumbing to turmoil?

  1. Understand which parts of the business are 3rd platform: These are the areas that should be supported with stronger marketing spend.  These are the areas to integrate new marketing technologies and processes in first. These areas will make or break your entire company. Use this opportunity to position marketing as a driver for the company’s future success!
  2. Invest in 3rd platform staff and programs: Supporting 3rd platform products is key, but marketing also needs to shift the way it operates. This means investing in 3rd platform technologies and skills like: marketing technology, sales enablement, content marketing, and data & analytics. These areas create leverage and efficiencies for the entire marketing organization. In short, putting the right people, in the right positions, with the right tools  gives your marketing organization its greatest opportunity for success. 
  3. Have a plan, but be realistic and be patient: The larger the company the more time should be allowed for this organizational shift to the 3rd platform. Marketing leaders must definitively set the end vision for their 3rd platform marketing organization, but at the same time must have the patience to see the entire process through. The path may be non-linear and there will certainly be failures and misdirection along the way, but despite the time and effort needed, the end results will pay back the marketing organization (and company) many times over. 

If you are interested in how your company’s marketing organization stacks up as this shift to the 3rd platform continues, reach out to me directly at smelnick (at) IDC (dot) com.

You can follow @SamMelnick on Twitter

2014: The year of Digital Marketing…Wait a Second, What Exactly is Digital Marketing?

Or maybe 2014 will be the year of mobile, or the year content marketing. Ok, Ok, I can guarantee one thing, 2014 will be the year of the horse.

While 2014 might not be the year of digital marketing, digital will continue to be deeply important to the marketing organization. As digital spend continues to increase, the focus grows. Despite this, there can be a lack of clarity around the topic. What exactly falls within digital marketing? How much budget is actually being spent on digital? And how does it all meld together?

Let’s dive in.

Digital Marketing Budget Trends:

From 2009 to the end of 2013 digital marketing program spend has increased from 13% to 34% of the total marketing program mix. For 2014 IDC’s CMO Advisory Service expects this to increase to 39% and to 50% in 2016 (highlighted within Kathleen Schaub and Rich Vancil‘s IDC Chief Marketing Officer (CMO) 2014 Predictions). While this level varies depending on sector and size, the upward trend is clear. 

What is Digital Marketing:

At this point all marketers agree that digital is important. That is all well and good, but without a consistent definition around the topic, digital marketing may mean different things to each person or organization. To be successful in building a digital marketing practice, having clear definitions is imperative. This will drive consistency throughout the organization leading to proper tracking and staff allocations.  Below is IDC’s definition of which marketing programs fall within “digital marketing.”

For specific definitions for each area please view IDC’s Worldwide Sales, Marketing, and Market Intelligence Taxonomy, 2013.

Digital as an Organizational Practice:

Defining and tracking digital marketing is important, but the modern marketer understands it must be executed in orchestration with the full marketing strategy. A key guidance for 2014 is to create “systems not silos.” In short, rather than creating another walled practice within marketing (think, advertising vs email marketing, vs events), make digital an organizational practice that spans across all tactics and staff. Separating digital and non-digital marketing will create more complex challenges for the organization. Avoid this approach and make digital a strength across all of marketing.

3 Take Aways:

  1. Digital marketing spend is growing, FAST, it will be 50% of the (multi-billion dollar) B2B tech marketer’s program budget by 2016. 
  2. Work to define digital marketing so everyone in the organization is speaking in the same terms. 
  3. Do not separate digital from the rest of marketing, it is too important to sit on an island. 
Now it’s your turn, what are you planning to do within digital marketing for 2014? What other suggestions do you have for your peers? What did I miss?
Follow Sam Melnick on Twitter: @SamMelnick

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

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.

#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