Laura McLellan
Research Vice President
16 years at Gartner
37 years IT industry
Laura McLellan serves CMOs and other marketing executives, sharing how digital strategies are being integrated with traditional marketing. With an extensive background in marketing and information technology services, she can help CMOs understand how companies are using digital marketing technology ...Read Full Bio
by Laura McLellan | March 20, 2013 | 5 Comments
Digital marketing budgets averaged 2.5% of company revenue in 2012, growing 9% in 2013 — and that’s still too low. At a time when 2012 marketing operating budgets were over 10% of revenue, spending only 25% on digital marketing implies some companies aren’t taking the shift seriously enough.
Let’s look at just 3 areas of digital marketing spending. Understand that marketing’s purpose is the same as it has always been – attract, acquire and retain customers in order to grow revenue and profitability. And do that in a way that will bring the highest returns, regardless of marketing (or sales) channels used.
Digital/on-line advertising makes up the largest part of the digital marketing budget, but is a small percent of total advertising, especially for consumer-focused companies. This is not a battle between digital and traditional advertising or inbound vs. outbound marketing (no matter what your agency says) – this is a struggle to get the right content in front of the right buyers at the right time to influence their decision to purchase. Take the time to understand how buyers are changing their behaviors and where they are spending more time on-line – that should inspire more integrated marketing channels, including digital/online advertising.
Corporate website also makes up a large part of the digital marketing budget. As your face to the outside world, helping prospective buyers understand who you are, what you stand for, as well as what you offer becomes increasingly critical. It is also linked to the social and mobile customer experience and digital commerce. It used to be enough to update websites a few times a year, but now has become a continuous process and one you simply can’t underfund. The days of static “website as on-line corporate collateral” are gone forever.
Digital commerce experience is the top priority for increased digital marketing spending in 2013. Multidimensional stories told with the intent of leading a prospect down the buying path and driving a transaction, commerce experiences provide consumers with a sequence of information, experiences (think entertainment and gamification) and channels that draw them into the buying process. Not fully mature yet, but all organizations should be exploring and piloting.
See this free research “Key Findings from U.S. Digital Marketing Spending Survey, 2013” to learn more about these 3 digital marketing activities, as well as others such as analytics, social, mobile, content and search marketing. Based on a survey of 203 marketers from U.S. companies with more than $500 million in annual revenue (average revenue 5B$), it examines how marketers have allocated their budgets, what activities contribute to marketing success and where the largest 2013 investments will be made.
Or attend our free webinar on March 26th Why Digital Marketing Budgets Are Underfunded
Category: Digital Marketing Tags: digital marketing, digital marketing budget, digital marketing investment, digital marketing spending
by Laura McLellan | December 27, 2012 | 6 Comments
Digital marketers will increase investments in social, mobile and analytics in 2013 (see the graphic below). No surprise there. But there are other factors in the digital marketing money trail that matter more —where the money comes from, how it’s used, and how you measure success. We believe 2013 will have to be the year to follow — and to improve — the money trail if digital marketers want higher investments in following years.
Two Parts of the Money Trail That Are Difficult
Digital marketing should be a slam dunk. Who can say no to increased investments that promise to improve the customer experience, shorten the buying cycle, increase retention, and open the door to new customers? Not to mention improve product development, reduce selling expense, and speed up customer service? Well, it turns out that plenty of CMOs, as well as their financial and internal IT counterparts, are moving ahead more cautiously than the hype would suggest.
What holds them back? Let’s look at just two of most commonly expressed reasons – both connected to the money trail:
1. Unclear measurements of success
Oh, there are plenty of digital marketing measurements around. Some are too tactical, some are of questionable merit, some are downright unverifiable. Metrics come from big name external branded sources, from marketing service providers you use to help with digital marketing, and from internal analytics. Some are done via Excel spreadsheets; others from sophisticated marketing analytics software. Providers of marketing software and services have developed their own Return on Marketing Investment (ROMI) calculations.
Our research has shown that marketing is typically measured on revenue and profitability. Problem is, few of the digital marketing measurements companies are using can be rolled up – simply or reliably – to those two metrics (the exception is specific campaigns). So if you want to justify increased investments in digital marketing, you need to find, trust and use better measurements. The riskier alternatives are to formulate and document your own assumptions, or convince management to take a leap of faith.
Conclusion: A clearer, cleaner set of measurements is required. Metrics need to aggregate easily from the tactical to the strategic. They have to show how digital marketing investments support the ways marketing is measured and the company’s business objectives.
2. Sources (and uses) of funding
The marketers we’ve been speaking with tell us they have four major sources of funding for digital marketing investments: cut traditional media spending, especially advertising; pare back other areas of traditional marketing spending (some because of the savings digital marketing can create); obtain increased budget from the business units they support; or convince the CEO and CFO to increase marketing’s budget. Some companies are fortunate enough to have all four sources.
Problems arise when marketers try to manually allocate labor, internal cross-charges and external expense and capital spending to digital marketing projects so they can match spending vs. returns. For example, if you have two people who are doing most of your social marketing, are you going to make them fill out daily time sheets? Try to say which blog they worked on belongs to which business unit? Most company’s financial systems aren’t set up to support all the different types labor and expenses of digital marketing efforts. Should they be? Maybe the “big rocks” – planned, high cost projects or high-visibility pilots – but certainly not the day-to-day efforts.
Conclusion: Someone — the Marketing Operations manager or the financial person supporting Marketing or the digital marketing manager —has to settle on a money trail tracking method that gives enough detail to capture the sources and uses of funding, without being too onerous for the people involved.
A Look Ahead
Gartner surveyed 512 large [500M$ to over 10B$] companies in the U.S. and Europe about their digital marketing investment plans. The graphic below shows results from 244 marketers responsible for digital marketing. This research is just a snapshot in time, and the respondent base may not accurately represent the market in general. Details from the research show significant differences by vertical industry and geography.
What’s Next?
Look for upcoming Gartner research on 2013 digital marketing budgets, on marketing analytics, and specifically on the measurement methods for digital marketing.
Category: Digital Marketing Tags: digital marketing, digital marketing budget, digital marketing investment, digital marketing spending
by Laura McLellan | December 8, 2012 | 5 Comments
What will be different in 2013? Marketing will lead more disruption, create more innovation, drive more change. In short, it will generate a lot more visibility than ever before, all across the organization. Gartner analyst Jennifer Beck predicts that starting in 2013, digital marketing will be one of the top three imperatives on 100% of CEO agendas. See “Predicts 2013: Digital Marketing Pushes Marketing Executives to a More Strategic Role” [subscription required] Leading marketing publications are calling 2013 “the year of the marketer.”
If you’re a marketer, you could argue that marketing has always played a major role in setting business strategy, but most functions outside of marketing wouldn’t agree with you. The most egregious perception is that marketing equals advertising, or marketing is all about promotion. Baloney! It hasn’t been that way in most companies for a decade or longer. It’s so ironic that marketers – acknowledged communications experts – have such a difficult time “marketing Marketing!”
One function that is listening and learning, however, is the internal IT organization. Gartner research with 512 U.S. and European companies this year (1/2 marketing, 1/2 IT managers) validates the trend we started to see some years ago. Marketing is assuming a more significant role in guiding the organization’s strategic direction.
This graphic shows that both marketing and internal IT managers recognize a huge increase in just four years, with the largest increase due to come in 2013-2014.
But what is the opportunity this strategic expectation of marketers presents? Consider:
- Marketing-directed outcomes. You increasingly have significant responsibility for four big outcomes beyond the expected ones of revenue and profitability. They are go-to-market plans, product roadmaps, a customer experience plan , and company-wide strategic plan. 31% of marketing managers in a recent survey said they had total responsibility for strategic planning. Five years ago that would have been unthinkable.
- The spiraling marketing money trail. Marketing spending as a percentage of company revenue currently averages in the neighborhood of 8 to 12%. Marketing is mainly measured on revenue and profitability. In a significant number of companies you are already responsible for a P&L. For executive teams to approve that amount of marketing investment, you know there’s high importance put on achieving strategic business objectives such as “grow the business”!
- An unlikely culprit – digital everything. Digital marketing, digital business, digital commerce, digital analytics – we see digital used as a modifier for almost every aspect of business. Often marketing is the vanguard of digital – if not leading the company, then an active participant in cross-functional teams who are evolving everything from offerings, go-to-market channels, processes and business models. The expected outcome is to acquire and retain customers more effectively, more cheaply, and with more speed.
So let’s all do our part to meet expectations – make 2013 the year your actions raise awareness of marketing’s strategic value and business contributions.
Category: Digital Marketing Tags: digital marketing, marketing strategy
