As the technology industry bounces back, marketers are gradually increasing budgets and marketing programs. Technology companies will increase their marketing budgets by about 3% in the first half of this year, according to IDC's "Technology Marketing Spending and Resource Priorities for 2005" report, issued last month by its CMO Advisory Research service. In 2004, tech marketers increased their marketing budgets by 5.8% for the full year over 2003, IDC said. Of those companies increasing their marketing budgets this year, more than 90% will increase their spending on marketing programs and about 80% will increase their spending on staff.
However, the growth of marketing investment by technology companies does not match the growth in overall IT spending, IDC found. The research company projects global IT spending will increase 6% this year over last.
"There is a disconnect between companies' overall direction and their marketing spending," said Michael Gerard, research director of IDC's CMO Advisory Research. "If your revenue is projected to increase and you're not changing your marketing spend, it means you will fall behind."
One way technology companies are addressing this gap is with marketing performance management systems, which carefully track how every marketing dollar is spent and how these investments perform.
A commitment to marketing dashboards, which measure the efficiency and effectiveness of marketing programs, is a key attribute of technology marketing leaders, Gerard said. "Marketing needs to be more accountable and use marketing performance management (MPM) processes to justify the current investment in marketing," he said.
Culture of measurement
Last month, IDC awarded Cisco Systems and Tektronix Inc. its CMO Best Practices Awards for marketing dashboard development (see case study, p. 33). "These companies developed a culture of measurement within their organizations," Gerard said. "Each of the groups within marketing knew they needed to be accountable for whatever activities they implemented." He noted that Tektronix began thinking about how to measure success "before marketing activities were even implemented."
Cisco Systems likewise implemented a marketing dashboard last year, after recognizing a need to put a formal process in place to measure marketing performance. "Cisco has always been a very data-rich company, but we needed to develop standard terminology for metrics, a process for collection and internal education processes," said Denise Peck, VP-marketing operations at Cisco.
After meeting with Cisco CMO James Richardson and other key constituents within the organization, Peck's team launched a marketing dashboard that included metrics for image and brand perception, lead generation, employee retention and customer satisfaction. "Every organization has a lot of metrics associated with operational performance, customer insight and marketing data," Peck said. "We brought all the key pieces into one place to provide further insight into where we needed to put emphasis and make corrections."
The dashboard forces more accountability and alignment between marketing and organizational goals, Peck said, adding: "When people know what they're being measured on, it brings more clarity." She declined to comment on Cisco's marketing budget, but said there will be no major budget shifts among the media the company uses.
Martyn Etherington, VP-worldwide marketing at Tektronix, agreed that measuring marketing performance brings more accountability to marketing. "It brings clarity of charter, clarity of roles and clarity of responsibility," he said.
One way Tektronix is making its marketing managers more accountable is by tying bonuses directly to sales orders. "Now, marketing and sales have shared goals," Etherington said. Previously, bonuses were tied to companywide goals rather than direct sales orders. "Direct, line-of-sight accountability is becoming a more common practice in high-tech marketing," he said.
Oracle Corp. is another company that will focus heavily on marketing measurement this year.
"It's important to have executive sponsorship," said Robb Eklund, VP-product marketing, Oracle. "Prioritizing this as an operational focus goes beyond our president all the way up to [Oracle Chairman-CEO] Larry Ellison."
Like a number of other tech marketers, Eklund is a proponent of measuring the impact of marketing investments and basing decisions on these determinations. "We can track which programs result in revenue and we can make real-time decisions about the effectiveness of our marketing programs. If we see a program is performing well-such as getting a lot of response on a particular event-we can increase [the] scope of it."
This year, Oracle plans to use advertising, events, direct mail, online and other marketing communications programs.
While Ecklund declined to comment on the company's marketing budget, he did explain the general strategy. "We tend to vary the specific mix depending on the market segment and geography," he said. "In those markets in which we are more mature, awareness programs are not as important, so we will focus more on demand generation. In newer markets and industries, we'll be focusing more on awareness."
A huge focus at Oracle this year will be the CRM market in the aftermath of its long fight to acquire PeopleSoft.
"There will be a lot more `bandwidth' given to it in terms of the programs we're resourcing on the marketing side and integrating those into what the field sales organization is doing," Ecklund said, adding that integration of programs across the organization is a key component of success in technology marketing. "If we change our marketing mix, it is not exclusively a marketing exercise. It is integrated into what the field sales force is executing and product development as well."