IDC projects rise in tech marketing budgets will outstrip rise in IT spending

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Technology companies will increase their marketing budgets by an average 8% this year over last, the largest increase in five years, according to research firm IDC.

In its 2007 CMO Tech Marketing Barometer report, IDC also projects that global IT spending will increase by 6.6% this year.

"The business of tech marketing is costing more and more," said Rich Vancil, VP-executive advisory group at IDC, noting that this is the third consecutive year that marketing spending by technology companies will outpace global IT spending.

"We are advising our clients to continue to scrutinize their costs and to be more rigorous on which costs need to grow and which costs need to go," Vancil said.

IDC found that 65% of the average marketing budget is allocated to marketing program spending and 35% to people spending.

The report was based on telephone, in-person and online interviews conducted in January and February with senior marketing executives at more than 60 technology companies, representing more than $125 billion in revenue.

The report also found that the average marketing budget ratio (marketing spend as a percent of revenue) was 3.0% in 2006.

On the program side, advertising still makes up the largest share of the marketing budget (21.7%), followed by events (19.5%), marketing support and sales tools (15.8%), direct marketing (14.6%), public relations (7.1%), collateral (5.6%), Web (5.1%), research (4.4%), analyst relations (1.9%) and other activities (4.3%).

In advising tech marketers which costs need to grow, IDC recommended that marketers continue to invest in their brands, most talented people and unique campaigns and programs that resonate with the market.

IDC recommended marketers seek out areas of waste and overlap in processes, people and technology, particularly in product lines and field marketing structures within nonheadquarters regions and countries.

"Marketers can cut costs by creating shared service centers or centralizing functions in marcom, PR and AR," Vancil said.

IDC also advised tech marketers to consider integrating their sales and marketing operations functions.

One way to do this is through a "soft merge," which aligns the goals and responsibilities of marketing operations people and sales operations people as they report separately up through the marketing and sales structures, IDC said.

Another way to integrate operations is through a "hard merge," which would incorporate the sales and marketing operations functions into a single organization, according to the report.

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