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Tech marketing budgets lower than expected

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Tech marketing budgets will increase an average of 3.5% this year over last year, well below expectations, according to a new report from IDC

IDC’s ninth annual “Tech Marketing Benchmark Study,” released in a conference call with clients Sept. 13, was based on interviews with 105 senior marketers at technology companies. The interviews were conducted online, by telephone and in person, between May 15 and July 31.

The respondents represent the largest global tech companies, including Hewlett-Packard Co., IBM Corp., Intel Corp. and Microsoft Corp., with total revenue exceeding $850 billion.

In March, IDC released its “Tech Marketing Barometer” study, based on an online survey of 45 tech marketers in January and February that found marketing budgets were expected to increase by 8.0% during the year.

“CMOs now have had half a year or more of actual spend. The average marketing budget has increased 3.5%, which clearly is well below the 8% sentiment they began the year with,” said Rich Vancil, VP-executive advisory group at IDC. He also noted that tech marketing spending is far below average IT global revenue growth of 6.5% for the year.

“When times were normal, the typical relationship of marketing investment to revenue growth was parallel,” Vancil said. For example, in 2008, before the recession hit, IT marketing spending and global IT revenue both grew at about 3.5% over 2007.

In 2009, global IT revenue was down 4.5%, while marketing spending was down 8.3%. Last year, global IT revenue increased 5.8%, while marketing investment increased by only 3.7%.

“Clearly, we’re not out of the woods in terms of CMOs putting a lot more marketing fuel in the fire,” Vancil said.

This year, 52% of all marketing program spending will be focused on awareness-building activities, while 48% will be focused on demand generation, according to IDC.

“During the recession, the focus was more on the demand side, but now it’s shifting more to the awareness side,” said Joe Ferrantino, research analyst at IDC’s CMO Advisory Service.

Digital marketing will make up 26.4% of total marketing spending, compared with 19.3% last year, the survey found. Traditional advertising will make up 13.4% this year, up from 11.9% last year.

“Advertising is increasing, which is not surprising, given that we’re seeing an increase in awareness activities,” Ferrantino said.

Within digital marketing, the top investment areas by tech companies this year are: company websites (making up 31.5% of total digital spending), display ads (21.5%), email marketing (16.4%), search ads (14.9%), social networks (6.0%), search engine optimization (5.9%) and digital events (3.8%).

Although social media is still a very small slice of the marketing pie (making up only 1.3% of total marketing spending), it is growing in importance, Vancil said.

Within social media spending, 55% of marketing budgets goes to staff and 45% is spent on social media programs, including tools and technologies to support social media.

“I don’t think, as marketers, we know the formula yet for social,” Vancil said. “A lot of experimentation is going on, and a lot of us are still scratching our heads, asking ‘what is it doing, is there value, and is there return?’ ”

Vancil said marketers should stay the course, invest in people and hire “social natives”—smart, young people who have grown up with social media personally and professionally.

Another key issue facing tech marketers is brand building.

“I believe that, going forward, brand will become a lot more important in tech marketing, particularly in hardware,” Vancil said, pointing to challenges such as commoditization, slower industry growth and consolidation.

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