Since 2000, b-to-b marketers have had to adapt to adversity, from the boom-and-bust economy to the effects of the 9/11 attacks to the erosion of trust in corporate America.
They slashed budgets, cut staff, shuttered businesses and restructured operations. The overarching mantra was "Do more with less."
As companies struggled through the recession, they learned to stretch their marketing dollars and come up with innovative strategies to attract and retain customers.
Many used technology to their advantage. While the economy floundered, technology continued to improve, giving marketers new ways to communicate with their target audiences and measure the impact of their marketing efforts.
Online advertising, e-mail, search, CRM and database marketing gave companies more precision in marketing, advertising and customer relations.
At the same time, marketers had to become more accountable to senior management.
Gone were the days of throwing millions of dollars at Super Bowl spots to reach mass audiences. Marketers had to justify every dollar spent, creating new ways to track and measure performance.
With this scrutiny on the marketing department came the rise of the chief marketing officer, or CMO, a job with overall responsibility for corporate marketing efforts.
CEOs weren't the only ones scrutinizing marketing. As e-mail and electronic communications proliferated, the government began to crack down on electronic marketing, and issues of privacy moved front and center.
Through it all, marketers continued to expand their businesses, reaching into global markets and serving new audiences. They also continued to experiment with new technologies, such as cell phones and PDAs.
The following trends from the past five years demonstrate the resilience, adaptability and innovation of b-to-b marketers.
Focus on marketing ROI
One of the most far-reaching impacts of the recession has been an increased focus on proving marketing's return on investment.
As organizations cut marketing budgets and staffs while at the same time trying to boost sales, marketing executives were charged with justifying every expense and finding ways to prove the effectiveness of their marketing investments.
"A driving force of accountability is the fact that measurement and the ability to calculate returns have improved dramatically with the Internet and real-time response measurement capabilities," said Taddy Hall, chief strategy officer for the Advertising Research Foundation.
However, he added, "Accountability is a two-edged sword. An exclusive focus on ROI can cause you to overfocus on the short term and can distort your vision on some strategic issues to drive long-term viability, such as building the value of the brand."
To address short- and long-term marketing objectives, some b-to-b companies have developed marketing "dashboards" that define which metrics to include and give a unified view into the effectiveness of their marketing.
"The dashboard gives better accountability to the marketing organization, and it gives better visibility to the CEO," said Chris Ewert, director of marketing operations at software company Adobe Systems.
"One of the holy grails is: What is marketing's direct impact on the financial performance of the company?" Ewert said. "It is not an easy question to answer."
In an attempt to answer it, Adobe tracks four levels of metrics in its dashboard: marketing activities, such as ad reach and Web site metrics; operational efficiencies, such as cost-per-sale and program-to-people ratios; outcome-based metrics, such as market share and number of leads; and leading indicators, such as brand loyalty and lifetime value of a customer.
"You're starting to see more and more accountability being driven from the C-level down into various organizations," Ewert said. "Marketing is the next frontier for operational improvements and efficiencies."
Marketing still has a long way to go, said the ARF's Hall.
"If you don't have accountable, measurable processes, you have no clue about what to change in the marketing process to improve or optimize programs," he said. "Too many organizations don't have the infrastructure where ROI can be meaningful."
The rise of the CMO
Maybe it's because marketing executives couldn't get any lower than they were in 2001 and 2002 when budgets evaporated, but many observers agree that CMOs at b-to-b companies wield more influence now than they did a few years ago.
"The marketing department in general is in ascendancy, and one of the evidences of that is the frequency with which you are coming across the CMO title in organizations today," said Rick Segal, chairman of HSR Business to Business, a Cincinnati-based advertising agency. The dot-com crash of 2000 discredited branding to some extent, making it synonymous with monkeys, sock puppets and other silliness.
The recession forced many marketing departments to cut staff, and marketing executives were forced to prove-more than ever before-that their expenditures provided a return on investment. This commitment to fiscal discipline, while first viewed as a burden in many departments, has ultimately had the effect of creating a rising respect for marketing among top management.
"Marketing has `professionalized' substantially [in the past five years], and one of the indicators of that is the representation of the marketing function in the C-suite," Segal said.
The CMO Council was expressly created to increase respect for the discipline of marketing. Its mission statement says the organization "is dedicated to advancing the effectiveness, stature and influence of chief marketing executives."
Several large b-to-b companies have named CMOs in recent years, indicating a new respect for marketing in general. Most prominently, General Electric Co. in 2003 named Beth Comstock CMO, a post that had remained vacant for about a decade.
Additionally, other companies have named former top marketing executives as CEOs or COOs. Within this group are Bill Campbell, current chairman and former CEO of Intuit Inc., who is also a former VP-marketing at Apple Computer Inc.; Bruce L. Claflin, president-CEO of 3Com Corp., who was in sales and marketing at IBM Corp.; and John Beystehner, COO of United Parcel Service of America, who was senior VP-worldwide marketing and sales at the company.
Donovan Neale-May, executive director of the CMO Council, told BtoB earlier this year that it's true that CMOs are getting more consideration for the top job at b-to-b and tech companies. "It's certainly happening, but it's not happening at anywhere near the frequency it should," he said.
Embracing electronic communications
The advancement of Internet technologies led to a boom in electronic communications with customers, from e-mail to database marketing to CRM.
While many of the early Web efforts focused on e-commerce, b-to-b marketers have become a lot more savvy about using electronic communications to build relationships with existing customers and target messages to address their needs.
In a recent study by Forrester Research, titled "What B2B Marketers Need From Technology," marketers were asked to rank their top b-to-b challenges. Reaching decision-makers and deepening relationships with existing customers tied for first, with 63% of respondents citing each as a top challenge.
Elana Anderson, Forrester analyst and author of the report, said that "nearly half of b-to-b firms say they will sponsor technology initiatives this year focused on building or expanding customer information systems."
Hewlett-Packard Co. has been at the forefront of using electronic technologies to communicate with customers.
"With search engines, RSS feeds, spam filters, iPods and other technologies, customers are now more in control of the information they receive than ever before," said Scott Anderson, director of enterprise brand communications at HP.
"With that in mind, our strategy is to engage our customers with online interactions and content," he said, pointing to the Web, e-mail, database marketing, broadband and blogs as just some of the electronic tools that HP uses. "In the early `90s, the Web was a hot topic. Today, it is a fundamental platform for doing business."
W.W. Grainger Inc., a 78-year-old distributor of maintenance, repair and operations supplies, is a traditional marketer that has embraced electronic communications to improve relationships with customers. The company sells more than 500,000 products through several channels, including 582 branch offices, a catalog, call centers and its Web site. Online sales made up 15% of Grainger's total revenue of $5 billion last year.
"The Internet-and e-business in general-is a key part of our multichannel strategy," said Len Greski, director of e-business development at Grainger.
Grainger has developed a sophisticated online procurement system that handles ordering, payment and shipping, and integrates into customers' existing purchasing systems.
Grainger also uses electronic communications, such as e-mail and a self-service center on the Web, to let customers know about specific products of interest.
"Our customers are really embracing e-business platforms," Greski said. "They provide a way for the customer to control how they interact with Grainger."
Online advertising goes mainstream
In the last five years, online advertising has been on a roller-coaster ride, from a steep incline just before the dot-com crash to a sharp drop in the early part of this decade, back to a gradual climb of steady growth.
And now, as marketers see the positive results of online advertising and ad technologies continue to advance, online has finally become a mainstay of the marketing mix.
In 2000, online ad revenue totaled $8.2 billion, up a whopping 78% from 1999 revenue of $4.6 billion, according to the Interactive Advertising Bureau. The following year, online ad revenue fell 12.3% to $7.2 billion as the Internet bubble burst.
In 2002, online ad revenue dropped again, this time by 16%, to $6 billion. Since then, the medium has slowly but surely fought its way back, reaching $9.6 billion in 2004, up 33% over 2003.
"Marketers don't ask if they need to be online anymore," said Greg Stuart, president-CEO of IAB. "The question is how to do it effectively and well for their brand."
One of the key drivers of online ad growth is its accountability through tracking technologies and the ability to prove ROI.
"CMOs are demanding that marketing organizations are held accountable for their marketing investments," said Shar VanBoskirk, an analyst at Forrester Research. "The best medium to do that is online. It is very hard to prove ROI on a traditional media buy like TV."
Forrester projected that online advertising will reach $26 billion by 2010, making up 8% of total U.S. ad spending.
Another driver of online advertising has been a broader understanding of how to use the medium for both branding and direct response, said Andy Sims, director of interactive services at SF Interactive, a Butler, Shine, Stern & Partners company.
"Originally, people thought of the Web as a direct response vehicle only," Sims said. "Over the last five years, b-to-b marketers have learned how to use online advertising to reach buyers at different stages of the purchase cycle, including raising brand awareness and purchase intent."
The promise and frustration of e-mail
While the promise of e-marketplaces dominated much of the news coverage five years ago, e-mail soon emerged as a powerful and cost-effective marketing tool.
The medium grew significantly in the early years of the new millennium, particularly as the dot-com bubble burst and companies scrambled to find low-cost means to reach customers and prospects.
E-mail marketing spending has grown from $836 million in 2000 to a projected $3.5 billion this year, according to Jupiter Research.
"E-mail marketing really started to take off," said Loren McDonald, VP-marketing at EmailLabs, an e-mail marketer. "It was considered cheap and easy."
Early on, e-mail marketing messages were often transmitted to the masses. "There were a lot of available lists out there, and whether they were quality lists or not, the response rates were very good," McDonald said.
Over the next few years, e-mail marketers started to recognize that permission and deliverability were important, and they began driving site traffic and capturing e-mail addresses to grow their in-house databases.
After the federal CAN-SPAM Act went into effect on Jan. 1, 2004, many marketers lost faith at least temporarily in the once-popular medium, as companies large and small grappled to comply with the new law.
Analysts say CAN-SPAM has not made a significant dent in the problem. Spam this year will cost about $50 billion worldwide in lost productivity, information technology and help-desk costs, according to Ferris Research.
"It's a problem for direct marketers, people who send out e-newsletters and anyone who sends a large volume of [permission-based] content to the recipient," said Richi Jennings, lead analyst at Ferris Research.
However, e-mail marketing is by no means dead. Return on investment for e-mail marketing tops all other channels except for telemarketing, according to eMarketer.
"Most companies realize now that you can't use one or the other," McDonald said. "You've got to use both together. It is the key way to communicate with prospects and customers. It just takes some work."
Search is on
Search engine marketing has been the biggest advertising success story of the past five years, with staggering growth lifting all interactive advertising.
While virtually nonexistent in 2000, search engine advertising last year accounted for 40% of all online revenue, up from 35% in 2003, according to the Internet Advertising Revenue Report, prepared by PricewaterhouseCoopers for the IAB. Search advertising revenues totaled $3.9 billion in 2004, a 56% increase from 2003.
"When direct marketers find something that works, they can't put enough money into it," the IAB's Stuart said. "That's what happened here. They found something that worked extraordinarily well."
Stuart said search's appeal includes the ability to target, set pricing and find highly relevant customers who are motivated to purchase. Vonage Holdings Corp., a VoIP telecom company, is among the many b-to-b marketers that recognize the power of search, and it has dramatically increased its keyword buys.
"I'd be thrilled to spend more money on search, but we can't do any more," said Vonage CMO Dean Harris. "We've maxed out."
Siemens Energy & Automation is also a proponent. "We've increased our spend on search because we see there is value," said Lesli Smith, director of e-business communications at the company.
The trend in favor of search shows no signs of letting up. According to the Search Engine Marketing Professional Organization, 83% of marketers plan to increase their search advertising investment this year.
The success of the medium over the past few years has also fed mergers and acquisitions, including ad agency Aegis' recent purchase of iProspect for $50 million, and DoubleClick's $58 million purchase of Performics.
"Right now, the market values these companies' skills very highly, and it values their clients, too," said Ken Sonenclar, senior adviser at DeSilva & Phillips.
It's a small world after all
Over the past five years, the globalization of b-to-b marketing has only accelerated. The failed acquisition of Honeywell by General Electric Co. is an example of how increasingly important international markets have become. The deal was derailed not by U.S. regulators but by the European Union in 2001.
These days international business attention is focused not so much on Europe as it is on India and, in particular, on the People's Republic of China. In a scene being played out regularly across the U.S., hundreds of business executives gathered for a morning conference in May in Chicago to hear representatives from Motorola, FedEx Corp. and Caterpillar, b-to-b marketers that have established a beachhead in China.
Michael L. Ducker, exec VP-international and ExpressFreight services for FedEx, spoke at the gathering and explained his company's approach to overseas business this way: "We're a global company that happens to be based in America."
The Chinese market is also playing well in Peoria, Ill., where Caterpillar is based. Stuart Levenick, group president at Caterpillar, echoed Ducker's sentiments. "If you're a global company and you're not in China, you ought to be," he said, adding that his company estimated that 40% of the world's construction opportunities are in China. A key project is building the infrastructure, a highway system in particular.
As Western companies wade into China, they need to use media to reach the new audience. Local Chinese-language newspapers are a key means of communication, but the Western media presence has increased, especially in the past five years, as foreign investment rules have been relaxed. The Asian Wall Street Journal has been published in the Far East since 1976. International Data Group has had a presence in China since 1980, and the company is now helping Reed Business Information's Variety and other publications gain a foothold in the country.
And while U.S. companies parade into China, this marketing road is becoming a two-way street as Chinese companies increasingly target the U.S. Most notably, China-based Lenovo International made headlines with its purchase of IBM Corp.'s PC unit earlier this year. Lenovo will now need to spend marketing dollars in the U.S. "We have to establish the Lenovo brand outside of China," acknowledged Fran O'Sullivan, a former IBM employee and now general manager of Lenovo.
The trade show business shifts from big to small
Comdex, the once unrivaled technology gathering, went from king of the trade shows to defunct in about five years' time. PC Expo went through an iteration or two before it disappeared. And once-large, must-attend shows such as Manufacturing Week have become shadows of their former selves.
One school of thought holds that large trade shows are rapidly fading and that small, targeted conferences is the way that face-to-face media will work in the future.
TechTarget has altered the face-to-face model by not charging attendees. Instead, it closely vets them to make sure that sponsors, which pay the freight within this conference business model, are reaching prospects with the responsibility for buying decisions. CMP Media's XChange conferences take that a step further: They pay attractive prospects to attend.
Earlier this year, the Brookings Institution released a study cautioning municipalities against paying for new conference facilities precisely because trade shows are fading. Those were fighting words for the exhibitions industry.
"With respect to the large trade show, reports of its death are premature," said Adam Schaffer, publisher of Tradeshow Week. For proof, he pointed to his magazine's "Tradeshow Week 200," which found that square footage for the top 200 trade shows increased 3% between 2003 and 2004.
Most b-to-b trade shows slumped in 2002 and 2003, but proponents argued that was because of the effects of the 9/11 terrorist attacks, SARS and a pesky recession. For every Comdex, the trade show industry can point to large shows that continue to thrive, such as the Consumer Electronics Show and ConExpo-Con-AGG.
In another sign of strength, Penton Media CEO David Nussbaum said his company was studying the launch of two large trade shows in the next 12 to 24 months.
Marketers experiment with wireless
With the proliferation of wireless devices, including computers, Internet-enabled cell phones and handhelds over the last five years, marketers have been eager to find ways to market to a mobile user base.
Two key advances in mobile communications have been Research in Motion's BlackBerry device, which just achieved the 3 million subscriber level, and SMS-enabled cell phones, which allow users to send and receive text messages. More than 90% of cell phones are now SMS (short message service)-enabled, Jupiter Research reported.
However, although penetration of wireless devices is growing rapidly, challenges remain to using these devices for marketing.
"In comparison to a medium like the Internet, the page views are too small," said Julie Ask, research director at Jupiter.
Also, she said, "The number of people using browsers to look at content on mobile Web devices is very small."
According to a report released earlier this year by Jupiter, only 23% of cell phone users are aware that their phones provide Web browsing.
"It can be used as a marketing vehicle now, but people have to be able to understand the technology and use it," Ask said.
In an effort to help marketers reach a mobile marketplace, as well as respect users' privacy, the Mobile Marketing Association last month issued best practices guidelines for mobile marketing in association with the Cellular Telecommunications & Internet Association.
The guidelines include best practices for mobile advertising, subscription services, opt-in and opt-out communications, and a glossary of standard terms and abbreviations.
The guidelines state, for example, that approval from the subscriber must be given before marketers can send commercial SMS messages and other content.
A few b-to-b marketers have run limited mobile marketing campaigns. In 2004, FedEx ran an opt-in text message campaign on the Vindigo wireless platform promoting FedEx Kinko's copy and printing centers.
Other industries that have experimented with wireless marketing include restaurants and entertainment.
The government is watching
Marketers have been under increased scrutiny in the past five years as regulators and legislators focused on privacy issues.
The Federal Trade Commission's Do Not Call Registry, introduced in June 2003, has proved highly popular with consumers, with 62 million phone numbers registered to date. It also has severely hampered the telemarketing industry.
Direct Marketing Association President-CEO John A. Greco Jr. recently suggested telemarketing do-not-call issues could soon affect b-to-b marketers more directly. Until now, b-to-b marketers have been largely exempt from impact. "The popularity of the Do Not Call Registry has unfortunately only continued to fuel the states' aggressive push of legislation that would cover b-to-b solicitations as well," he said.
The privacy backlash has also wreaked havoc on e-mail, once the darling of interactive marketing because of its cost-effectiveness. The CAN-SPAM Act, a response to the rise in unsolicited commercial e-mail since the late 1990s, went into effect on Jan. 1, 2004. Some analysts say the law has not had a significant impact in reducing spam and has only made it more difficult for legitimate marketers to advertise through e-mail.
Some blue chip marketers, such as AT&T and Office Depot, suspended or strongly curtailed e-mail marketing in the wake of the new law. Meanwhile, those that continue to use e-mail often have their permission-based marketing messages kept out of in-boxes by spam blockers.
Privacy issues have more recently been exacerbated by the rise in e-mail fraud, identity theft, phishing attacks and stolen data.
Reported by Kate Maddox, Sean Callahan and Carol Krol.