Most Brands Aren't Budgeting For Innovation

Why Marketing Leaders Must Rethink Their Culture

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Only 11% of marketers set aside a specific budget for marketing innovation efforts, and only 9% make marketing innovation a part of every marketer's budget, according to a recent Forrester survey. Yet 95% of these marketers agreed that they are achieving positive ROI from their innovation programs. Why the disconnect? Mastering marketing innovation is getting harder and harder due to the ever-changing customer landscape caused by digital disruption, perpetually connected customers and shifting customer expectations.

In every industry, digital competitors are taking advantage of new platforms and tools to undercut competitors, get closer to customers and disrupt the traditional way of doing business. In fact, the same survey found that the majority of firms -- 46% of whom generate over $1 billion in revenue per year-- are still in the early stages of innovation maturity. To keep up, Forrester maintains that the only way to compete is to evolve and innovate. But creating an innovation-driven culture is challenging. First, firms must understand the four marketing innovation cultures in order to determine both their current and aspirational state:

Risk-averse This culture typically exhibits "command and control" personalities like those that are in highly regulated industries or have monopolistic power within market segments. Traditionally, they only innovate when forced.

Pragmatist This culture tends to be conservative and consensus driven, which makes it slow to react to changes. Although these organizations' current marketing programs still drive business, they are increasingly at risk from smaller, more nimble competitors. Forrester has found that more than 60% of brands fall into this category.

Experimenter Typically, firms with an experimenter culture are highly focused on innovation to drive differentiation around customer experience but lack a long-term strategy.

Customer-obsessed These firms are defined by their obsession with the lifestyle, needs and wants of their customer and build a culture that is both rare and inherently innovative. Forrester has found that only 3% of brands fall into this category.

What's next after a brand has identified its approach to innovation? Leading innovators don't target where their customers are today but where they will be in the future. With customer technology adoption moving faster than ever before, marketers must accelerate their brand and company through a disrupted, fragmented ecosystem. Marketers can get started by:

Making the business case for innovation and securing C-level support. The key to long-term success for a marketing innovation program is C-level monitoring. Forrester has found that only 20% of marketers receive support from executive leaders when it comes to these types of programs. In order to make a stronger business case for innovation, marketers must consider: a plan to develop organizational leadership; specific marketing innovation budget allowances, either by total or percent of marketing spend; and expected return on investment. One way to maximize productivity is to take advantage of in-house or agency partner innovation labs to brainstorm and ideate "what's next" opportunities. Once strong contenders are identified, conduct pilot market tests, measure results and scale those that gain traction. The results of these pilot programs can be used to demonstrate the need for ongoing funding and support.

Leveraging customer insights to take an innovation-anywhere approach. It's no secret that understanding customer behavior is critical to success. So why do only 40% of brands source innovation ideas from their customers and technology and agency partners? Just as firms would conduct physical store walkthroughs, marketing teams should regularly conduct digital touch-point walkthroughs. By taking the same digital journey as a customer, brands will learn invaluable information about customer experiences, expectations and challenges. In addition, leverage employees who interact with traditional and digital touch points on a daily basis.

Establishing a dedicated marketing innovation budget and holding the team accountable. A dedicated marketing budget is critical to success. Take the Coca-Cola model of 70-20-10, where 70% of the marketing budget is for "now," 20% for "new," and 10% for "what's next" marketing programs. It's also imperative to hold teams accountable by determining the success or failure of each program. The only way the organization will learn what works and what doesn't is to synthesize the insights, end failing programs fast and quickly scale the successes.

Bert DuMars is a VP-principal analyst at Forrester Research serving CMO Professionals.

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