IDC: Tech marketing investment climbs

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Tech marketing spending will increase by 7.5% this year, the highest growth rate in four years, according to an August report from research company IDC.

While tech marketing investment will climb this year, it will barely outpace global IT spending, which will be up 7.0% in 2006, IDC found.

"As companies increase their marketing investment-and get approval for marketing budgets-they have to look at how it compares to revenue growth," said Michael Gerard, research director at IDC's CMO Advisory Research service.

"Is your MBR [marketing budget ratio] dropping, even though your marketing investment may be increasing?" he asked clients during an Aug. 24 conference call.

IDC's annual benchmark study of tech marketing investment was based on interviews with 95 senior marketers at technology companies. It found that about 40% of tech companies are seeing declining marketing budget ratios despite an increase in marketing spending. (Marketing budget ratio is defined as marketing expense as a percent of total revenue.)

Software companies will lead the pack in marketing spending this year, increasing their marketing budgets by an average 9.4% over last year, IDC found.

Hardware companies will increase marketing spending by an average 5.4%, while service providers will boost marketing budgets by an average 5.3%.

IDC also looked at how tech marketers will allocate their marketing dollars. The biggest piece of the pie will go to advertising (21.1%), followed by events (19.3%), marketing support and sales tools (17.3%), direct marketing (14.7%), public relations (7.1%), collateral (5.6%), Web (5.0%), research (4.2%), analyst relations (2.0%) and other activities (3.7%).

Another significant finding is that companies are falling behind in investing in technology for marketing.

The average tech company allocates 2.0% to 2.5% of its marketing budget to IT, while IDC recommends an allocation of 5.0%.

Companies are also falling behind in people skills, IDC found.

"The problem is very stark," said Rich Vancil, VP at IDC CMO Advisory Research.

"Tech marketing departments don't have the caliber or level of people they need to become superlative marketers," he said. "Companies need to have the marketing talent to identify and create demand, not just respond to it."

Recognizing this need, tech marketers are beginning to take steps to improve the hiring, training and retention of marketers with the advanced skills needed for the job, the survey found.

The study indicated that 34% of tech marketing organizations plan to conduct a marketing personnel skill set inventory in 2006-07, and 33% are starting or adding to a marketing competency training program.

IDC recommendations

IDC recommends that tech marketers conduct such a basic skill set inventory; develop a "gap analysis" or roadmap to cover the deficit in skills; and involve human resources or outside help to hire and train marketing professionals with proficient skills.

Another major finding from the study is that the three "pillars of marketing" too often stand alone. IDC defines these pillars as: corporate marketing, product marketing and field marketing.

"Much of a CMO's time is spent on processes that are closest to home-overall strategic planning, image and brand," Vancil said. "CMOs need to spend a proportionate amount of time reinforcing the other two pillars-product marketing and field marketing."

He said that over the past two to three years, CMOs have improved performance in corporate marketing functions, including brand stewardship, the development of marketing processes, performance measurement, marketing operations and improving relationships with C-level executives.

However, there is room for improvement in CMOs' role in product marketing and field marketing, he added.

To be effective, product marketers should listen to the voice of the customer, translate that voice into market opportunities from a prioritized list of wants and needs, work closely with product management to design and build the product, and bring the product to market through effective pricing, packaging, support and training, according to IDC.

Effective field marketers have two main priorities-supporting sales and supporting the channel, IDC said.

IDC says marketing needs to do a better job of helping the sales department understand key business and industry issues, help it analyze the potential "share of wallet" by account and help it back out of investing time in accounts that should not be in the product pipeline.

On the channel side, marketing needs to invest time in understanding the operational and marketing capabilities of channel partners and establish a shared baseline of capabilities before performance metrics are created.

"I believe the CMO role will stay but will need to broaden in scope," Vancil said.

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