Tech Marketing Budgets to Increase 3.5% This Year

IDC Survey Shows Largest Growth Will Come from 'Third-Platform' Companies

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Source: IDC's 2004-2014 Tech Marketing Barometer Surveys
Source: IDC's 2004-2014 Tech Marketing Barometer Surveys

Rebounding after several sluggish years, marketing budgets at technology companies will be up an average 3.5% this year over last year, and revenue will be up an average 3.7%, according to an International Data Corp. study released today.

IDC's twelfth annual "Tech Marketing Benchmark Study" was based on a survey of 101 senior marketers at technology companies, with average revenue of $7.7 billion, conducted in the third quarter.

"This is the first time in eight years -- since before the recession -- that we have seen marketing budgets rising at the same rate of increase as marketing revenue," said Rich Vancil, group VP-executive advisory group at IDC.

"Even when revenue bounced back after the recession, marketing budgets were not keeping pace with revenue increases," he said.

In 2011, revenue at tech companies increased an average 6.5%, while marketing budgets increased by only 3.5%, according to IDC. In 2012, revenue increased by 2.2% and marketing budgets increased by 1.7%. Last year, revenue at tech companies grew by 1.5%, and marketing budgets were down by 0.5%.

"We know for certain that increases in marketing budgets follow increases in revenues. It is not the other way around," Mr. Vancil said.

Mr. Vancil noted that while average marketing budget growth is projected at 3.5%, most of the vendors IDC surveyed are the largest IT companies in the world, providing "second-platform" services -- referring to the second era of IT services such as client-server and Internet [first-platform technology includes mainframe and computer terminals].

"For second-platform companies, revenue growth and marketing budget growth is very thin -- between 2% and 5%," Mr. Vancil said.

"For third-platform companies [cloud, mobility, social business and analytics], revenue growth and marketing budget growth is growing at 10% to 20%," he added. "This is where all the action is in terms of budgets."

As to how tech companies will allocate their marketing budgets, 28% of marketing program spend will be on advertising; 22% will be on events; and 10% will be on direct marketing.

The remainder will go to sales and partner enablement (6%); branding and content (7%); PR (5%); co-op marketing (5%); website (4%); marketing intelligence (4%); marketing technology (4%); social marketing (2%); analyst relations (1%); and other (3%).

Despite the upturn in revenue and marketing budgets, tech marketers still face significant challenges. The study found that 51% of CMOs have been in their jobs for less than two years.

"The bar for the CMO continues to get higher and higher," Mr. Vancil said. "If CMOs aren't demonstrating, very fast, capabilities for social and digital execution, they are not going to make it in this environment -- it is changing too fast. You have to be not just the marcom CMO -- you have to be the digital and technology CMO."

He also said CEOs are recognizing this is a crucial time for marketing, and are willing to put more investment into marketing. "It's marketing's time to rise to the challenge -- to understand the new buyer's journey and radically transform marketing," Mr. Vancil said.

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