Tech marketing growth slows

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Hit with the slowing economy and pressure to cut costs, technology companies are decreasing their rate of marketing spending this year, according to IDC's annual tech marketing benchmark study.

According to the report, which was based on an online survey and telephone interviews with 99 senior IT marketing executives, tech marketing spending will be up 6.1% this year over last, a drop from the growth rate projected by IDC in March of 8.0%.

Last year, tech marketing spending grew by 7.5% over 2005.

Also, for the first time since 2004, tech marketing spending will lag global IT spending, which is projected to increase 6.7% this year.

Michael Gerard, director of IDC's CMO Advisory Practice, pointed to several reasons for the slowing growth rate in tech marketing spending.

"Companies are trying to improve their overall operating expenses by implementing cost-control measures," he said, "not just in marketing but in other areas, such as R&D."

Also, "ROI continues to weigh on marketers, and they are leveraging more online marketing options, such as Web 2.0, which are significantly less expensive than traditional marketing costs and are easier to measure."

Finally, he said, many marketers are "doing more with less," such as implementing fewer ad campaigns and taking a more targeted focus with those they do employ.

Another key performance indicator looked at in the benchmark study was marketing budget ratio (MBR), defined as marketing investment as a percentage of total revenue.

Software companies had the highest MBR (5.5%), followed by hardware companies (2.3%) and services companies (1.1%).

The study also examined marketers' awareness-demand ratio. For hardware companies, 51.7% of the marketing budget is spent on creating awareness (the remainder on demand); for software companies, 44.3% is spent on awareness; and for services companies, 61.5% is spent on awareness.

The benchmark report also looked at the breakdown of marketing expenditures. Events make up the greatest share of the marketing budget (19.1%), followed by advertising (17.9%), marketing support and sales (14.6%), direct marketing (13.3%), online and interactive marketing (9.9%), public relations (6.3%), collateral (6.3%), research (5.1%), Web (3.6%), analyst relations (2.2%) and other (1.7%).

This year, IDC broke out online and interactive marketing into a separate category. Last year, Web advertising was included in total advertising (which made up the largest share of the marketing budget at 21.1%), and e-mail was included in direct marketing.

"There has been so much effort by companies to look at their online marketing strategies, we thought it was important to pull it out into a separate category," Gerard said.

Within online marketing, banner ads and sponsorships make up the largest share of the budget (30%), followed by webcasts/podcasts (28%), e-mail marketing (24%), search engine optimization (17%) and other (1%).

IDC recommends several steps tech marketers can take to improve the efficiency of their marketing operations and performance.

The first is changing the orientation from "inside-out," which is marketing from the vendor's perspective, to "outside-in," which is marketing based on customers' needs.

"We don't see enough of marketing from the outside-in, where marketers are listening to the marketplace," said Rich Vancil, VP at IDC's CMO Advisory Practice.

Some of the characteristics of inside-out marketing include an emphasis on positioning, messaging and going-to-market strategies, and heavy use of military jargon, such as "launching" campaigns, "blasting" e-mail and "targeting" the customer.

"Our counsel is to think more about the outside-in—where are your buyers in terms of the cycle and what are they looking for from vendors?" Vancil said.

Another strategy for tech marketers is improving the management and measurement of their channel marketing, IDC said.

"As vendors create and support these channels, they are often not clear what the ROI is," Vancil said.

When asked to rate their current ability to maintain control of and measure marketing investments made with channel partners, tech marketers gave an average response of 2.8 on a scale of one to six.

"In general, IT vendors are moving down the market," Vancil said, noting that developing channels to serve small and midsize business customers will become increasingly important to tech marketers as they look for new audiences to reach.

"As vendors move that way, performance measurement on channel marketing will become more important."

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