Monday, September 20, 2010

Planning Season for 2011: Trickier than Usual

This is my 8th year of analyzing and guiding on tech marketing budgets and allocations and it will be the most dynamic that I have witnessed.

Here are the facts and factors, and some guidance thoughts.

First, the Macro-Economics of revenues and marketing budgets:

Based on IDC's annual Tech Marketing Benchmarks Survey (completed 9/10), marketing budgets for the very largest tech vendors will increase by 3.7% in 2010. (I estimated that it would be 3.5% back in 3/10; and so our forecast was very good.)

For the first half of 2010, revenues for tech vendors grew faster than IDC had expected when we began the year. Today, our current forecast is for 5.8% WW IT revenue growth. My sense is that this better-than-expected sales volume in the first half of 2010 took the marketing-planners and budgeters a bit by surprise; and so the marketing investment level for the year will be somewhat behind the revenue growth. Unless of course revenue growth slows in the last quarter. These types of changes are what keeps us analysts in business :--)

Bear in mind that this "snap-back" in budgets for 2010 follows on the 8.3% decline in budgets during 2009. This means that the average large tech vendor is operating with a budget that is still below the 2008 level.

Guidance thoughts on these macro numbers: I don't see that marketers are investing fast enough into this recovery. Marketing leaders tend to keep investment at or higher than revenue growth and so many are behind the curve. Yes, I am seeing some big new campaigns and launches but where is the pent-up spend from 2008 and 2009?

Second, the Micro-Economics of marketing budgets and mix allocations:

What's happening within the whole cost envelope of Marketing in 2010? This envelope that has increased in size by a whopping 3.7%?? Here, we are looking at all discretionary spend (programs) and all fixed spend (marketing staff + overhead).

Advertising spending for traditional (print and broadcast) media has declined by 43% in 2010.
Digital program execution has grown by 53% in 2010.
Can we pause for just a moment and think about those numbers? These are very large changes. The 2008-2010 recession just threw huge quantities of fuel on the fire of the on-going marketing media shift.

On the "People" side of the ledger: not much change in 2010 with one exception. Marketing Operations staff grew by 35% from its 2009 basis. This is great news in our opinion: the "M.O." function that we have called for since 2004 continues to gather great momentum and it is now the fourth largest job-role category in tech marketing.

Guidance thoughts on these Micro-numbers. Are the "within-mix" shifts that we are observing finally impacting the macro view? Or in other words, is the "less expensive" digital and social media finally putting a dent in the top line marketing budget number? I think the answer is YES and this is a big shift in trend.

We have seen it coming... but the 2010 numbers have, in my opinion, made a permanent dent in the shape of the marketing mix.

What's the plan now for tech marketers? How do you execute within this accelerating transformation ? More on that in my next post.

Rich Vancil