Thursday, October 3, 2013

2013 Tech Marketing Budget Trends: 3rd Platform Companies and Products Lead the Growth

Yesterday, IDC's CMO Advisory Service had our annual Tech Marketing Benchmark Webinar. This study goes out to close to 100 senior lever marketing executives and represents the largest B2B Tech companies in the world (this year the average company revenue was $9.1B.) The webinar was packed with great information and was a great success. However the overlying question each year is where will marketing budgets sit at the end of the year and what direction are they moving. The results are some good news mixed with trends that point to hard work that marketers need to do around their budgets. 

Good News: More Organizations are Increasing their Marketing Spend Than Decreasing

As seen in the graph below, across the entire tech industry a net of 15% of companies are increasing marketing spend versus those decreasing. While it may not always feel like it, there are marketing budget increases out there to be had!


Challenge for Marketers in 2014: Finding the Right Areas that Should Receive More Marketing Budget

Despite the fact more companies across the tech industry are increasing marketing budgets than decreasing, budgets at the aggregate levels are flat to slightly negative. IDC expects Marketing budgets to decrease 0.5% year-over-year from 2012 to 2013. So that leaves us with an interesting juxtaposition, more companies are increasing budgets than decreasing, but at the aggregate weighted level the data shows a slight decrease in overall budgets. Three reasons we are seeing this:

  1. The largest companies within the Tech Industry are seeing flat to declining marketing budgets due to continued transformation within the industry. This brings the weighted levels down. 
  2. Hardware companies (as seen in the above graph) are the only sector where more companies are decreasing marketing budgets than increasing. Companies within this sector are typically larger and the Hardware industry is feeling more affects from the industry's transformation. 
  3. 3rd Platform companies and other high growth product lines and business units are driving much of the revenue growth and in turn are receiving much of the increases within marketing budgets. These companies are smaller, so they add the "n" value of companies increasing, but do not affect the weighted average as heavily. 
Illustrating the final point (#3) you can see in the graph below that Cloud Software Vendor's (who are right smack in the middle of IDC's 3rd Platform) Revenue Growth, Marketing Investment Growth, and Marketing Budget Ratio (total marketing budget / total revenue) are all at least 3X  that of their on-premise peers. Some of this can be attributed the size of the Cloud Vendors (typically smaller), but the growth being seen in the 3rd Platform areas is undeniable.

Note: If you would like to discuss cloud vendors marketing benchmarks further please email me at smelnick (at) idc (dot) com!

In closing the 3 budget takeaways we are giving for budgets in 2013 - 2014 are:
  1. More companies are increasing (vs. decreasing) marketing spend. (This is good news!)
  2. There is not enough "Peanut Butter" to go around... (so an even spread will not work this year)
  3. Marketing Investment will inevitably find growth areas: products; markets;  segments; or geos. (So, work hard to find those areas and invest wisely)
Sam Melnick is a Research Analyst at IDC's CMO Advisory Service and manages the entire benchmark survey and study. You can follow him on twitter at @SamMelnick

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