Tweet this: Social media important to company performance but difficult to prove

New results from The CMO Survey point to this disconnect. Social media spending is currently 9.4% of marketing budgets and is expected to increase 128% to 21.4% in the next five years (see Figure 1). However, the 351 marketing leaders responding to August 2014 survey overwhelmingly report that proof lags spending and only 15% of marketers report their companies can show the impact of social media using quantitative approaches.

What’s the buzz? Companies experienced a 25% percent increase in sales through the Internet in the last year—from 8.9% to 11.3% of sales. There does appear to be a sizable opportunity in reaching customers through the Internet that underlies this spending push. Consistent with this view, digital marketing, more broadly, is expected to increase 10.8% in the next year, while traditional advertising budgets are predicted to decrease 3.6%. In other words, there is a signal in all this buzz.

Figure 1. Social media spending as a percent of marketing budget

social_media_line_600notitle

Pinning it down: Demonstrating the effect of these spending increases on businesses remains a challenge. Forty-five percent of marketers have not been able to demonstrate this impact at all while 40% have qualitative proof only. Getting that all-important quantitative proof, which only 15% have, is essential to justifying this spending (see Figure 2).

Figure 2. How companies demonstrate the impact of social media spending

social_media_pie3

Doing so will likely require more spending on measuring marketing ROI. Survey results indicate that companies spend only 2.3% of marketing budgets on measuring marketing ROI. It will also require companies to rethink the way they approach such measurement. Survey results also indicate that only 11.9% of companies surveyed use experiments—a method that allows marketers to know with certainty what, whether, and to what degree social media spending impacts performance.

Post By Christine Moorman (70 Posts)

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  3. avatar avatarPiotr

    For what the market was a test? USA and wider range?

  4. avatar avatarChristine Moorman

    The sample for The CMO Survey is currently top marketers at U.S. companies.

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  12. avatar avatarMichael Leander

    Thank you for sharing these interesting results. Although you are surveying a US audience of CMO’s, I think this particular part of your survey is representative for a global audience.

    The key take away here is that brands in general do not spend enough on measuring ROMI. And I don’t think we will see a big change in that behaviour until CMO’s and their teams get on a different remuneration package. They must have skin in the game in order to care more about the results they generate.

    Thanks again for all the good work you do.

  13. avatar avatarChristine Moorman

    Thanks for the comments, Michael. What type of incentive structure do you think is ideal and why? Would you tie a CMO’s pay to performance outcomes or right behaviors? If the former, what are the challenges you foresee and how would you mitigate these in your design?

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