Companies are spending more on digital marketing. The most recent CMO Survey reports that companies will spend 13% more on digital marketing compared to an 8.9% increase in overall marketing spend in the next year. However, marketing leaders report only average or below average contributions of mobile and social investments to company performance.
One reason performance is lagging may be because companies remain focused on digital strategies, not on building a digital marketing organization. A digital marketing organization means embedding digital marketing activities into the very core of the organization. This means that digital marketing activities transform how the company operates, including its culture, its leaders, how it makes decisions, employee training and incentives, cross-functional cooperation, and the role of marketing capabilities.
To examine whether the digital marketing organization is important, The CMO Survey asked marketing leaders to rate the ten indicators in Table 1 in response to the question “To what extent have your company’s digital marketing activities changed the following areas in your company?” where 1=not at all and 7=greatly. Psychometric analysis indicates these items are measuring the same idea and so I created one overall measure to reflect the “digital marketing organization.” Among the 349 companies responding, the mean score is 3.95 (standard deviation = 1.35).
Table 1. Measuring the Digital Marketing Organization
To get a simple view of its importance, I correlated the company’s digital marketing organization score with CMO ratings of the company’s marketing return on investment and ratings of social and mobile contributions to company performance. I compared these correlations to correlations of these outcomes with digital marketing spending. In all cases, as shown in Table 2, digital marketing organization scores were more strongly related—often 2x to 3x times stronger—to social, mobile, and marketing ROI performance compared to digital marketing spend.
Table 2. Digital Marketing Spend vs. Digital Marketing Organization
More sophisticated econometric analysis is necessary to isolate the effects of digital marketing spending versus digital marketing organization on firm performance. However, this analysis does offer simple descriptive evidence that a company’s digital marketing performance is influenced by the strength of its digital marketing organization and that this impact is stronger than digital marketing spend levels.
So, if you want stronger digital marketing performance, build a digital marketing organization.