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Six Reasons Marketing Budgets are on the Rise

Marketing budgets as a percent of overall firm budgets and as a percent of firm revenues are both on the rise as noted in my prior post. Why are firms spending more on marketing? Here are six reasons I see in The CMO Survey™ data and in my research.

  1. New jobs: Marketing appears to be taking a leadership role in managing social media activities in companies. Given social media spending as a percent of marketing budgets is expected to rise from 7.6% to 18.8% over the next 5 years, this means new funds are flowing toward marketing.
  2. New skills: Companies plan to increase marketing training by 3.7% in February 2012 to 7.2% in August 2012. In particular, I see many companies in investing in programs to build marketing capabilities. A good example is GE’s Experienced Commercial Leadership Program, which develops cohorts of young marketers for the company. Another example is Becton Dickinson’s Marketing Excellence Initiative, which provides non-marketers with a big dose of training in key marketing tools and processes.
  3. New knowledge: Big Data has captured the imaginations of leaders in companies big and small. The ability to leverage information about customers in order to deliver and demonstrate value opens the door for marketers to fill the role as analysts and “data whisperers” as McKinsey calls them. As noted by McKinsey in its Chief Marketing and Sales Officer forum, “Data whisperers are those analysts who can coax meaning and insights from the increasingly sophisticated and massive data sets available today.”
  4. New growth: Experience of the recession reminds leaders that growth is not a certain prospect and that they need to seek out new markets for existing offerings and develop new products and services. Both types of growth are expected to rise over the next year. Currently, marketing plays a leadership role in innovation in only 39% of firms. This means that growth strategies are driven by strategy, finance, or R&D, none of which necessarily has the customer as their primary focus. As these strategies falter, I expect business leaders will recognize that new growth must have a stronger customer focus, which marketing can uniquely provide.
  5. Increasing focus on long-term firm value: Over the last twenty years, there is a clear shift in expectations toward improving marketing’s contributions to the firm over the long run. This means that marketing is no longer viewed as merely a tool for building market share or short-term revenues, but is instead considered a strategic investment in building critical intangible assets, such as customer relationship and brand equity, which produce important long-term profits. As the promise of marketing contributions rises, so does the funding.
  6. New cooperation with sales: In most companies, especially B2B, marketing and sales share the customer management process. In 69% of companies, marketing and sales work on an equal basis. Firm success hinges on finding ways to increase the effectiveness of interactions between these two groups. If marketing plays a bigger role in marketing analytics and social media activities as noted above, this should influence how marketing and sales interact. This requires marketing to figure out how to use Big Data to improve the selling process and to ensure that social media contributes to sales activities. Marketing will likely receive increased funding to do so.

Why do you think marketing is receiving larger budgets?

  1. Frank Reed says:

    There could be a fair amount of desperation fueling the increase in marketing.

    Sales don’t just ‘happen’ and with the economy still in a relative holding pattern companies are finally realizing that the ‘if you build it they will come and buy it’ days are done.

    Marketing has changed so much in that interactivity drives conversions unlike the passive days of ‘placing ads’. The result is the need to play or be passed up by consumers and competitors as well.

    Many are just waking up to what may have been buried in denial or a ‘wait and see’ take on social and the new era of Internet communications. Now decision makers might be using another old tactic (just throw money at it) which gets them in the game but will require plenty of experimentation and waste before they truly settle down, see what this new world order requires and then makevplans to go after it in a more business like manner.

    I know I sound negative and cynical but I see the hesitation that still exists today to do what is necessary to reach customers via the online channel. Not sure what it’s going to take but many need to get off the sidelines and into the game for real.

  2. Christine Moorman says:

    Thanks for the comment Frank. Motives are a hard things to judge. We try to measure these in our research and it is a challenge. However, we can document that firm behaviors have clearly swung in favor or supporting marketing. I agree that the emphasis on social is a part of that change. Marketing for marketing’s sake or marketing for a competitor’s sake is not a good idea, though. Firms need to be sure that they understand who their customers are and then use all means possible to reach and convert them into valuable customers. We’ll see if the trends stay up for the next CMO Survey planned for February. Stay tuned and thanks for your support!

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