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Six Reasons Marketing Budgets are on the Rise

CMO Survey Results

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?