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Senior
Execs Say Marketing Budgets Will Rise 20%, Jump 27% for Companies that
Measure Effectiveness
By Peter DeLegge
Marketing budget projections for first quarter 2005 are in… and they’re
promising. Research conducted by Blackfriars indicates that companies are
increasing 2005 budgets an average of 20% compared to 2004. Blackfriars
estimates that strong marketing spending will continue into 2005 – double
the growth seen in 2004.
Blackfriars’ analysis found a number of benefits to marketing departments
measuring the effectiveness of their programs. Departments that measured:
- Spent 90% of their
marketing budgets vs. only 67% at non-measuring firms
- Were
more likely to experience greater budget increases
- Were significantly more satisfied with their marketing efforts
(Note: The definition
of “measured” used here refers to any form of measurement, not necessarily
marketing return-on-investment or other sophisticated measures. According
to Blackfriars’ Carl Howe: “The most popular measures are customer
satisfaction and number of sales leads, but some companies use other hard
metrics like increases in sales and profits.”)
“As more companies
begin to see marketing as a quantitative business tool as opposed to a
black art,” observed Howe, “ attitudes towards marketing will improve and
marketing spending will increase.”
Q
& A with Carl Howe:
DeLegge:
Multiple studies underscore the importance of marketing making a case for
its credibility within the organization. Measures used by marketing are
not always known or understood outside of the marketing department. And
marketing is often criticized for having poor process, measures that are
too soft, and indecipherable results. In order to prove its worth,
marketing needs to improve awareness of what marketing does and how it
measures success. What is the challenge for marketers in gaining
executive-level credibility and how can they go about accomplishing this?
Howe: I
completely agree that marketing must prove its worth. I think that’s why
you’re seeing measurement play such an important role. What a CEO wants
from the VP of Marketing is results. Measurement provides that. When the
VP can prove that he or she can deliver a set of business results for some
number of dollars, marketing becomes a simple business decision: “Should I
spend these dollars for those results or should I put them elsewhere for
different results?”
Once
marketing has shown it can deliver a set of objective results, such as a
5% increase in leads or a 100% ROI on marketing spending, the question
becomes “Can you improve those numbers by doing what you do better?” That
is the VP of Marketing's job in running his or her department. In some
companies, there may need to be a lot of transparency. In other companies
(particularly those that outsource some of their marketing work), it may
be fairly opaque. It all starts with a dialog between the CEO and the VP.
DeLegge: How
do you believe marketers can best use tools like the Blackfriars Marketing
Index in benchmarking and establishing budgets?
Howe: The
Blackfriars Marketing Index is a benchmark for marketing budgets that
takes out some of the gambling. It tells you when companies plan to
increase or decrease budgets. It also tells you when companies are
underspending their budgets and thereby providing an opening for a
competitor to take share.
Let's say your CEO just came back from a board meeting where the board
encouraged him to cut G&A expenses by 10%. One of his temptations is going
to be to cut the marketing budget, maybe by more than that percentage to
compensate for other expenses he can't cut. But if you can point out that
Blackfriars just showed that the average marketing budget went up 20% (as
it did for 2005) and that your competitors are planning to overweight
their Q1 spending by another 4%, it provides a counter-argument to cutting
marketing first and worrying about it later.
Blackfriars sets its quarterly index by analyzing the responses of 100
senior business executives to questions concerning marketing budgets,
attitudes, and spending. Respondents represent a cross-section of
U.S.
businesses as tallied by the 2001 U.S. Census. Blackfriars surveyed
executives at the beginning of January 2005; it distributes the
Blackfriars Marketing Index each quarter to provide a benchmark for
U.S.
marketing demand and spending. Blackfriars’ research report Marketing
2005: Optimism Reigns provides in-depth analysis of the survey data.
The report details actual fourth quarter 2004 spending, projections of
budget changes for 2005, analysis of first quarter marketing budgets, and
comparisons of business-to-business, business-to-consumer, and nonprofit
marketing mixes. The report is available for $495 from Blackfriars
–
www.blackfriarsinc.com. |
