The IDC CMO Advisory Service projects IT vendor marketing budgets to increase by 6 percent across the IT industry in 2004. This indicates a strong turn-around in marketing spending relative to the average 1.7 percent decrease in budgets during 2003. Based on the CMO Advisory's second annual Technology Marketing Benchmarks survey, IDC finds that as marketing budgets rebound, marketing leadership is acting more selectively and strategically in determining where and how to invest these additional monies, and executing a more balanced strategy with respect to brand building and lead generation.
Much of the increased spending is aimed at the objective of brand building. In IDC's survey, 56 percent of respondents indicate that increasing brand awareness is the top marketing challenge for their company. IDC's awareness-demand (A-D) ratio (the portion of each marketing dollar spending on awareness building versus demand generation) is trending upward from $.52 in 2003 to $.57 in 2004, further indicating companies' willingness to increase investment in awareness building.
IDC's research on marketing investment, allocations and measurement has established a number of key performance indicators (KPI) and benchmarks to guide tech marketers through their planning, budgeting, measurement and reporting processes. The marketing budget ratio (MBR) - the percentage of revenue spent on marketing - which now stands at 3.2 percent of revenue across the industry, compared to 3.0 percent in 2003. IDC's study found that software vendors have the highest MBR, spending on average 6.4 percent of revenue on marketing. Hardware companies averaged 3.7 percent while IT services companies spend only 1.1 percent on average. The program-to-people (P-to-P) ratio is an important KPI for measuring the balance between variable and fixed marketing expenditures and the organizational capacity for program execution. The average P-to-P ratio for 2004 is 66 percent for programs versus 34 percent for people, a slight increase from IDC's 2003 results of 65 percent and 35 percent for program and people spend, respectively.
Overall IDC finds that marketing organizations are becoming leaner and more efficient and focused on implementing measurement techniques to gauge the effectiveness of their marketing investments.
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