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Marketing Budget Survey:
How Do I Plan for 2011?

If the past few years have been a search for a “new normal” in marketing, it appears                   Goldstein Group
marketers think they’ve found it.                                                                      Communications
                                                                                            30500 Solon Industrial Parkway
                                                                                                        Solon, Ohio 44139
That’s the pattern we see in our latest survey of business-to-business marketing                            440-914-4700
executives, conducted jointly between our agency and our partners at Hearst Business        
Media. Together, we surveyed management and marketing executives from across
North America in a November 2010 email survey on 2011 marketing decisions, budget
patterns and priorities.                                                                          Hearst Business Media
                                                                                                        Electronics Group
                                                                                            50 Charles Lindbergh Boulevard
The past few years have seen once-in-a-career shifts brought on by the global economic          Uniondale, New York 11553
collapse and the emergence of new tools such as social media. So it’s not surprising                          516-227-1300
that prior surveys reflected rather significant changes in marketing against this     
backdrop of uncertainty and new media. Now, though, based on opinions from the 86
who responded, 2011 may just be a year of steadied progress rather than wholesale
re-configuration of marketing. From steadier budgets to more uniform responses to
questions about future initiatives, marketers seem to be in a mood to implement recent
decisions rather than search for new answers.

Steady Budgeting for 2011
One needs to look no further than budget spending plans for next year to see evidence
of this. When asked how spending would change next year, 44% reported no change to
budgets, a full 11 points higher than a year ago. Continued recovery is still forecast by
many, with 27% projecting an increase and just 6% pointing to budget decreases.

       How do you anticipate your total marketing budget changed from 2010 to 2011?
                   2010 Forecast                           2011 Forecast

                No Answer                              No Answer
                       7%                                     8%
        Don’t Know                             Don’t Know                   Increase
                    16%       35% Increase                 14%       27%

                       33%    9%                              44%
           No Change            Decrease          No Change

The allocation of traditional to online approached parity in this year’s study, 51%
traditional to 49% online. Two years ago, marketing budgets still were split 60-40
traditional to online. On the traditional side, print advertising and trade shows stayed
relatively constant from last year to this year, and most reported that their spending in
these areas would hold steady. Printed literature and direct mail continued to erode in
priority on the traditional side. In online spending patterns, search engine marketing
and online advertising continue to consume larger portions of the budget. Social media
and online video, the darlings of every conference and trend forecast article, remain
fringe areas of the budget despite the tremendous amount of attention they receive.

               Please identify the marcom tactics you will use in 2011, by noting
                     what percentage it represents of your total budget.
                           2009                                         2011

            Online    40%                              Online     49%
                                   60%                                         51%   Traditional

               Please identify the marcom tactics you will use in 2011, by noting
                      what percentage it represents of your total budget.
                Web Development Costs 8%
                                                 2% Webcasts/Webinars
                    Online Video 1%
                                                                16% Advertising—Print
                  Telemarketing 1%

           Collateral/Catalogs 8%

          Public Relations 7%                                             16% Online Advertising—
                                                                              Banners, Email,
              Social Media 2%                                                 Digital Magazines,
            (blogging, Twitter,                                               Sponsored Microsites
       Facebook, LinkedIn, etc.)

            Trade Shows/Events 16%
                                                               14% Search Engine Marketing—
                                                                    Organic AND Pay-Per-Click
                                         Email 7%
                                                        2% Direct Mail

It’s interesting to note that with all the complaints marketers hear about email fatigue,
spending on email is predicted to maintain the same share of budget in 2011 that it
occupied in 2010; 21% of marketers even plan to increase email spending in 2011.

In fact, areas targeted for increases in spending remained similar to last year, with all
the online tactics targeted for the largest budget increases going forward. Online
advertising, though, defined as banners, digital magazines and sponsored microsites,
dropped from the clear leader last year, with 44% indicating an increase to this line item,
compared to just 27% who plan to add more dollars here in 2011. Leading the pack this
year were web development, with 32% planning to increase this budget, and search
engine marketing close behind at 30%. Marketers seem to recognize that Google, Yahoo
and Bing have become the front door for purchase decisions today, and that search                               Goldstein Group
engine presence is a key driver to getting their company’s fair share of sales.                                 Communications
                                                                                                     30500 Solon Industrial Parkway
                                                                                                                 Solon, Ohio 44139

                                                                                                           Hearst Business Media
                                                                                                                 Electronics Group
                                                                                                     50 Charles Lindbergh Boulevard
                                                                                                         Uniondale, New York 11553

              Please indicate if you expect that tactic’s 2011 budget to increase
                               compared to 2010 funding levels.

                         Online Advertising*                                               44%
                                           Email                           32%
                         Web Development                                  30%
                   Search Engine Marketing                                30%
                               Social Media                             25%
                               Online Video                           22%
                                  Webcasts                            22%
                            Public Relations                        19%
                               Trade Shows                  7%
                           Print Advertising            4%
                                  Collateral                 13%
                                                           9%                         2010
                                 Direct Mail            4%                            2011

                             Telemarketing                7%
                                                   0        10     20       30       40     50
                          *Banners, Digital Magazines, Sponsored Microsites
The responses to a follow-up question on lead quality confirm their understanding of
the value of search engine marketing. When asked to name their companies’ single best
source of quality leads, search engines occupied the top spot this year for the first time,
ahead of the historic favorite, the company’s web site. Marketers seem to be indicating
that they believe success in using search engines to drive traffic will bear fruit more than
most techniques. It’s also interesting to note that the gap between these two techniques
and everything else widened during this year’s survey. Lead quality is defined by search
engines and web presence; nothing else appears to be part of the discussion in a
meaningful way.

              What is your company’s SINGLE best source of lead quality today?

                                       2010                                      2011
                           Web Site                              29%                             20%
                    Search Engines                      19%                                        25%
               Trade Shows/Events                9%                                       8%
               Advertising - Online             7%                                         11%
                        Don’t Know           4%                                            11%                      Goldstein Group
                 Advertising - Print           5%                                 2%                                Communications
                                                                                                         30500 Solon Industrial Parkway
                                 PR             8%                                 4%                                Solon, Ohio 44139
                     Telemarketing         1%                                    1%                                      440-914-4700
                          Webcasts            4%                                  2%                     
                         Direct Mail       1%                                     2%
                              Email          3%                                      7%
                                                                                                               Hearst Business Media
                       Social Media        0%                                    1%
                                                                                                                     Electronics Group
              Directory Advertising         2%                                   0%                      50 Charles Lindbergh Boulevard
                         No Answer            5%                                    5%                       Uniondale, New York 11553
                                       0      10       20        30              0    10     20     30

Quality Trumps Quantity
Among the more stark changes in marketer opinions this year was seen in responses
to the question about the “single most important method” for measuring the impact
of marketing programs. This year and last, “sales increases” occupied the top spot and
became even more critical to marketers, with 36% saying it’s their key measure (30%
in 2010’s survey). But the call for more leads gave way to lead quality this year by quite
a margin; 23% say lead quality is their most important metric, and just 12% say lead
volume is their top barometer.

                        What is the SINGLE most important method you currently use
                           in measuring the impact of your marketing program?

                                              Lead Volume                  12%
                                              Lead Quality                  14%
                                       Brand Awareness    5%
                                       Brand Preference 1%

                                            Sales Increases                              30%
                                      Market Share Gains              5%
                                            Quote Volume             4%
                                                                     4%                             2009
                                                         Other         8%                           2010
                                                   No Answer         4%
                                                                 0    10      20     30         40

 Anecdotally, that’s what we hear from many b-to-b marketers, that the drive for filling
 the pipeline and feeding the sales channel with leads has given way to a concern for “A”
 quality leads. It’s consistent with the growing focus on sales increases as the top metric.
“A” leads, those prospects with active budgets, decision-making authority and near-
 term purchase plans, are the most likely to produce revenue, and therefore companies
 are placing even more of a priority on sifting through the masses to find those true

Marketers also seem frustrated with the quality of the leads they’ve generated this year.
Just 30% say their lead quality is improving, far smaller than the 42% who pointed to
improving lead quality last year. They’re comfortable with lead flow, with 45% reporting
lead flow is increasing, more than last year’s 38%. But they clearly are pointing to the
priority they’re placing on lead quality, and that they feel don’t feel comfortable in their
flow of quality leads.
                                                                                                                                       Goldstein Group
          How are your incoming leads                                           How are your incoming leads                            Communications
             changing in volume?                                                   changing in quality?                     30500 Solon Industrial Parkway
                                                                                                                                        Solon, Ohio 44139
                                               38%                                                                   42%                    440-914-4700
       Increasing                                 45%                       Improving                       30%             
                                            32%                                                              32%
           Same                              35%                                Same                                  46%
                              12%                                                                11%
      Decreasing                16%                                          Declining          7%
                                                                                                                                  Hearst Business Media
                              12%                                                                11%
      Don’t Know        2%                                                 Don’t Know              14%                                  Electronics Group
                                               2009                                                              2009
      No Answer
                          7%                   2010                         No Answer
                                                                                              4%                 2010       50 Charles Lindbergh Boulevard
                        2%                                                                   2%
                                                                                                                                Uniondale, New York 11553
                    0    10     20     30     40    50                                   0     10    20    30   40     50                     516-227-1300

Many marketers discuss the priority they place on lead generation, yet the bulk of
their advertising spend remains centered on impressions or brand awareness buys.
Vertical search engines, such as those offered to the electronics engineering industry
via, exist to drive qualified leads to client sites. However, companies are still
struggling with plotting the uninterrupted path from lead to order, something that’s
always been easier said than done.

Lack of Clarity, Lack of Consensus
The past few years showed clear opinions about what was limiting growth, and what
companies were doing to respond. This year, the picture became muddied, with no
clear diagnosis about growth barriers, and little uniformity on strategies marketers
were adopting.

Last year, there was no equivocation: when asked what barriers to growth were
experienced during 2009, 71% pointed to a “lack of customer spending with us,” about
20 points ahead of the second most popular response, “sales channel challenges.” While
slow customer spending plans still occupied the #1 position this year, far fewer pointed
to customer spending problems (45%), and there wasn’t as much of a gap between the
top three barriers.
               What barriers to growth did your company experience in 2010?

                       Sales Channel Challenges                      28%
                  Problems in Product Launches                        29%
                Insu cient Budget for Initiatives                                   49%
                     Low Price Foreign Products                      27%
Lack of Customer Spending with Us/Competitors                                                        71%
      Ine ective Corporate Strategy/Distractions               21%
                   Unclear Marketing Messages            9%
                                                        7%                              2010
                       Competitor E ectiveness
                                                             17%                        2011
                                                    0   10   20      30     40     50     60    70
The same pattern occurred when marketers were asked what strategies they planned
for 2011 in response to these barriers – a lack of a clear preference as their best response.
There wasn’t much disparity between the top four choices – expand to a new product
line, increase lead generation, expand into a new market, or expand the sales force. Just
14 points separated them. Three of those same choices – expand to a new product line,
increase lead generation, expand into a new market – appeared in the top tier of actions
when marketers completed the survey last year.
                                                                                                                      Goldstein Group
                                                                                                           30500 Solon Industrial Parkway
                                                                                                                       Solon, Ohio 44139

                                                                                                                 Hearst Business Media
                                                                                                                       Electronics Group
                                                                                                           50 Charles Lindbergh Boulevard
                                                                                                               Uniondale, New York 11553

           What strategy(ies) is your company putting in place for growth in 2011?

Expand Into New Sales Lines/Product Lines                                               57%
        Increase Lead Generation Activities                                          52%
                  Expand Into New Market                                          47%
                   Expand Geographically                            25%
                       Expand Sales Force                            26%
          Change Product Feature/Pricing                  15%
   Acquire Another Company/Product Line                   14%
                Add Distribution Channels                    17%                       2010
                                                           16%                         2011
   Change Sales Force Compensation Plan                   14%
              Delete Distribution Channels          5%
                                     Other            9%

                                              0      10      20      30    40     50     60   70

It’s interesting that in each of the past few years, geographic expansion was chosen as
an important strategy by fewer and fewer marketers, declining markedly from 45% in
2009’s survey to just 21% planning this as a strategy for 2011. It’s unclear why that would
be the case, given the tremendous growth opportunities most companies are finding in
Asia. Does that imply these strategies are already showing success and it’s well in hand,
or does it imply companies are rejecting geographic expansion as an effective growth
strategy? We would assume it’s the former.

Sales Channels Settling In
There’s not much movement in plans companies are making in their sales channels.
While a few years ago it was in vogue to talk about “managing channel conflict,” as
Internet sales seemed to threaten the structure of the b-to-b sales force network of
direct, sales reps and distributors, there hasn’t been much movement in the past three
years about how marketers plan to go to market. The boost in online sales is incremental
during the past three years, and when asked about any intention to change channels
more to direct or online, responses and satisfaction with current sales channels have
remained consistent.

                                                                                                              Goldstein Group
                                                                                                   30500 Solon Industrial Parkway
                                                                                                               Solon, Ohio 44139

                                                                                                         Hearst Business Media
                                                                                                               Electronics Group
                                                                                                   50 Charles Lindbergh Boulevard
                                                                                                       Uniondale, New York 11553

                           What sales channel(s) do you sell through today, and
                              how will that change in the next three years?
                                         Today                                                    In 3 years

          Direct Sales Force Only                   22%                                                 11%
                                                 13%                              2010                  8%
   Independent Sales Reps Only
                                               8%                                 2011
  Distributors/Direct Sales Force                    23%                                                   15%
Combination of Direct/Reps/Dist.                                              50%                                                  58%
                                Online                       23%                                                        33%
                      Don’t Know                                                                        8%
                                         0     10       20    30    40       50    60            0    10     20    30    40   50   60

                                  How satis ed are you with the performance
                                  of your overall sales channel strategy today?

                                                                    3.27                       2010
                                                                    3.24                       2011
                                         1          2           3        4         5
                                     Very                                       Very
                                  dissatis ed                                 satis ed

 Global Budget Coverage in Place
 There’s no question of Asia’s rising importance to marketers today. Yet in this year’s study,
 b-to-b planners report only incremental budget changes expected in how they plan to
 cover overseas geographies. With several years under their belts in building overseas
 sales channels and capabilities, marketers by no means think their Asian strategies
 have achieved everything they can. However, they appear to be settling in for slow
 growth rather than dramatic leaps in sales from overseas. For instance, all regions of Asia
 represented 11.7% of budgets for this year for those responding to the survey, and will
 grow to 14.5% of budget next year.

                                  What percentage of your company’s revenues                                                                  What percentage of your marketing
                                    come from various parts of the world?                                                                       budgets were allocated to these
                                                         Asia                                                                                regions in 2010 and what percentages
                                                              14%                                                                                 are you planning for 2011?
                                   Middle East,
                                                                                                                                        North America                              78%
                                                                              73%                                                              EMEA           9%
                                                                                        North America                                                         9%
                                                                                                                                                China      6%
                                                                                                                                                Japan    2%         Goldstein Group
    Where are your materials/messaging (ads,                             Where are spending decisions made for                                           2%        Communications
    literature, web, etc.) created that are used                      international marketing programs (what ads
     to market in international geographies?                           to buy, what shows to participate in, etc.)?                           Taiwan 30500 Solon Industrial Parkway
                                                                                                                                                         2%         Solon, Ohio 44139
                  No answer                                                           No answer                                                         1%                   2010
 All at overseas o ces    11%                                        All at overseas o ces   8%                                                         1%
                       7%                                                                 8%
        Some at U.S.                                                      Some at U.S.                                                    Rest of Asia 1%
       headquarters 6%                                                    headquarters 10%
                                         52%     All at U.S.                                                                                                Hearst Business Media
                                                                                                                     All at U.S.
                                                                                                             57%                                Other 1%          Electronics Group
                          24%                                                                                      headquarters                         1%
                                                                              Mostly at U.S.                                                          50 Charles Lindbergh Boulevard
         Mostly at U.S.
                                                                              headquarters                                                                Uniondale, New· York 11553
         headquarters                                                                                                                                 0     10       20 · · 70     80

                   Your Title                              Company Sales
                No answer                                           Under $1 million
Advertising Executive                                  No answer
                      1%        CEO/President                  11% 4%
  Marketing            7%    25%              $151 million +
Communications 21%                                           16%            $1 to $10 million
                  10%                                 $51 to 12%
            Sales           36%                    $150 million
          Executive                                                  26%
                                  Executive                       $11 to $50 million

Hearst Electronics Group is the largest publisher of product information to the electronics
industry. Its directories, e-newsletters, web sites, magazines, webcasts, inventory access
tools, and databases are invaluable resources for engineers involved in product design.                    Goldstein Group
Hearst Electronics Group is part of Hearst Business Media (HBM), an operating group of the                 Communications
Hearst Corporation.                                                                             30500 Solon Industrial Parkway
                                                                                                            Solon, Ohio 44139
Goldstein Group Communications, a technology b-to-b agency, brings an unusual                   
combination of corporate communications management and engineer-level writing
capability to its national client roster. With deep experience in electronics and industrial
markets, the agency is able to draw on its skills to articulate with impact and clarity the           Hearst Business Media
technical advantages its clients bring to their customers. Unlike other agencies, staff                     Electronics Group
                                                                                                50 Charles Lindbergh Boulevard
members for the most part have built their careers on the corporate side of the desk, rather        Uniondale, New York 11553
than as agency executives, a perspective that results in a higher level of accountability and                     516-227-1300
measurability in the agency’s programs.                                                   


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