Tech Marketing Getting More Expensive, Less Effective

For tech vendors, the cost of marketing and selling is not generating the same returns as yesteryear.

According to IDC’s CMO Advisory Practice, the average marketing budget increase for a tech vendor now outpaces the average revenue return, indicating that every dollar of vendor revenue is becoming more expensive to garner.

Because of this, the global marketing budgets of IT vendors will increase by an average of seven percent in 2006, the greatest year-on-year increase in spending in five years.

Why? Because CIOs and technology consumers of all stripes, have become savvy shoppers, said Rich Vancil, vice president of the CMO Advisory Practice.

“If you bought a PC today verses if you bought a PC 10 years ago, how much smarter are you in that process? A lot smarter, right?,” said Vancil. “We are all smarter consumers when it comes to IT and that’s true for the business consumer as well. And that knowledge brings power in the buying process.”

The trend towards smarter buyers is driven primarily by experience. But tech marketing costs are also increasing because there are more choices today, more marketing channels to address, and longer sales cycles because of more complex solutions.

“If you look at the overall tech industry from the vendor’s perspective it’s a slower growth environment now,” continued Vancil. “Really from 1960 to the year 2000 the industry grew at double-digit growth rates … but now the industry is growing at five, 5.3 percent.”

This means tech marketers have to do more to get less.

“So you’ve got to be marketing on lots of different fronts; so you’ve got more mediums that you need to communicate through; so, if you combine that with fragmenting markets, … it all adds to the cost of that marketing equation,” he said.

The report, 2006 CMO Tech Marketing Barometer: Marketing Leaders’ Formula for Success, analyzes the level and direction of overall tech marketing spending. The study includes information collected from surveys and interviews with senior marketing leadership at 47 hardware, software and information technology services vendors, as well as telecommunications service providers.

The study also compares and contrasts results with IDC’s CMO Advisory 2005 Technology Marketing Benchmarks Survey. IDC surveyed over 95 of the largest and most influential tech vendors, representing approximately $300 billion in total revenue and over $9 billion in marketing spend.