Tech Marketing Budgets Projected to Increase by 6% With Renewed Focus on Brand Building, According to IDC

FRAMINGHAM, MA – SEPTEMBER 7, 2004 – The IDC CMO Advisory Service projects IT vendor marketing budgets to increase by 6% across the IT industry in 2004. This indicates a strong turn-around in marketing spending relative to the average 1.7% 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% 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. "Successful technology firms will leverage the brand-building expertise of their marketing organization to develop the differentiation required to compete in today's more competitive, slower growth market", said Michael Gerard, research director with the CMO Advisory Service.

IDC’s landmark 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. These KPI’s include the Marketing Budget Ratio (MBR) – the percentage of revenue spent on marketing – which now stands at 3.2% of revenue across the industry, compared to 3.0% in 2003. The Marketing Budget Ratio varies significantly by industry sector, size of company, and channel strategy. IDC’s study found that software vendors have the highest MBR, spending on average 6.4% of revenue on marketing. Hardware companies averaged 3.7% while IT services companies spend only 1.1% on average.

As tech marketers continue to focus on productivity improvements, 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% for programs versus 34% for people, a slight increase from IDC's 2003 results of 65% and 35% 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.

In the study, Marketing Budget Planner 2005: Benchmarks and Key Performance Indicators (IDC #31755), IDC analyzes the level and direction of overall tech marketing spending to help guide IDC clients with their marketing investment and allocation decisions. This study is based on interviews conducted with senior marketing executives at 100 of the leading IT hardware, software and services vendors, representing over $370 billion in IT revenues and more than $13 billion in marketing spending. The study also compares and contrasts results with IDC's CMO Advisory 2003 Technology Marketing Benchmarks Survey and 2004 CMO Tech Marketing Barometer Survey. The Tech Marketing Benchmarks analysis is the cornerstone of the IDC CMO Advisory – a research service that provides analysis and insight to help IT marketers improve the productivity and efficiency of their marketing practice.

For more information about IDC’s CMO Advisory Service: www.idc.com/cmo

To purchase this document, call IDC's Sales hotline at 508-988-7988 or email sales@idc.com.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company. Additional information can be found at www.idc.com.

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