Companies Set to Increase Spending on Digital Marketing

Digital marketing is forging a new relationship between technology and marketing. We surveyed more than 250 U.S. marketers and found that digital marketing spending currently averages 2.5% of company revenue, and these budgets are expected to increase by 9% in 2013.

Consumer communication and buying activities have been migrating to digital channels at a much faster pace than marketers, so you would expect marketing spend to be rapidly shifting to digital marketing as it attempts to catch up. Still, only 3% of the marketers responding to the Gartner survey said they are spending more than half of their marketing budgets on digital activities. The majority spends between 10 and 50% of their marketing budget on digital marketing activities, with the average being 25%.

When we asked our respondents to identify how they are funding their digital marketing activities, two out of every five marketers said digital marketing generally costs less than traditional techniques, and they’re taking the money they save and reinvesting it into their digital programs. On average, 28% of marketers say they have reduced their traditional advertising budget to fund digital marketing activities.

The shift towards digital marketing is complicated by the fact that digital and traditional marketing techniques are merging, making it increasingly difficult to count and allocate digital marketing on its own. For 20% of companies, digital marketing activities have already been incorporated into each function within marketing, and budgets are no longer broken out separately. This blurring of digital and traditional marketing is likely to grow as areas such as second screen TV, social TV, and QR codes merge channels.

Digital marketing has been a growing area of investment in many organizations for a decade, but we’re seeing its scope increase and its techniques mature. However, increased funding is a double-edged sword. While it brings new opportunities, it also puts more pressure on marketers to measure and attribute investments to revenue and profit growth.

So where are savvy digital marketers putting their money? Digital advertising accounts for the largest share of digital marketing budgets at 12.5%, while content creation and management account for the second-largest share. The enormous pressure to create, manage, and distribute content for multiple marketing activities through the right channels will only increase as customers use more digital channels for collaboration, researching, and acquisition of products and services.

Improving the customer’s e-commerce experience is the activity that will get the largest budget increase in 2013. Companies are focusing on improving the ability of customers to find their e-commerce sites, and on their online shopping experience. Companies also want to develop strategies to embed e-commerce in digital marketing channels such as search, social, and mobile.

That’s not to say that more traditional online marketing methods are being neglected. In fact, the corporate website and digital advertising were both ranked as the top digital marketing activities for marketing departments’ success in our survey, while social marketing emerged as the next most important activity. This suggests that, for most brands, the corporate website will not be replaced anytime soon by the brand’s social media presence. So, marketing leaders need to continue to invest in web analytics and testing to measure and optimize their websites. They need to pay particular attention to features such as customized landing pages and dynamic content that encourage visitors to engage with the brand.

With the arrival of cloud-based software solutions, marketing has recently begun to take responsibility for its own technology. Tools that facilitate the business of marketing have been slower to evolve than other areas, such as supply chain or human resources. However, digital marketing forces marketers into an environment where they must invest rapidly and respond quickly to market changes. The lack of “foundational” technologies, plus the growing demands of the always on, engaged customer, are the fundamental reasons why marketing departments have begun to own and control their own technology investments.

Andrew Frank is a vice president and distinguished analyst at Gartner and part of the Gartner for Marketing Leaders research team.

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