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On the Rise: Marketing Technology Spending Expected to Skyrocket

10 Dec 2015 by Susie Steckner

Marketing functions are changing at a mind-boggling pace propelled by Intelligent Technology™. And spending for digital strategies is only expected to grow.

IDC predicts spending on marketing software will hit a whopping $32 billion by 2018, up from roughly $20 billion in 2014.

“Over the last ten years, marketing has seen perhaps the greatest explosion of technology of any business function in history,” says IDC, hosting a recent web conference on the marketing software revolution. “But, changes in the next five years could make that look like a walk in the park.”

Looking further out, Foundation Capital predicts even more growth and dubs the next 10 years the “Decade of the CMO.” Analysts forecast that tech spending will reach $120 billion by 2025. What’s more, technology will account for 10% of the $1.2 trillion marketing spend anticipated in 2025.

“Changes in consumer behavior and the unprecedented advances we are seeing in the MarTech space today add up to a significant shift in the mix of marketing spend from media and marketing services to technology,” according to the firm.

Growing role

Not surprisingly, executive leaders today are expecting more from marketing functions and the Intelligent Technology that are greatly expanding the reach of a company or product.

“Digital marketing has moved into the mainstream, as 98% of marketers affirm digital techniques are merging into the larger marketing operation,” said Yvonne Genovese, group vice president for Gartner, discussing the firm’s CMO Spend Survey 2015-2016.

Among the survey’s key findings and insights:

New expectations — Marketing budgets increased in 2015 and two-thirds of marketers expect to see more growth in 2016. The dollars are boosting social marketing, analytics, customer experience and digital commerce. At the same time, marketing is taking on a larger role, fueling profitable growth by landing and expanding valuable customer relationships.

Digital commerce — Digital marketing took the top spot among marketing technology investment strategies in 2015. About 20% of marketers flagged digital commerce as their highest priority, compared with 10% last year. Though budgets are evenly split across channels and categories, marketers say digital commerce affords opportunities to show clear impact on revenue.

Getting social — Social marketing accounted for the most investment in 2015, according to 65% of marketers. To maximize those investments, marketers are taking both proactive and reactive approaches. Social listening offers critical insights into what people are saying about a company or product, offering “opportunities to delight customers or restore a relationship,” the survey says. Successful proactive social marketing can get prospects and customers engaged with the company or product and reap big rewards, turning loyal customers into real advocates.

Next Big Thing — Marketing operations continue to include funds earmarked for discreet innovation budgets. According to the Gartner survey, more than 70% of marketers targeted funds for innovations in 2015, up from 64% the previous year. Of those organizations, more than 90% are “either assessing, piloting or actively using technologies such as Internet of Things, real-time social listening tools, marketing analytics and digital marketing hubs,” the survey says.

Change in action

Foundation Capital highlights two companies that are embracing marketing strategies to match the digital world.

Retail giant Canadian Tire experimented with strategies to boost sales of its Sport Chek brand, and found that its commitment to both print and digital advertising wasn’t hitting the mark. The company began replacing a quarter of its print fliers with digital and saw a 12% jump in sales, well over the usual 5% boost. It repeated the experiment six times and ultimately decided on an all-digital strategy.

The company turned to Facebook for another experiment. It promoted a sample of 50 products in a six-second auto-play video and then compared sales of those products with a group of 50 products that were not included in the video. The result: The products in the video hit 50% more sell through.

Another company, Unilever, put big data in the driver’s seat when it decided to launch its “All Things Hair” YouTube channel. It teamed up with Google to capture and analyze the data of the billions of hair-related searches performed every day by consumers, revealing rising trends. Next, the company worked with bloggers and online personalities to create an audience searching for the latest looks — from rocker chic to quick braids — and also promote its brands.

“Technology today is both friend and foe for the CMO,” says Foundation Capital general partner Ashu Garg. “The shift from art to science requires CMOs to reinvent themselves and their organizations or become irrelevant. The CMO of tomorrow is the data nerd of today.”