Marketers are investing in the customer experience to drive business advantage and profitable revenue growth, according to a survey of marketing executives by Gartner, Inc. The survey found that marketing budgets remained healthy in 2014, with, on average, companies spending 10.2 percent of their annual 2014 revenue on overall marketing activities, with 50 percent of companies planning an increase in 2015. Digital marketing spending averaged one-quarter of the marketing budget in 2014. The survey found that of the 51 percent of companies who plan to increase their digital marketing budget in 2015, the average increase will be 17 percent.
These findings are included in Gartner's Digital Marketing Spending report that is based on a survey of 315 individuals located in the U.S., Canada and the U.K. Respondents represent organizations with more than $500 million in annual revenue across six industries: financial services, high-tech, manufacturing, media, retail and transportation, and hospitality. The survey took place in July and August 2014 to gain insight into marketing and digital marketing spending priorities and plans for the future.
"The amount of the marketing expense budget spent on customer experience in 2014 is remarkably consistent across all key survey demographics, averaging 18 percent," said Jake Sorofman, research director at Gartner. "The survey also found that the highest marketing technology investment in 2014 is for customer experience. Customer experience is also considered by many companies to be the top innovation project, just edging out product innovation."
Not only are marketing budgets remaining healthy, they are forecast to grow in 2015, with half of the companies surveyed planning an increase in 2015. The larger the company, the higher the marketing expense budget as a percentage of revenue — those with revenue of $5 billion or more reported 11 percent, compared with 9.2 percent for those with revenue between $500 million and $1 billion. Marketing budgets as a percentage of revenue varied widely, with 46 percent spending less than 9 percent of revenue, 24 percent spending between 9 percent and 13 percent of revenue, and 30 percent spending more than 13 percent of revenue. The 50 percent of companies planning an increase report their average 2015 increase will be 10.4 percent. Of those, the ones that report outperforming competitors said their planned 2015 increase will be 13.6 percent.
"The line between digital and traditional marketing continues to blur," said Laura McLellan, research vice president at Gartner. "For marketers in 2014, it's less about digital marketing than marketing in a digital world. Hence, marketers manage a much more balanced and integrated marketing mix than in previous years, which were characterized by online and offline silos. The resulting digital experience moves customers toward a more self-service buying model, allowing reductions in sales budgets that were designed around older, physical models."
Sixty-eight percent of respondents said that their company had a separate digital marketing budget. However, it's difficult to gauge just how much companies are spending on digital marketing because the treatment of budgets varies by company, with some having a digital marketing budget in total (32 percent of respondents), others in detail (36 percent), and yet others that have incorporated digital marketing into each function of the marketing budget (23 percent) or none of the above (eight percent).
As in prior years, the survey revealed that when it comes to allocation of the digital marketing budget by activity, digital advertising takes the top spot. However, there appears to be less difference between this and other activities this year compared with last year, as marketers hedge their bets. Expenditures for digital advertising will grow in 2015, as brands, ad agencies and publishers invest in ways to deliver more-relevant advertising to people. Fueling this trend is the use of programmatic media, which allows marketers to target the audience they want and automate bidding rules for ads based on the business value they deliver. Nevertheless, the survey suggested that in 2015, digital advertising will share its top ranking with mobile marketing.
With digital marketing spending on the rise, respondents were also asked where additional funding was coming from:
"Gartner's 2014 CEO Survey found that digital marketing was the No. 1-ranked CEO priority for technology-enabled business capability for investment during the next five years," said Yvonne Genovese, managing vice president at Gartner. "It therefore comes as a little surprise that the digital marketing spending survey found that over 60 percent of companies that justified an addition to the marketing budget for digital marketing obtained incremental funding from elsewhere in the organization."