Key Findings From U.S. Digital Marketing Spending Survey, 2013
Digital marketing budgets total 2.5% of revenue and will increase 9% this year. This document has been made available free of charge to support Gartner for Marketing Leaders. For more information, visit gartner.com/digitalmarketing.
Marketing leaders have secured bigger budgets to define markets and attract, acquire and retain customers. Yet, increased funding is a double-edged sword. It brings new opportunities but puts more pressure on marketers to deliver and prove a return on the investments. Use our seven key findings to benchmark your marketing budgets and review our recommendations to enhance your digital marketing efforts. (See Note 1 for the definition of digital marketing.)
On average, companies spent 10.4% of their annual 2012 revenue on overall marketing activities. These expenses include salaries, and both traditional and digital marketing costs. The range of spending is wide — 14% of companies spent less than 5% of revenue and 17% of companies spent more than 15% of revenue on marketing. Figure 1 shows budgets will increase an average of 5.7% this year.
Media companies allocated a larger share to marketing expenditures (12.7%) than other vertical industries. Media companies also plan the biggest increase in spending (9.9%) this year.
A total of 43% of respondents said their 2013 operating budgets will increase this year. Forty-seven percent said their budgets will stay about the same. Only 10% are bracing for a budget decrease.
By comparison, IT budgets for 2012 averaged 3.5% of revenue, according to "IT Metrics: IT Spending and Staffing Report, 2013." Gartner's annual CIO survey reports global weighted average IT budgets are essentially flat in 2013, decreasing on average 0.5% (see "Hunting and Harvesting in a Digital World: the 2013 CIO Agenda").
In addition to these marketing expense budgets, two-thirds of marketers have a capital budget that they are using to acquire marketing software licenses and the infrastructure (servers and storage) to run it on.
Note: Data was gathered from responses to the following questions: What percentage of your organization's revenue is allocated to your total marketing expense budget for fiscal 2012? Compared with fiscal 2012, by how much do you expect your organization's total marketing expense budget to decrease, stay the same or increase in fiscal 2013?
Source: Gartner (March 2013)
Customers are transitioning to communicating and buying through digital channels. That means marketing spending is rapidly shifting to digital marketing. On average, annual digital marketing operating budgets represented 2.5% of a company's revenue in 2012. These expenses include personnel costs, contract labor, software as a service and external marketing services such as agency creative services, search, website design, content creation and management, social and mobile marketing.
Three percent of the marketers responding to our 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 — the average is 25%.
It is becoming more difficult to count and allocate digital marketing spending as digital and traditional marketing techniques are merging. For 20% of companies, digital marketing activities have already been incorporated into each function within marketing, and budgets are no longer broken out separately. We expect this trend to continue growth as areas such as second screen TV, social TV and QR codes integrate with traditional channels.
Note: Data was gathered from responses to the following question: What percentage of your organization's total marketing expense budget is allocated to digital marketing in 2012?
Source: Gartner (March 2013)
Marketing leaders support a diverse and increasingly complex marketing mix. We asked marketers how much of their digital marketing budget they're allocating to different activities such as mobile marketing or analytics.
Figure 3 shows that marketers allocated 12.5% — the biggest share of their digital marketing budget — to digital advertising. Still, marketers wrestle with digital advertising's effectiveness. Advertising agencies, technology providers and brand advertisers are working to address this concern by improving measurement standards and formats.
Content creation and management account for the second largest share of digital marketing budgets. This is driven, in part, by the desire to populate the infinite appetites of inbound marketing channels. Social networks, customer forums, and the blogosphere are examples that drive inbound inquiries or actions. However, you need to create content that delivers the right message to the right person at the right time, regardless of how the dialogue gets started. That means content is equally needed to meet the demands of outbound marketing as well. 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.
Top priorities for increased budgets in 2013 are commerce experiences, social and mobile marketing, and content creation and management. See "Digital Marketers Escalate Investments to Support Commerce Experiences" to learn why enhancing commerce experiences is a business imperative.
Note: Data was gathered from responses to the following question: How much of the 2012 digital marketing expense budget is your organization spending on each of the activities listed? This includes personnel costs, software and externally purchased services.
Source: Gartner (March 2013)
We asked marketers to identify how they're funding their digital marketing activities. We found that digital marketing's effectiveness helps stretch digital marketing budgets. Figure 4 shows that two in five marketers are realizing savings from digital marketing compared with traditional techniques. And they're taking that money and reinvesting it into more digital marketing. Fifty-nine percent of the marketers in retail organizations report that this is happening compared with only 28% in manufacturing.
On average, 28% of marketers say they've reduced their traditional advertising budget to fund digital marketing activities. Thirty-four percent of the marketers at high-tech companies are more likely to take this approach compared with only 19% of the marketers at financial services and insurance firms.
Reinvesting savings into digital marketing activities is a smart move. And it's a relatively new activity in a corporate culture where technology has primarily been used in recent years to cut costs. We don't recommend chasing shiny new objects unreservedly. Rather, we suggest supporting a culture that is agile and keeps an open mind to testing new techniques and underlying technologies. It's okay to fail — as long as you fail fast in a program with a limited scope and budget, and you intend to learn from these early failures.
Note: Data was gathered from responses to the following question: In order to fund digital marketing, which of the following statements are true?
Source: Gartner (March 2013)
The pace of change and needs for specific skills force marketing to seek services from external providers. We asked marketers to estimate what percentage of the work is performed internally by employees or contract labor, and what percentage is performed externally or outsourced.
Culturally marketing is accustomed to outsourcing. Working with agencies, data providers and external technology providers are an intricate part of marketing processes. This hasn't changed and may be increasing. The responses reveal that digital marketers need help — lots of it — with specialized tasks such as search marketing, online advertising and mobile marketing. For the most part, marketers outsource one-third or more of their work to an agency, digital services organization or other external provider.
Figure 5 shows that, on average, marketers outsource one-half of their search marketing — the highest proportion of any marketing activity. Media companies, financial services firms and retailers keep a majority of their search marketing work in-house.
Digital marketers are more likely to maintain social marketing in-house, with one exception: Marketers at manufacturers outsource 53% of their social marketing activities. We find that social analytics, and content creation and management are areas of focus for outsourcing. Monitoring and analyzing social activities require time and new technologies. And keeping customers interested through social channels requires constant feeding and nurturing with new content.
As a rule, outsourcing your digital marketing activities is a smart tactic when you don't have in-house resources to stay on top of quickly changing technologies and techniques, or need specialized talent. But you need to monitor results, ensure these providers have a stake in your success, and assume some risks.
Note: Data was gathered from responses to the following question: For the following list of digital marketing activities, please estimate what percentage of the work is performed internally by employees or contract labor; and what percentage is performed externally by some type of digital marketing services organization (agency, business process outsourcer, specialty firms ...)?
Source: Gartner (March 2013)
Finding No. 6: 70% of Companies Surveyed Have a Chief Marketing Technologist — 80% of Them Report to Marketing
Marketing's dependence on technology results in new responsibilities — and roles. We asked marketers whether their companies have the equivalent of a chief marketing technologist and where that person reports. Figure 6 shows that two out of three organizations have such a role. Most of the chief marketing technologists report to a senior marketing executive and only 13% report to the CIO.
Chief marketing technologists are familiar with marketing techniques as well as technologies. They need to understand how to use technology to define markets, attract, acquire and retain customers. They often have organizations that align this goal to areas such as marketing software, data and analytics, social and mobile platforms, digital advertising networks collaboration and website design. This role may come under one of many different titles, including CTO of marketing, chief digital officer, chief digital marketing officer, VP of e-business or even the CMO.
What's driving the need for this role? Marketers are increasingly dependent on technology to:
- Design the customer experience across many channels — social, mobile, commerce and website.
- Integrate data from an increasing number of sources, including internal data (such as transactions or on-site search) and external data (estimated household income) to get a better understanding of customers.
- Support marketing campaigns and programs, such as a mobile app, paid search marketing and social marketing.
Hiring marketing technologists will help you achieve your tactics. But you need a senior-level executive who can guide your customer experience strategy across many channels and match marketing technologies to the organizational goals.
Note: Data was gathered from responses to the following questions: Does your organization have the equivalent of a chief marketing technologist today? If so, where does he or she report?
Source: Gartner (March 2013)
Finding No. 7: The Top 3 Digital Marketing Activities Key to Marketing's Success — Corporate Website, Social Marketing and Digital Advertising
Marketers are focused on the marketing mix that will drive success. We asked digital marketers to identify the three digital marketing activities that are most important to their success.
Figure 7 shows that the corporate website and digital advertising share the distinction of being the No. 1 digital marketing activities that are important to marketing's success. Social marketing emerged as the next most important activity.
Our survey results suggest that the corporate website will not be displaced by a brand's social media presence anytime soon. That's all the more reason for marketing leaders to continuously invest in testing and optimizing their websites, paying attention to all aspects — from customized landing pages to compelling content that encourage visitors to be engaged with your brand.
Only 9% of respondents said that analytics is most important to their success. We believe this is an oversight. You need to use analytics to support continuous improvement, understand your customers' requirements and drive results.
Note: Data was gathered from responses to the following: Please prioritize which of these digital marketing activities are most important to your marketing organization's success by choosing three and ranking them most important, second most important and third most important.
Source: Gartner (March 2013)
- Review how companies like yours allocate their marketing budgets. Use Gartner's "Toolkit: Compare Your Digital Marketing Spending Against Those of Your Peers" as a starting point to evaluate whether and how you should shift digital marketing budget allocations.
- Ensure that your marketing team and external partners have the marketing chops to adapt to the evolving landscape. Marketing has always been an art and a science, but the growth in underlying technology (marketing analytics, for example) requires marketers to have access to technology talent.
- Appoint a chief marketing technologist, or someone with equivalent responsibilities, to align your organizational goals of attracting, acquiring and retaining customers across the many digital channels with current and future technology landscape. We've come across people with titles such as CTO of marketing, chief digital officer, chief digital marketing officer, VP of e-business and CMO who have assumed the duties of chief marketing technologist.
- Take any savings from your digital marketing activities, reinvest those funds into more of what's working well, plus pilots for emerging techniques. Measure the effectiveness of experimental activities to determine whether they should stay in your marketing mix.
- Take a fresh look at your corporate website and online advertising activities — don't let either run on autopilot. Both require significant investments in content creation and management and technology. Both were cited as the most important digital marketing activity to marketing's success.
- Test how and what offerings can be sold via your company's commerce experience and determine how you'll drive buyers there.
- Rely on agencies and other marketing service providers when you lack specialized expertise such as mobile app development or running paid search efforts. Ensure these partners have a stake in your success and assume some risks.
Gartner's U.S. Digital Marketing Spending report is based on a survey of 253 marketers from U.S.-based companies with more than $500 million in annual revenue (average revenue $5 billion). Respondents were from six industries: Financial services and insurance, high-tech, manufacturing, media, retail, and healthcare. The survey took place in November and December 2012.
This document presents an overview of the key findings — one in a series that explores the results from this survey. For a presentation version of the results, see "Toolkit: Presentation of Key Findings, 2013 U.S. Digital Marketing Spending Survey."
Respondents were at a level in the organization where they could provide information about types of digital marketing techniques used, and their relative effectiveness, as well as spending on digital marketing such as labor, external service providers and marketing applications. They were responsible for decisions on digital marketing techniques for new revenue growth opportunities, improved customer experience, integrated channel marketing, brand enhancement, or digital commerce.
The survey was conducted using an online questionnaire developed by Gartner analysts who are familiar with digital marketing, and was reviewed and tested by Gartner's Research Data and Analytics team. Quotas were set by vertical industry, organization's size, and respondent roles. Findings from 203 marketers are contained in this analysis. The results of this study represent the views of the survey participants. Although we have drawn the sample in an attempt to mimic the characteristics of the target population, the exact relationship between the sample and the broader market is unknown because it can't be finitely determined. Thus, results represent the sample base and not the market as a whole.
The following definition was provided to marketers that participated in the survey:
Gartner defines digital marketing as a set of techniques, enabled by technology, which allows marketing to improve its processes to engage in a dynamic conversation with people who are influencers and buyers and ultimately target, acquire and retain customers.
It includes the ability to interactively communicate with customers through electronic channels, such as the Web, email, smart devices such as phones and tablets, and mobile applications.
The four most recognized techniques of digital marketing are social, mobile, analytics and e-commerce.