Digital marketing is now reappropriating the sales budget

Digital Marketing Sources of Funding

It probably comes as no surprise that digital marketing budgets are rising. But the velocity of growth is actually quite breathtaking. In research conducted by Gartner among their clientele, digital marketing budgets rose 20% in 2013. And they’re expected to rise again by double digits in 2014.

For large companies, those are large budgets being moved around in a short time span.

Yesterday, Laura McLellan of Gartner presented a webinar on their latest research that confirms this phenomenon: Digital Marketing Technology and Services Spending on the Rise. While she shared many fascinating revelations — for instance, digital marketing has now been recognized by CEOs as by far the most important investment to improve their business over the next 5 years — there were two findings that I thought were particularly worth noting.

The first is where the money for this rising digital marketing budget is coming from:

  • Reinvestment from other marketing programs
  • Incremental increases to the overall marketing budget
  • Sales reinvestment, directly reducing the sales budget

It’s that last point that caused my eyebrows to jump. In Gartner’s research, 22% of the participants said they reduced the sales budget because digital marketing activities have changed buyer’s paths to purchase.

Now, that shouldn’t be surprising. We’ve all seen the research — and the evidence within our own businesses — that buyers have taken a huge portion of the sales cycle into their own hands, preferring to do research and evaluation on their own on the web before getting on the phone with a salesperson. It makes perfect sense that businesses should reallocate budget accordingly.

But still, sales has been king for a long time. You don’t simply steal reappropriate their budget — at least not without expecting the corporate equivalent of The Red Wedding (apologies for the Game of Thrones reference).

I don’t usually give safety tips on this blog, but to my CMO friends: if the CIO and the head of sales invite you out for a drink, just make sure to meet at a well-lit bar with plenty of witnesses people around. Just some friendly advice.

But seriously, this is an important inflection point. It’s one thing to talk about the buyer’s journey shifting from sales to marketing. Reallocating budgets across those departments, however, is the concrete signal that this disruption to the way business is conducted has been accepted at the highest levels.

The second finding that caught my attention was data on investments in marketing technology and substitutes:

Marketing Technology Investments

Again, no real surprise here — yet still remarkable that most businesses are increasing or significantly increasing marketing technology spend in direct expenses, capital expenditures, cross-charged expenses from IT, and expenses for marketing service providers. Green lights all across the board.

Confirmed: marketing technology is a huge growth market.

So I wouldn’t expect the marketing technology landscape to shrink any time soon.

One last piece of good news:

I am thrilled to let you know that Laura McLellan will be one of the featured speakers at our inaugural MarTech Conference in August. She’ll be giving a talk on her groundbreaking research around the roles of “chief marketing technologists” and the impact they have on the tectonic changes underway in the marketing organization.

If you’re living at the intersection of marketing and technology, you won’t want to miss this.

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Comments

  1. Really interesting, Scott. To what extent do you think the apparent decrease in sales budgets could reflect simply reclassifying some activities (or tech solutions) that used to be considered in the “sales” category – perhaps like classic CRM or customer comms – as marketing activities now?

  2. Yes, some budget will move from sales to marketing since the buyer is much more involved in digital marketing activities than in interacting with sales. However, it’s critical that the (now smiling) CMO redirect some of those new digital marketing dollars back to help the sales organization be more effective at the moment of truth.

    For example, the marketing team needs to help sales understand what the buyer is thinking once they reach out to sales. They also need to nurture active pipeline opportunities in concert with sales. Finally, they need to help the sales team understand how to use things like social listening tools so they can participate in those buyer conversations earlier than they do today.

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