How much do tech companies spend marketing their technology? How much do you spend? How much should you spend? Find out how you compare. Are big competitors outspending you? Probably. Do you need to match them? Probably not but, whatever you spend, be sure that growth - not just activity - is the result.
In this post, we look at:
- How much global technology players spend
- How much Aussie tech companies spend
- How they spend their budgets
- How you can spend far less, but still compete and win.
How much do the big guys spend?
Australian technology vendors often compete with global giants who have stratospheric sales and marketing budgets. Here's what some spend:
According to an infographic from Vital, Marketo spends a whopping 66% (US$98.8m) of revenue on sales and marketing, Salesforce 53% (US$2.2m), Oracle 20% (US$7.6m), Microsoft 15% ($8.1m), and Apple 7% (US$12m). They're pretty big figures from mighty big players, but they do combine sales with marketing, so this is not an accurate picture.
According to a Deloitte CMO survey, Software and Biotech companies now spend 15% of their companies’ total budgets (not revenue) on marketing. For Communications & Media companies, it's 13%.
Deloitte's 2018 CMO Report says Social Media Marketing has seen the biggest increase in marketing spend - 243% since 2009 - and forecasts that spending will grow another
71% in the next five years.
How do they spend their budgets?
The last few years have seen seismic shifts in marketing, from social media to mobile marketing and automation. Marketing is mostly digital and heavily
reliant on automation; as a result, an increasing portion of marketing is spent on IT systems. The latest CMO survey data from Gartner suggests that 'marketing leaders allocate 27% of their expense budget to technology, equal to 3.24% of overall
revenue, compared with CIO technology spend of 3.4% of revenue.' That's almost the same.
In a broader survey of companies of all sizes, Smart Insights found 10.3% of budget was spent on marketing automation and double that (20.3%) on Content Marketing.
Why tech marketing isn’t just for the CMO
These changes have been tough on CMOs, so it comes as no surprise to see IDC reporting 'an astonishing rate of change’ when it comes to marketing personnel: over 50% of the 152 companies surveyed had replaced their CMOs in the last 24 months: The bottom line? According to IDC: ‘To get CMO selection right, means the CEO needs to understand and get closer to marketing.’
Most Australian technology vendors don’t have large marketing teams or CMOs; more likely they have CMOs heading up small marketing teams, or no formal marketing function at all. Those who do, often work with external agencies to control the scope and cost of marketing, and keep overheads to a minimum. Either way, your CEO needs to have a first-hand understanding of marketing, to make sure your company uses the best model to achieve its objectives.
How much should you spend on tech marketing?
This is the question most frequently asked by CEOs, followed by 'and how much is enough?'. The CFO will of course say 'less than we spend now'.
The answer depends on a few more questions, and the most important of them is: what do you want to achieve? If you want to grow your revenue by 50% a year, you’ll have to spend a lot more on marketing than if your goal is 10%. Your existing revenue baseline is key here too. How achievable your goals are, and how much you'll need to spend, also depend on:
•How established you are in your target market(s)
•How accepted your technology is there
•How much competition you face.
So, if you’re a newbie, you’ll have to spend more on marketing and profile-raising than established players. If your technology is disruptive or entirely new, you’ll have to spend on educating the market first. If you’re one of many competing vendors, you’ll have to spend on differentiation. If you want to attract new investors, you’ll need to spend on marketing the broader benefits of your technology and your management expertise.
Marketing costs less if you're the Thought Leader
If your technology is the stand-out performer and you are (or could become) the thought leader in target markets, you could enjoy enviable growth with a reduced marketing spend. See more on the role of thought leadership in high tech marketing here.
This is why small high tech companies should aspire to being Thought Leaders. It gives smart companies an undeniable edge, and it's fits better with small size: true thought leaders are usually small and agile, never large and cumbersome. It's a critical element in achieving growth in a market awash with large, well-heeled competitors.
So what does that really mean?
Spending money on isolated tactics without a clear marketing strategy, can burn cash faster than a bush fire. Spending too little or spending on piecemeal, uncoordinated activities will also burn money, just less of it. Whatever you spend on marketing, it needs to be based on a strategy, even if it’s just 3 bullet points on a napkin. You need to focus on:
- Where your technology could win - and you could become the Thought Leader
- What your target buyers need from you - to make a choice in your favour
- How to reproduce and automate these activities - so they generate a high return at a low cost.
What do Aussie hi-techs spend on marketing?
Accurate figures are not available, but previous surveys found that two thirds of Australian companies with a turnover of $5 to $50 million spent less than $500,000 on marketing. Yet, how much less and by what companies by size or industry, we can't tell. Our own experience in the technology sector - where most clients fit into the $5-50 million turnover range - suggests that it's closer to 5% than 10% in Australia.
Aussie technology companies spend about half of what the big global players do, in relative terms. The upside for small players is that the big guys have to splash cash everywhere: events, analyst reports, collateral, social, search, email marketing and more - in every market - because they have to be seen and heard everywhere. You don’t. You only have to focus your marketing on:
•The markets you can win - where your technology is superior
•Becoming the Thought Leader - because you know the patch better than anyone else (especially the big guys)
•Strategy and tactics that will help you do both.
When you're small and agile, you can win the markets you need to achieve your growth goals, and the big guys probably won't even notice, so you don't have to worry about tackling them head-on. Find out how to do this in The Australian Technology Marketing Blueprint. Choose the one for your industry.
What are they spending big on?
There are few surprises here: as you'd expect,
The key to lower spend and higher ROI
You don’t have to take on every market or every competitor. You just need to focus on those you can win or beat, which will dramatically trim your marketing spend, while boosting your marketing ROI. This is the sort of thinking that will make the CEO really happy, not to mention the CFO.
For small technology companies, it's essential to maintain a clear marketing focus on segments with the best chance of success. The next rule is to focus on activities that will grow your business. After all, tech marketing is supposed to be an investment, not an expense.
The Greenhat Report shows that investment in Marketing Automation has grown strongly, with 54% of respondents using automation. The downside is that only 41% have connected it to their CRM systems, which suggests that they've struck serious obstacles to integration.
Despite the increased spending on Social Media Marketing, the ROI is still an uncertain quantity. In last year's Greenhat Report, just 20% reported seeing good results and ROI from their investment; this year it's 21%
Clearly a lot of companies are still struggling to make Social Media Marketing work for them. Some of our customers have struggled as well, and have asked us take care of it for them. We know it isn't easy, but we've learnt what works and what doesn't in the technology market.
Learn about our approach to marketing in the technology sector or contact us about a gaining higher ROI on your marketing spend.
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