Only sheep follow a Bellwether
Measuring the health of the marketing industry has become increasingly problematic over the past few years.
For 16 years the quarterly IPA Bellwether report has assessed client marketer budget revisions and confidence, alongside several economic factors such as buyer confidence and GDP growth. But the mere definition of marketing and the role of the CMO have exploded resulting in yes, media fragmentation, but more importantly budgetary atomisation. Budgets may have demonstrated an unprecedented 13 quarters of positive growth, but a much broader revolution is at play, and a silent war for budget is being fought far away from the bright lights of adland.
Anyone without their head in the sand will be familiar with the military march of unrelenting growth of digital advertising, with traditional activities such as print media becoming collateral damage in its wake. The UK was the first country in the world in 2015 to witness digital spend surpass 50 per cent of the total advertising spend. But this is merely the modernisation of marketing. YouTube advertising is TV advertising. PPC ads are classified ads. Facebook ads are magazine ads. Same formats, new media owners. The old world wrought digital.
Those that fight the tide do so from a fiduciary duty to their agencies and media owners. Technology enabled the channel shift, and technology is enabling client marketers to build their own digital marketing platforms (DMP) and bring much of the digital advertising process in-house.
Figure 1: Charts like this obscure the real change in CMO budgets
So if the channel shift to digital is a sideshow, where is the real battlefront? The Gartner CMO Spend Survey suggests that 33 per cent is spent on technology, 17 per cent on experience and 7 per cent on innovation. For the arithmetically inclined that leaves only 43 per cent that covers what the IPA Bellwether Report analyses.
In the not too distant past, the word communications was implicit and synonymous with marketing. Today, according to Gartner, the bulk of marketing spend is on activities that are not communications.
Digital transformation, that is business transformation for a digital age, is a significant trend on the CMO agenda. In a joint whitepaper by Ovum and SapientNitro, Be The Gryphon: how to change your organisation’s trajectory through digital business transformation, 44 per cent of CEOs planning a digital business transformation project have a ‘strategic intent’. It often requires significant investment in technology, and this investment is often justified through a bonfire of agency retainers and media efficiencies. A seismic shift that is going undetected in the Bellwether.
At 33 per cent of budget, technology spend does not ebb and flow like advertising spend. It is often part of a multi-year capital expenditure programme, a safe harbour in an economic storm, protected from short termism. The trenchant attitudes of some towards the efficacy of digital advertising versus traditional activity entirely miss the point. Digital agencies and consultancies are not busy resizing banners and buying PPC ads, they are working with clients to transform their businesses through technology and experience. This is where the bulk of CMO budgets are today and should come as no to surprise to anyone who has witnessed the marketing technology companies storm the beaches of Cannes in recent years in an attempt to breach the Palais.
Investment in experience at 17 per cent is the other significant area of spend for CMOs. Once upon a time these investments were limited to the outside layer of an organisation, the redesign of a website for example and their impact was minimal. Today, few brands would truly benefit from a new website. Instead the focus is on the redesign not just of the interaction layer of a business, but the design of services. In order to better serve customers, organisational structures and business processes are being assessed and re-engineered. Never has the CMO had such an impact on the internal changes a company has to go through to deliver a better experience for their customers.
According to Forrester’s annual Customer Experience (CX) Index, nine out of the 15 leaders in the field are privately held companies, free from the prying eyes of financial analysts, and a further three leaders (including Amazon) are putting innovation ahead of profit. Maybe there is a clue in here as to why some brands are disrupting traditional markets, without the pressure of profit expectation; brands can invest in their own interest, building brands through exceptional service and product design rather than exceptional advertising of mediocre experiences.
In the 1990s it was not uncommon for brands to redesign their website to reflect their new advertising campaign. Many actually used prime real estate on their site above the fold to proudly showcase their TV advertising – something that was designed to drive people to the site in the first place!
Today you are much more likely to see customer utility or service design as the advertising campaign, whether that is the Specsavers in-store iPad app or the Santander banking app. This demonstrates a simple truth: however amazing investments in technology and experience are paying off, those experiences still need to be communicated.
There is no harm in measuring the quarterly fluctuations in communications budgets, but to do so in isolation of technology, experience and innovation is to ignore the majority of a CMO’s world today.
Simon James is VP, global lead, data & analytics at SapientNitro