Forrester Research reports that 71% of Chief Marketing Officers (CMOs) have cut budgets. Most of the reduction is in traditional marketing: 61% in TV, Radio and Magazine advertising and 52% in direct mail. Email has been cut 11% and social media 7%. Yet, almost half of the CMOs said they would increase spending on social media. Forrester predicts that online or interactive marketing will represent 21% of marketing spend by 2014 (close to $55 billion) as marketers increase spend on online search, email, social media, display ads, and mobile marketing.
The reduction in marketing spend can be attributed to the currrent economic recession. But, while the increase in online marketing tactics (Internet, email, social media) may have been accelerated by the recession, it is actually caused by disruptive technologies that have changed the way businesses and individuals make buying decisions.
First, the Internet broke down geographic and psychographic barriers to selling products and services. With the Internet, a business could more easily reach global markets. In addition, the Internet allowed businesses to quickly create the impression of an established, credible business. The Internet also led to information overload. Newspapers, magazines, TV, and now email, web pages, and searches across billions of web sites…? How could businesses make informed decisions with this new barrage of information?
Second, Web 2.0 created communities online that allow buyers to connect with others in their industry and follow experts in others. By interacting with connections, buyers learn about new technologies and solutions that they might want to purchase. They don’t need to weed through the information overload themselves, but they benefit from others who do so. Web 2.0 is the disruptive technology that changed the way people buy, which requires a change in the way businesses sell.
The recession simply accelerated something that was already happening. Spending on traditional marketing media has been declining for the last several years, but many CMOs didn’t embrace this trend until the recession forced it. It’s easier to market the way we always have than to change. It’s made even more difficult by the fact that businesses often fail to accurately track the results of their marketing. They may think their traditional advertising is working, when in fact today most people don’t want to be sold to via ads. They want to get information about products and services from their trusted advisors, and they are increasingly turning to social media to facilitate this process.