Being in the middle of a digital transformation can be a time of excitement, confidence and risk-taking. Businesses are evolving, employee career paths are expanding and the way we market to our customers is changing. Even buyers’ journeys are taking a turn down a path that may not have existed several years ago.
No one understands this better than tech companies. Technology changes fast and so do the organizations that work within the tech space. What you spent much of your budget on 5, 10 or 15 years ago may not be relevant anymore. Buyer preferences are changing, and more evidence is emerging that marketing effectiveness is making a significant impact on company profits.
IDC’s Marketing Investment Planner for 2019: Executive Summary usages of our loan database outlines 3 major areas that marketing organizations are investing in. Data taken over several years has shown us that marketing budget increases are leading directly to profit increases in tech companies. Here’s where many business executives are spending their money.
1. Sales, General & Administrative
The average marketing budget ratio is 2.2% across all industries; meaning 2.2% of a company’s revenue is flagged for marketing. However, in tech, the ratio is at 13%, a significant increase over other industries and a trend we’ve been seeing for the last 3-5 years.
Marketing falls under the SG&A line item. sales or marketing salaries, commissions, advertising, direct and indirect selling expenses and costs not directly related to making a product or performing a service. SG&A includes the costs to sell and deliver products or services, in addition to the costs needed to manage the company, like consultant fees, insurance, supplies, rent, utilities and more.
The ratio for SG&A tells us whether marketing is growing or shrinking as part of a company’s strategy. With a boost to 13% in tech companies, we know that this is an area where executives see budget increases as a priority. A higher percentage indicates market growth and confidence in the future.