IBM Fine-Tunes Marketing Budget

In 1993, when IBM Corp. was labeled a “dinosaur” by several leading business publications, it wasn’t exactly facing extinction. But it was in danger of becoming irrelevant, according to T. David McGovern, IBM Global Services’ manager of worldwide direct marketing and branding.

IBM was plagued by disparate business strategies, a lack of marketing expertise and no marketing management system. So last year, after a decade of limping along, the firm used neural network analysis to adjust its marketing priorities.

IBM realized it needed to change to reflect workplace evolution. Hardware wasn’t the revenue source it had been. In contrast, IBM Global Services (IGS) — Big Blue’s data center, outsourcing, consulting, product support and disaster recovery unit — was playing a greater role in the company’s health by offering a gateway to its products, especially in small and midsize business markets.

But the division’s marketing wasn’t necessarily in line with its business objectives. Similar organizations were spending a higher portion of their revenue on marketing. Even so, rather than throwing more money at the marketing department, IGS retained analytics firm MarketBridge to examine its budget priorities.

MarketBridge broke IGS’ marketing spending into four categories: planning, analysis and research; brand-building activities; demand generation, including direct marketing and lead generation; and sales enablement, which encompassed all activities that support IGS’ sales force.

IGS determined that the key to revenue growth was maximizing “signings” — new clients — rather than cross-selling or upselling in the small-to-midsize business markets. MarketBridge then went to work aligning marketing spending with this goal.

It proposed two scenarios:

• Using neural network analysis, MarketBridge determined that even with no increase in spending IGS could boost signings between 6.6% and 10.4%, with a sales productivity jump of $600,000 per sales rep. The company would dramatically increase sales enablement while scaling back demand generation and cutting way back on brand building.

• Given a 30% rise in marketing spending, IGS would again bump up sales enablement spending while raising demand generation slightly. This could result in signing increases between 5.6% and 13.3%, with sales productivity going up by $700,000 per rep.

IGS is playing close to the vest on final budget allocations, but McGovern says it’s already focusing more on sales force enablement for business consulting and outsourcing, and has added internal spending and return tracking mechanisms for marketing.