Dot-bomb? Internet implosion? The year 2001 may have been notorious for the nosedive taken by so many Web-based companies, but it was a lifetime ago for marketers. Brands have gone digital this past year as never before.
And yet memory counts. This time around, brand managers are motivated by more than irrational exuberance. They’re molding technology to their own ends and adapting the best of promotional marketing practice to high-tech platforms. In the process, brand managers are leveraging to the hilt their options for consumer engagement and program personalization. Games, contests and sweepstakes, for example, almost always have some Internet component; hundreds of products are now offering online coupons in addition to (or instead of) print FSIs; rewards and incentives are now often fulfilled instantly thanks to digital premiums like downloadable wallpapers, tunes and film clips. Even event producers are using digital tools to collect attendee data and extend experience beyond the moment.
Simultaneously pressured to prove the value derived from their marketing spend, brand managers are increasingly opting out of “brand awareness” efforts (think 30-second Super Bowl spots) for digital calls to action that create measurable impact. For all the years that brands have talked about “return-on-investment” metrics, the Internet and other digital marketing platforms are finally making measurability a reality.
The 2006 benchmarking survey of interactive marketing practices among PROMO readers tracks this reassessment. As one participant wrote in, “The shift away from traditional media to the Internet continues at a very rapid pace.” As does the shift to mobile text and video phone marketing, e-mail marketing and other digital platforms.
How are marketers funding these initiatives? The largest number of brand respondents — 19.6% — say they are supporting new interactive marketing efforts by shifting budget out of traditional media advertising via print and broadcast media. Another 12.8% say they are increasing marketing spend across all budgetary lines, while 11.5% say they are focusing increases only on their interactive efforts, while keeping other lines flat. Very few say they have reallocated funds out of consumer sales promotions (4.7%), and fewer still (3.4%) say that the money had been sourced from the trade promotion line.
We asked a similar quetion of the agency executives surveyed, and their take on budgetary reallocation was even more pronounced. Nearly a third (31.6%) say their clients were funding digital marketing by siphoning funds away from traditional media. A smaller percentage (10.5%) say brands were raising their budgets across the board, while 6.6% said only interactive lines were increasing.
Most brands devote less than 10% of their overall marketing budget to interactive marketing (see chart on opposite page). The average brand allocated a relatively modest 7.5% in 2005 (this includes all media advertising, as well as consumer and trade promotional spending). A remarkable 8.8% of those brands surveyed say they are already devoting more than 20% of spending to digital marketing, both on and off the Internet. And unlike their 2006 media spending plans, digital marketing is trending upward to an average 8.8% of total brand marketing this year.
What are brands looking to accomplish in digital channels? They told us their top priority is building loyalty (noted by 51.4% of those surveyed). They also cited prompting a sale (48.0%), driving consumers to a Web site for further engagement (45.9%), collecting personal data (45.3%), offering an incentive to steer behavior (39.9%) and awarding prizes instantly (16.9%). A minority wrote in that they hoped to build brand awareness and recognition, provide some sort of training for either consumers or employees, increase their earnings or build trial of new products.
For the most part, U.S. brands have focused their interactive marketing on Internet-based programs. The bandwidth and infrastrucure available in North America have made it possible for marketers to mount highly visual, highly personalized interfaces for both consumer and business-to-business sites. On average, 16.1% of total marketing budgets were allocated to Internet development and maintainence in 2005; in fact, 10.1% of brands say they devoted 26% to 50% of their total spend on Internet programs, and nearly 5% put the bulk of their budgets (51% to 99%) on the Internet. Such reliance may be driving a projected increase in Web-spending this year, when average allocation is expected to reach 21.6%
However, several marketers told us they are looking beyond the Internet to accomplish their goals. More than 13% of marketing budgets were allocated by these companies to non-Web digital platforms, with an increase to 15.6% expected for 2006. These companies are experimenting with campaigns via short-message service (SMS texting) or multimedia service (MMS, which allows images and sound messages via mobile phones), each of which have been successful in Europe and Asia, as well as North America. And despite spam filters, e-mail marketing continues to produce results for marketers, especially when consumers have opted into the mailstream (the backlash against uninvited e-mail continues unabated). Finally, several brands — especially those that build “brand ambassador” ties with employees, distributors or other internal audiences — have done well with closed networks.
On the Web or off, marketing is becoming increasingly digitized. PROMO will continue to track that evolution.
METHODOLOGY
While PROMO has tracked spending by marketers on the Internet for several years, digital technologies have become so diverse, we needed a closer look. In February 2006, two e-mail surveys were sent to PROMO readers: one was sent to brand marketers, the other to agency executives. Data collection and analysis was conducted by the research department of Prism Business Media, then provided to the editors. That data is available online at www.promomagazine.com/research.
Where is the money coming from?
Brands say…
They’re shifting budget from traditional media 19.6%
Increasing overall marketing budget 12.8%
Increasing interactive only 11.5%
Shifting funds from sales promotion 4.7%
Shifting from trade promotion 3.4%
Agencies agree, somewhat…
See a shift from traditional media 31.6%
Increase in overall marketing budget 10.5%
Increase in interactive only 6.6%
Shift of funds from sales promotion 7.2%
Shift from trade promotion 2.6%
Note: Multiple responses allowed.
Source: PROMO Interactive Marketing Benchmark Study
Digital tactics brands use most….
E-mail marketing 63.5%
Banners 47.3%
Online promotions 35.4%
Blogs 14.9%
Search 10.1%
Podcasts 10.1%
Mobile multimedia (MMS) 8.1%
Mobile texting (SMS) 7.4%
In order to…
Build loyalty 51.4%
Prompt a sale 48.0%
Drive consumers to the Web 45.9%
Collect personal data 45.3%
Offer incentives 39.9%
Award instant prizes 16.9%
Other 7.4%
Note: Multiple responses allowed.
Source: PROMO Interactive Marketing Benchmark Study
Measuring the Elephant
There is an old fable of six blind men who were asked to describe a creature that had been brought into a village. The first man thought he was touching a wall. The second felt what he thought was a spear. The third blind man nervously grabbed what seemed to be a snake…and so on. Each had ideas based on his experience — and none was complete. (Of course, the animal was an elephant.)
As PROMO conducted this benchmark study, we wanted to understand how marketers define “interactive marketing” — so we asked. Many drew no line between digital and other marketing tactics; others adopted more of an “I know it when I see it” approach:
Brand marketers said:
“Activity that gets the consumer to respond to us and give information that we can use in future promotions.”
“Anything on the Web…”
“Communication that allows for feedback and tailoring.”
“Direct interaction with the consumer.”
“Experiential events and conferences and exhibits.”
“We don’t [define it]…”
Agency execs said:
“It’s a direct, hands-on relationship with each client.”
“E-mail blasts and face-to-face with prospects…”
“It’s experiential opportunities that enhance [a consumer’s] personal relationship with the brand/product.”
Network
