Software Companies Turning Backs on Ads

Advertising is falling out of favor with software companies, a survey of U.S.-based software marketing executives found, but the opposite is true of Internet marketing.

The survey, conducted by Smith & Suita Inc. and Marketwise Innovations found that 55 percent of software marketing executives are planning to decrease their advertising spending in 2002, and only 27 percent plan to increase their ad budgets. The executives found advertising to be expensive and difficult to measure.

The study examined how companies allocate their marketing budgets across four categories: channels marketing (value-added resellers and distributors), product marketing (product and services), marketing communications (public relations, promotion and advertising) and market research (competitive, customer and industry). Of these, marketing communications accounts for the largest percentage of marketing budgets, with companies spending an average of 54 percent in the category.

In addition to advertising, conferences and events was also expected to see its share of funds shrink, with executives citing reduced travel and inadequate quality of leads as the reasons.

Seventy percent of the executives surveyed are planning on increasing their Internet marketing efforts, while only 5 percent will spend less money on Internet marketing in 2002. In addition to Internet marketing, customer research was also expected to see more marketing money in 2002. More than half of the respondents plan to increase their customer research dollars in 2002 to learn more about their prospective clients and the issues and challenges they face in their industry.

“Companies are putting their money where their mouth is and are backing up ‘customer-focused’ claims with more research, user groups and customer advisory panels,” said Carol Monaco, president of Marketwise Innovations.

Online direct mail, led by its low costs, quicker response time and flexibility compared to print and traditional mail, is also becoming increasingly important, the study found.

Not surprisingly, given the economic climate of the past year, the software companies in the study are struggling with generating sales and getting additional business while many are facing reduced marketing budgets and increased pressure to make every dollar spent accountable.

“Marketing executives spoke repeatedly about ‘getting value’ from marketing budgets and are placing renewed emphasis on carefully tracking the results of marketing activities and payoff for each marketing dollar spent,” said Paula Levis Suita, principal of Smith and Suita Inc. It’s no surprise the report found preference being given to marketing activities that can be easily measured and tracked.”

The respondents to the study include top marketing executives from 44 software companies headquartered in the United States, ranging in size from $6 million to more than $15 billion in annual revenue. Of those surveyed, 55 percent are from publicly held companies. Half of those surveyed increased their year-over-year revenue, while half experienced a decline.

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